Amazon has barred third-party stores on its Marketplace platform from using FedEx ground or home shipping for Prime deliveries, the Wall Street Journal reported, saying that the company has performed poorly in getting packages to customers. In an email to sellers, the Journal wrote, Amazon said that the ban will continue “until the delivery performance of these ship methods improves.”
The e-commerce giant has already stopped using FedEx for deliveries of products purchased directly from Amazon. FedEx discontinued its contracts to do so in August as it pitched itself as the delivery service of choice for Amazon’s competitors, such as Target and Walmart, and months earlier Amazon had begun construction of new air hub in Kentucky scheduled to open in 2021. According to the Journal, FedEx said that the newest shift will reduce “options for those small businesses on some of the highest shipping days in history,” but characterized the effect on its business as “minuscule.” The paper also reported that Amazon said third party merchants could continue to use FedEx’s pricier Express service on Prime orders, while non-Prime orders are unaffected.
ShipMatrix Inc. estimates showed that 90.4 percent of FedEx orders were on time the week after Black Friday, the Journal wrote—but UPS was on time 92.7 percent of the time and Amazon in-house deliveries were 93.7 percent on time.
ShipMatrix President Satish Jindel told Reuters those metrics are not directly comparable, as UPS and FedEx handle long-range shipments while Amazon handles “last-mile” shipments, often with teams of overworked contractors that don’t receive many labor protections. Still, the roughly two to three percent gap reflects at least hundreds of thousands of orders, especially given the holiday peak period.
According to CNBC, Amazon said that the temporary block was necessary to minimize the possibility of customers not receiving packages in time for Christmas. Jindel, however, told Reuters that “It’s not about service, it’s about being irritated with the relationship” between the two companies.
Amazon has long had a contentious relationship with the third party merchants that sell via its platform, who have complained of issues ranging from punishments handed down with little notice to one-sided business practices that limit their ability to compete or turn a profit. Evan Armstrong of supply chain consulting firm Armstrong & Associates told Reuters the decision on FedEx shipping “will create more ill will toward Amazon and drive more third-party sellers to re-evaluate how they are managing their brands and if they want to be dictated to by Amazon.” Amazon is also facing antitrust investigations by the House of Representatives, Federal Trade Commission, and the European Union, with the company’s efforts to pressure marketplace vendors into using its in-house logistics network coming up as a possible violation of anticompetition laws.