Amazon.com Inc (AMZN.O) blocked sellers from using FedEx Corp in handling Prime shipments as the company prioritized rapid delivery deadlines this holiday season.
FedEx representative stated that the scheme will only impact minimum number of sellers but “limits the options for those small businesses on some of the highest-demand shipping days in history.”
Amazon and FedEx did not disclose the volume of packages that will be affected by the temporary ban. In line, Amazon did not release timeframe of how long the scheme would last as it is deemed that the ban was mainly from FedEx’s on-time performance.
However, Amazon said that third-party sellers can resort to using FedEx’s more expensive and faster express services which include air transport for Prime deliveries. The FedEx Ground and Home delivery method which is not available for Prime deliveries are still an option for non-Prime deliveries.
Sellers offer an estimated 50% of the goods on Amazon as Amazon Prime members pay $119 annually to avail fast and free delivery.
The pressing truce between Amazon and FedEx was publicized last summer as FedEx pulled out its delivery arrangements with world’s top retailer following Amazon’s decision of increasing delivery pacing of Prime shipping to one day on millions of items.
Based on records released by ShipMatrix, on-time delivery rates of FedEx Corp were 90.4%, as US Postal Service recorded 92.7% and United Parcel Service Inc. were 92.7% during Cyber Monday sales week. In line, Amazon van drivers delivered 93.7% of US packages without delay during that week.
Delivery performances are not comparable as Amazon vans facilitate short-distance deliveries from fulfillment centers to customers while major shippers like FedEx and UPS deliver packages at long distances; with items exposed to weather conditions, according to ShipMatrix President Satish Jindel.
Amazon’s recent arrangement directly impacted FedEx’s quarterly financial data on Tuesday.
“It’s not about service, it’s about being irritated with the relationship,” Jindel said pertaining to Amazon’s decision.
Such could lead to more critical consequences for Amazon as increased level of scrutiny from regulators, labor groups, and consumer protection advocates may be experienced.
“It 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,” said Evan Armstrong, president of supply chain consulting firm Armstrong & Associates.