In August 2019, FedEx made an announcement that puzzled anyone who hadn’t been keeping a close eye on the tick-tock of the shipping industry: The company would no longer deliver packages for Amazon.
Why would a business entirely built around prompt package delivery go out of its way to fire the single largest customer that ships more time-sensitive packages than any company in history?
The breakup, it turns out, had been the culmination of years of a combative and eroding relationship between the two giants. Six years earlier, frustrated with FedEx and UPS delivery delays during the 2013 holiday rush, Amazon began building out its own delivery network for the products it sells and ships. As its network grew, Amazon steadily shrunk its dependence on outside carriers, and especially on FedEx, whose prices tended to be higher than UPS’s. So when FedEx formally severed its relationship with Amazon, they were breaking up with a customer that had essentially already dumped them.
Even after the formal split last year, third-party merchants that sell on Amazon were still free to choose FedEx delivery — until December last year, when Amazon further inflamed its new competitor by banning merchants on its platform from using FedEx during the month-long holiday rush. It rescinded the ban in January, but the damage was done. On March 16, FedEx’s stock hit a nine-year low of $90 per share, as the company first struggled to come to grips with the onrushing pandemic.
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Now Amazon is greasing its delivery network to deliver a much bigger blow: Going into business as a third-party shipper looking to steal business from FedEx and other shippers. “They’ve got tons of cash to subsidize going to go toe-to-toe with FedEx,” says Dean Maciuba, a career-long FedEx manager who is now a managing partner with logistics consultancy Last Mile Experts.