Amazon has announced that they are restricting the ability of third party sellers to opt for FedEx as a delivery partner. The company attributed this to the sub par performance by the platform and deteriorating quality of service.
This announcement is another nail in the coffin for the relationship between the two companies. In August, FedEx announced that it would end its ground delivery contract with Amazon in June. The company said it was an effort to “focus on the broader e-commerce market.”
Amazon said that FedEx can become a viable option again if they can manage their cutoffs better. Apparently, the company worries about FedEx’s late delivery to its prime users.
FedEx’s shares have taken a good hit in the negative, after the announcement, dropping by 1.1%. The delivery service confirmed Amazon’s decision after a report from The Wall Street Journal on Monday.
“While this decision affects a very small number of shippers, it limits the options for those small businesses on some of the highest demand shipping days in history, and may compromise their ability to meet customer demands and manage their businesses,” a FedEx spokesperson said in a statement to CNBC.
“FedEx Ground stands ready to support our customers and will continue to deliver record-breaking volume this holiday season.”
Amazon has not officially spoken about the matter. The announcement was made directly to the sellers through messages, and therefore was very private.
Amazon has been investing massive capital to become self sufficient in providing delivery services. In May, Jeff Bezos announced a new $1.5 billion air hub in Kentucky which aims to reduce the company’s reliance on FedEx, UPS and U.S. postal service. The air hub will house as much as 50 aircrafts.
The company also announced Delivery Service Partners program that will allow entrepreneurs to establish their own local delivery networks. Amazon also announced a new delivery drone that aims to bring down delivery time for Prime users.
Third party sellers make up for 58% of the company’s total products sold and are very integral to the platform’s growth. This new step can end up making it infeasible for some vendors to be able to sell their products on the platform.
However, Amazon has always been strict about their standards. The company has show time and time they are not ready to compromise for anything less than perfect. FedEx can make a comeback on the platform some time in the future. Needless to say, the relationship between the two companies has definitely strained.