FedEx decides to end its contract with Amazon

The contract between Amazon and FedEx will no longer be renewed, FedEx has decided. The recent announcements of Amazon’s Prime Air delivery drones have increased the competition with FedEx and as a result, the “Amazon’s FedEx Express” contract won’t be renewed.

Amazon uses FedEx mainly for its air transportation and a couple of other logistics, but not for last-mile or ground deliveries. These are mostly handled by UPS for two-day Prime delivery. This clearly highlights the growing tension between domestic shipping companies and the largest e-commerce retail giant.

In a statement to CNBC, FedEx said that it “has made the strategic decision to not renew the FedEx Express US domestic contract with Amazon.com, Inc., as we focus on serving the broader e-commerce market. This decision does not impact any existing contracts between Amazon.com and other FedEx business units or relating to international services.”

The statement means that Amazon and FedEx will continue to partner for some more period of time, but we don’t know for how long. In fact, Amazon’s free shipping is one of the reasons for its popularity. But the company also pays high fees to shipping companies including the US Postal Service, UPS, FedEx, etc.

For the same reason, Amazon is intently working on making all of its logistics in-house- from warehouses to delivery mechanics. We need to wait and see how the termination of the FedEx contract affects the e-commerce giant.