Key Takeaways:
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- Amazon has signed a multiyear partnership with FedEx to deliver select large packages to homes, expanding its third-party delivery network.
- The deal follows UPS’s decision to phase out over half of its business with Amazon, which accounted for 12% of UPS’s revenue in 2024.
- Amazon emphasizes that the FedEx partnership is not a direct replacement for its prior deal with UPS, as the majority of its deliveries are handled by its in-house logistics network.
- UPS is cutting costs in response, including eliminating 20,000 jobs and closing over 70 facilities.
What Happened?
Amazon has added FedEx as a delivery partner for large packages, marking a significant collaboration between the two companies after their split in 2019. The partnership is part of Amazon’s strategy to balance capacity within its last-mile delivery network, which already includes partners like the U.S. Postal Service and UPS.
The announcement comes after UPS revealed plans to phase out more than half of its business with Amazon over the next 18 months. In 2024, Amazon accounted for $1.07 billion, or 12%, of UPS’s revenue. The FedEx deal, described as mutually beneficial, is not intended to replace the UPS partnership but to complement Amazon’s logistics operations, which handle over two-thirds of its U.S. deliveries.
Why It Matters?
This partnership highlights Amazon’s continued efforts to diversify its delivery network and reduce reliance on any single partner. By bringing FedEx into its logistics ecosystem, Amazon ensures greater flexibility and capacity for handling large packages, a growing segment of its e-commerce business.
For FedEx, the deal represents an opportunity to strengthen ties with one of the world’s largest retailers, potentially offsetting the competitive pressure from Amazon’s in-house logistics network. Meanwhile, UPS’s decision to scale back its Amazon business underscores the challenges traditional logistics providers face in balancing profitability with high-volume, low-margin contracts.
What’s Next?
Investors should monitor how this partnership impacts FedEx’s revenue and operational capacity, as well as Amazon’s ability to scale its logistics network for large-package deliveries. UPS’s cost-cutting measures, including job reductions and facility closures, will also be key to its financial performance in the coming quarters.
Additionally, the broader logistics industry may see increased competition as Amazon continues to expand its delivery capabilities, potentially reshaping the dynamics between traditional carriers and e-commerce giants.
