FedEx ends partnership with Amazon for last mile delivery
FedEx announced earlier this month that it will not renew its express U.S. shipping contract with Amazon for last-mile delivery. This decision was made in the context of Amazon’s fast building of its own shipping and delivery network.
The shipping company representatives explained their decision with numbers. The percentage of total FedEx revenue which can be attributed to Amazon.com order deliveries represented less than 1.3% of total FedEx revenue for last year.
Last-mile delivery is becoming more important than ever due to the surge of online orders. FedEx still has a number of long-term advantages over Amazon and other similar competitors, and the company has a substantially impressive growth perspective. FedEx is targeting 9 percent revenue growth in fiscal 2019 and at least $1.2 billion in its express unit’s operating income growth.
“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 U.S. by 2026. FedEx has already built out the network and capacity to serve thousands of retailers in the e-commerce space”, FedEx representatives said in a press release.
Target, Walgreens and Walmart are just a few of the retailers that the shipping company will work within this continuous saga of building a strong e-commerce related delivery capacity. In response to FedEx’ decision, Amazon released a statement thanking the courier company for their partnership:
“We respect FedEx’s decision and thank them for their role serving Amazon customers over the years”.
Even if FedEx has always insisted that Amazon is not a direct competitor, it’s no secret that Amazon has been building out its own delivery network as a way to get rid of carriers like UPS, FedEx, and USPS for last-mile logistics. Amazon has optimized its supply chain, distribution, and logistics and then handed off last-mile services to carriers. And because this always was a massive expense for the eCommerce platform, is has fueled Amazon’s efforts to find new and more personalized delivery methods.
FedEx, on the other hand, is well known for its overnight shipping service and pioneering a system that could track packages and provide real-time updates on package location (to help in finding lost packages), a feature that has now been implemented by most other carrier services. Seeing that their innovative spirit continues to this day, the company is set to become a leader in the e-commerce shipping industry: “We are excited about the future of e-commerce and our role as a leader in it”.
Last-mile delivery is defined as the movement of goods from a transportation hub to the final delivery destination. The final delivery destination is typically a personal residence. The focus of last-mile logistics is to deliver items to the end-user as fast as possible. Last-mile logistics has become a popular area of interest for retailers due to the growing demand for fully integrated multi-channel retailing.