Amazon Bans Sellers From Using FedEx for Some Prime Deliveries in the US

Amazon said sellers can still use FedEx's pricier and faster Express services, including air transport, for Prime deliveries.

Amazon Bans Sellers From Using FedEx for Some Prime Deliveries in the US

Amazon Prime members pay $119 (roughly Rs. 8,400) per year for fast delivery

Highlights
  • The move is is likely to affect only a small number of sellers
  • Amazon and FedEx did not say how many packages would be affected
  • Sellers can still use FedEx's pricier and faster Express services: Amazon

Amazon.com is temporarily blocking third-party sellers from using FedEx's ground delivery network to handle Prime shipments as it strives to hit accelerated delivery deadlines this holiday season. This is likely to affect only a small number of sellers but "limits the options for those small businesses on some of the highest-demand shipping days in history," a FedEx representative said. Amazon and FedEx did not say how many packages would be affected by the restriction. Amazon declined to say how long the move would last. The Wall Street Journal earlier reported that the ban was due to FedEx's on-time performance.

Amazon said sellers can still use FedEx's pricier and faster Express services, including air transport, for Prime deliveries. The FedEx Ground and Home delivery options that are temporarily restricted for sellers' Prime shipments remain available for non-Prime shipments. Third-party sellers offer more than 50  percent of the goods on Amazon's site.

Amazon Prime members pay $119 (roughly Rs. 8,400) per year for fast, "free" delivery.

Tensions between Amazon and FedEx became public this summer. FedEx cancelled its delivery agreements with the world's leading online retailer just months after Amazon announced plans to speed up Prime shipping to one day from two days on millions of items.

On-time delivery rates during the record-setting Cyber Monday sales week were 90.4 percent for FedEx Corp, 92.3 percent for the US Postal Service and 92.7 percent for United Parcel Service, according to consultancy ShipMatrix.

Amazon van drivers delivered 93.7 percent of US packages on time during that week.

ShipMatrix President Satish Jindel said the performances were not directly comparable because Amazon vans handle short-distance "last-mile" deliveries from fulfilment centres to customer doorsteps. Major shippers like FedEx and UPS move packages great distances - at times from factories on one US coast to customer doorsteps on another - and are more exposed to weather and other disruptions.

News of the FedEx restrictions hit just ahead of FedEx's quarterly financial report on Tuesday.

"It's not about service, it's about being irritated with the relationship," Jindel said of Amazon's decision.

And it could have unintended consequences for Amazon, which is under increasing scrutiny from regulators, labour groups and consumer protection advocates.

"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.

© Thomson Reuters 2019

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