January 8, 2020

Amazon cuts FedEx off Prime services

In the midst of peak, as record parcel volumes came through carriers, Amazon made waves by blocking third party merchants’ use of FedEx Ground and Home to make deliveries to Prime shoppers. 

In reality, though, the change was not a huge surprise. Fedex poked the bear in August 2019, by saying that it would not renew its contract to deliver for Amazon. This was driven by the increasing prevalence of Amazon as an outright competitor in ecommerce logistics, creating its own huge network of parcel capacity by outsourcing last-mile deliveries to its cohort of “Delivery Service Partners” which use Amazon branded vehicles and run according to Amazon’s strict rules and oversight.

However, for Amazon to make this policy change in mid-December was surprising to analysts, who wondered whether the move was an attempt to “gain market share by hurting the leading competitors”, in the words of Bob Amster of the Retail Technology Group.

Regardless of the precise reasoning, it’s clear that Amazon felt compelled to act quickly rather than wait for a quieter period to make the change. The fact that it was comfortable doing so shows the scale and capacity it has reached in its delivery operations and the influence it is now wielding in the space.

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