FedEx to end ground delivery business with Amazon

FedEx won't renew ground delivery contract with Amazon

FedEx is reportedly severing shipping ties with Amazon as Jeff Bezos' company scales up its own logistics operation

FedEx will not renew its ground deliveries contract with Amazon at the end of August, Bloomberg reported Wednesday.

The move by the US package delivery company comes two months after it decided not to renew its contract with Amazon for USA cargo delivery through its plane-based express service.

FedEx also dumped Amazon from its air cargo services in June. The company will still provide worldwide deliveries for the online retailer.

Jeff Bezos's firm, which has gained ground in many industries by undercutting competitors, has reportedly been trimming fees and removing surcharges in an effort to poach business from established companies.

The company said in a statement that recent steps to bolster its delivery network have positioned the company "extraordinarily well" to "focus on the broader e-commerce market". The Amazon contract "we believe was a low-margin business".

The news comes as Amazon works to scale up its own logistics and delivery services, including hiring its own fleet of full-time drivers to deliver packages to Prime customers.

FedEx is reducing its dependence on Amazon as the online retailer builds out a logistics network with hundreds of fulfillment centers and adds next-day air capacity with leased jets.

Rumors have persisted that Amazon will someday cut out its third-party delivery partners like FedEx, as well as UPS and USPS, to focus on its own shipping operations. FedEx also signed up more dropoff and pickup points, and is even testing a ground delivery robot. The amount is probably close to that threshold, according to analyst estimates.

"Nothing but respect for FedEx but they were very small piece of our network and vice versa, we wish them nothing but the best (conscious uncoupling at its finest)", tweeted Amazon executive Dave Clark, who oversees the company's warehouses and delivery business.

Some of the ground packages that FedEx handled for Amazon will migrate to UPS, said David Ross, an analyst with Stifel Financial. Just as traditional media companies were all too happy to pad sliding DVD sales with licensing fees from Netflix Inc. for years, FedEx and rival United Parcel Service Inc. have enjoyed the revenue fruits of the booming demand for e-commerce shipments ushered in by Amazon. The company forecast a mid single-digit percentage drop in earnings for the current fiscal year, which ends in May.

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