When Amazon started more than two decades ago as an online bookseller, nobody quite thought that the company was going to become an e-commerce behemoth. Over the years, it has gone into a slew of new businesses and managed to make it a success. In the meantime, it has also been figuring out ways in which it could further improve its delivery methods and cut costs further. That could prove to be a threat to the delivery industry at large, considering the sheer volume of deliveries that are made by Amazon and other e-commerce firms.
Hence, delivery giant FedEx has now decided to end its ground delivery business with Amazon and instead go for contracts with more companies, which sell their products online. While it is true that Amazon is synonymous with an online order, it is important to note that other retailers like Target and Walmart have also gone into online deliveries in a big way. Both those companies have expressed their interest in further raising the volume of online orders and there lies the opportunity for FedEx. If it can work with such companies, then it would not lose out at all for severing its ties with Amazon.
This is an interesting move from FedEx and according to experts; it is a move that will allow the company to pick up more non-Amazon contracts. If FedEx is successful, then the loss of business from the Amazon contract will be offset. An analyst at Citi Research stated in a note,
This does not come as a surprise to us. The company is clearly trying to move away from its partnership with Amazon and we believe it is using this move as a selling point to win new non-Amazon business.
On the other hand, Amazon’s own decision to get into deliveries must also have prompted this move and the company stated as much in a government filing. Amazon’s shipping costs ballooned to $27.7 billion last year and it is not a surprise that the company is looking for ways to cut those costs.