NEW YORK (CBSNewYork/AP) — FedEx will no longer be making deliveries for Amazon.
The shipping company announced the move on Wednesday, as Amazon’s fleet of delivery transportation vehicles continues to grow – both on the ground and in the air.
The delivery giant had already terminated its air delivery contract with Amazon two months ago.
FedEx says it plans to take on more e-commerce deliveries from other companies, which are not direct shipping competitors.
Traditional retailers like Walmart and Target want to sell more of their goods online, which in turn allows FedEx to distance itself from Amazon.com without suffering the same competitive damage it might once have.
“This does not come as a surprise to us,” Citi Research analyst Christian Wetherbee said in a note to clients. “The company is clearly trying to move away from its partnership with Amazon and we believe it is using this move as a selling point to win new non-Amazon business.”
Cowen analyst Helane Becker said FedEx’s profit margin on Amazon shipments is probably in the “very low single digits,” and she believes the company can replace those packages with more profitable business from other retailers.
Last month, FedEx warned for the first time in a government filing that Amazon’s fledging delivery business could lower prices, hurt its revenue and “negatively impact our financial condition and results of operations.”
It was a departure from previous statements by FedEx officials — and those at UPS — who have long downplayed the idea that Amazon could become a competitor in the delivery business. They noted that it took many years and billions of dollars for their companies to build extensive, worldwide networks of planes and delivery trucks.
“I mean, we look at Amazon as a wonderful company and service, and they’re a good customer of ours,” said FedEx Chairman and CEO Fred Smith during an earnings call in December. “We don’t see them as a peer competitor at this point in time. For many reasons, we think it is doubtful that that will be the case.”
In a regulatory filing in February, Amazon tweaked the description of its business to say that competitors include transportation companies so FedEx “is taking them at their word and dropping them as a client,” Becker said.
“We think (FedEx) is treating Amazon like any other competitor. They wouldn’t carry competitor packages, like UPS, so why would they carry Amazon packages?” she said.
(© Copyright 2019 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.)