FedEx Corp. said it wouldn’t renew its U.S. air-delivery contract with Amazon.com Inc., as the courier focuses on “serving the broader e-commerce market.”
Amazon represented less than 1.3 per cent of FedEx’s sales last year, according to a statement Friday by the delivery giant.
The decision means that FedEx’s domestic air service will walk away from the dominant e-commerce company at a time when the rise of online shopping is fuelling record demand for parcel deliveries.
Amazon’s emergence as a logistics giant has posed a costly challenge to FedEx and United Parcel Service Inc. by stepping up pressure for faster deliveries.
FedEx will retain some Amazon business because the decision doesn’t affect existing contracts involving the courier’s other divisions such as its ground operation. Also, the decision doesn’t relate to international services. “There is significant demand and opportunity for growth in e-commerce which is expected to grow from 50 million to 100 million packages a day in the U.S. by 2026,” FedEx said in the statement. “FedEx has already built out the network and capacity to serve thousands of retailers in the e-commerce space.”
FedEx erased gains on the news, then recovered some of the lost ground. The shares rose 0.5 per cent to US$157.63 at 1:24 p.m. in New York. Amazon held steady, trading 2.6 per cent higher at US$1,800.19.