FedEx decided to bail on renewing its contract with Amazon for U.S. domestic express deliveries. There’s no change in the agreements between the two companies for international services, but FedEx chose to walk away from nearly $850 million in annual revenue.
Whether or not giving up close to a billion dollars of business is right for FedEx, what difference does the delivery company’s “strategic decision” mean for your Amazon Prime orders?
Here’s why U.S. consumers won’t suffer — or likely notice — when black-and-purple-shirt-wearing FedEx drivers no longer leave Amazon Prime boxes on doorsteps: UPS, USPS, and Amazon itself.
UPS already delivers a considerable percentage of Amazon’s Prime two-day and one-day orders. The United States Postal Service also delivers a growing share of Amazon’s brown boxes and packages. None of the involved parties, meaning FedEx, UPS, the USPS, and Amazon disclose specific delivery numbers, which makes citing precise counts or percentages impossible.
In the press release about the contract change, FedEx stated, “As previously disclosed, Amazon.com is not FedEx’s largest customer. The percentage of total FedEx revenue attributable to Amazon.com represented less than 1.3% of total FedEx revenue for the 12-month period ended December 31, 2018.”
In its 2018 Annual Report, UPS stated, without mentioning specific customer accounts, “No single customer accounts for 10% or more of our consolidated revenue.” As FedEx avoids Amazon loading docks in the U.S., UPS is bound to pick up the most substantial portion of those shipments.
Earlier this year in May, Amazon broke ground on a 3-million-square-foot cargo facility at Cincinnati/Northern Kentucky International Airport. When the $1.5 billion shipment hub begins operation in 2021, it will serve up to 100 Prime Air cargo planes.
Also, in May, Amazon encouraged current employees to quit and start their own delivery businesses. Amazon offered three month’s salary and a $10,000 startup fund to employees who become independent contractors with teams of drivers and up to 40 delivery vehicles. Employees who take Amazon up on the offer will join the Delivery Service Partners program launched in 2018.
In 2015 Amazon introduced the Flex delivery service, a gig economy-style business opportunity for anyone who can pass a background check and wants to earn money making deliveries for Amazon using their own vehicles. Suggesting that Flex drivers can earn $18-$25 an hour working flexible hours, Amazon lets drivers select blocks of time for deliveries ahead of time. Amazon Flex is currently available in ten regions in the U.S.
With UPS and the U. S. postal service ready now to pick up and deliver Amazon packages and Amazon’s own growing fleets of planes and trucks preparing for the future, Prime customers can disregard the FedEx departure.
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