FedEx cuts ties with Amazon for U.S. ground delivery

Memphis-based FedEx Corp. said it will not renew its ground delivery contract with Amazon when it expires at the end of August. The move comes as Amazon continues to build out its own shipping network, emerging as a competitor to FedEx.

The news comes on the heels of FedEx saying its Express unit would not extend an agreement to fly Amazon packages in the U.S.

“This change is consistent with our strategy to focus on the broader e-commerce market,” FedEx said in a statement. Recent moves to bolster service “have us positioned extraordinarily well” to handle demand, the company said.

FedEx will continue to keep its contract with Amazon for international deliveries, according to the statement.

“We are constantly innovating to improve the carrier experience and sometimes that means reevaluating our carrier relationships,” Amazon said Wednesday (Aug. 7). “FedEx has been a great partner over the years and we appreciate all their work delivering packages to our customers.”

Last year Amazon made up about 1.3% of FedEx’s sales. Meanwhile, FedEx recently announced it would begin seven-day delivery service in January 2020 seeking to regain more of the package delivery service it once handed off to the U.S. Postal Service. FedEx also has added more drop-off and pick-up locations inside Dollar General and select Walmart stores.

Bloomberg analyst Lee Klaskow said there could be some short-term pain for FedEx, but over time the carrier is looking to increase profit margins by walking away from Amazon.

Klaskow said the Amazon contract is believed to be a low-margin business.