Amazon will ship its last products using FedEx on June 30 and it will not renew the contract. Although other existing contracts will not be affected by this decision. However, Amazon has been working on its own delivery system that will take off from FedEx express delivery.
Amazon released a statement thanking FedEx for its service and they respected their decision. On the other hand, FedEx said that Amazon accounted for only 1.3% of its revenue. Other existing contracts and international shipping, however, will remain intact as FedEx focuses widely on the E-commerce market.
The two companies have been competing in so many areas, for instance, both companies are testing autonomous robots which they have developed for making deliveries around the urban centers. Additionally, Amazon is investing heavily to build a hub for its cargo planes in Ohio. Last year Amazon launched a new online service that matches shippers and truck drivers.
E-commerce industry will grow from 50 million to 100 million packages in the US alone by 2026 estimates made by FedEx. This rapid growth of E-commerce will see many logistics companies extra making moves to dominate the market. The competition between Amazon and FedEx is only the beginning. Amazon plans to build an Electric delivery system after investing in Rivian an electric car company. Furthermore, it has developed an electric delivery drone acquired Dispatch which is an urban delivery startup.
How will FedEx contract affect Amazon?
It makes sense for Amazon to control its shipments because last year it spent $27 billion and a 23% jump in the last quarter totaling a record $9 million. Amazon will make huge savings by using its own network to ship products for $6 per package. For example, Amazon is paying FedEx and UPS $8 and $9 currently. In addition, Amazon will have more control of products delivery speed killing two birds with one stone.
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