In what may well be the coming ‘sign of the times’, FedEx has made the strategic decision to not renew its US domestic contract with Amazon.com.
The express delivery company that has found itself, in a very short space of time, a competitor with its own major customer, Amazon.com, says the move is based on focusing “on serving the broader e-commerce market”.
“This decision does not impact any existing contracts between Amazon.com and other FedEx business units or relating to international services,” it adds.
The express giant notes that Amazon.com is not its largest customer. The percentage of total FedEx revenue attributable to Amazon.com represented less than 1.3 per cent of total FedEx revenue for the 12-month period ended December 31, 2018, FedEx says.
“There is significant demand and opportunity for growth in e-commerce which is expected to grow from 50 million to 100 million packages a day in the US by 2026, the company says. “FedEx has already built out the network and capacity to serve thousands of retailers in the e-commerce space. We are excited about the future of e-commerce and our role as a leader in it,” FedEx says in a note to investors.
For Amazon the news will not likely be much of a concern given that the e-commerce giant not only relies on a range of express partners including UPS and the US Postal Service, but has also continued to ramp up its own air lift capability through Prime Air, with ACMI leased aircraft through its air arm, Amazon Air.
Just last month, Amazon CEO Jeff Bezos broke ground on the USD 1.5 billion Amazon Air Hub located in the US state of Kentucky at the Cincinnati/Northern Kentucky International Airport (CVG).
Amazon will operate its 40 leased B767 freighters out of the hub with the 10 additional it recently signed for with Atlas Air Worldwide, coming on stream over the next two years. The hub can support a fleet of more than 100 aircraft.
And last week, Amazon revealed its brand-new hybrid Prime Air delivery drone, a device that Amazon hopes will one day compete with FedEx and UPS delivery trucks.
Amazon aims to have cargo drones with a 24 km range and the ability to haul packages under 2.27kg to customers within 30 minutes, but it’s not yet clear when the fleet will be ready.