Amazon Blocks Sellers from Using FedEx

Third party sellers aren’t now able to ship via FedEx ground-delivery on products sold on Amazon. The reason for this is that deliveries made from that courier service provided haven’t been efficient in recent times.

Ever since mid December 2016, Amazon has blocked its sellers from shipping using FedEx, this prohibition is not permanent though. Given the fact that Amazon doesn’t want to harm its high level of reputation it currently has, it will only allow shipments using FedEx when their performance improves. The reason why FedEx was blocked at that specific date was because holidays were approaching and they didn’t want to compromise their customer service area. Amazon sent an email to all of its merchants on December 15, 2019 and it was reviewed by the important site The Wall Street Journal

Given the high volume of sales on Amazon, FedEx shares decreased 1.1% in value after the news was released. The relationship between Amazon and FedEx has never been good but at the end of last year, it reached its worst point in history. FedEx spokesman argued that this decision was not a rational and while it wasn’t completely wrong on behalf of Amazon as only a few shippers would be affected, their options would be more limited precisely when they needed the most, during Christmas time. This could in turn make it harder for them to manage their business and meet their client needs. Nevertheless, FedEx stands ready to start its relationship with this giant product provider as soon as it is required. FedEx also stated that the impact of this decision on its business is almost insignificant despite the lowering price percentage their stock experimented. 

Amazon on its part, decided to stay silent in this regard. It simply limited to say that they sent an email to its sellers commenting them about their decision of restricting FedEx ground-delivery for Prime orders and it offered other options instead, these being, using FedEx’s ground and home delivery services for not Prime orders and FedEx’s Express shipping service for Prime ones. 

The way it works is that members pay $119 a year for the Amazon Prime service and get fast delivery without any additional cost. According to reports, delivery rates made on time was 92.7% for UPS, 92.3% for the US Postal Service, and 90.4% for FedEx, while the difference between the last one and the other two seems small, given the high volume of sales Amazon has, it amounts to a large number of orders not delivered on time. While Amazon van drivers deliver 93.7% of packages on time during holidays, it is clear that this number can’t be compared to the previous three since these were short-distance ones and therefore, were expected to have a higher on-time delivery rate than the others. Moving packages on large distances can mean many obstacles such as weather problems and other disruptions, specially, when delivered from one coast to another. 

FedEx isn’t performing good, its share lost over 1% in terms of price change and while its on-time delivery rates on Amazon is not bad per se, its overall on-time shipping rate is. In 2018, it was 77.5%. UPS hasn’t done well also, it dropped its on-time shipping rates from 86 to 80% from 2017 to 2018. Right now, more and more people are buying goods online; it seems that the largest couriers services of the world don’t have the capacity to meet their client’s needs completely. 

The most important thing for Amazon is to ensure that deliveries are made on time. This has always characterized the company and it has allowed it to survive and thrive even though turbulent times along with providing a huge portfolio of products. You can start to sell on Amazon using Viral Launch. Amazon didn’t take this decision out of the blue. In August, in August, FedEx said that it would terminate its agreement of providing ground-delivery services to Amazon. This was, because Amazon had put additional pressure on them, telling them their shipping times on Prime shipping be reduced from two days to one. On top of that, in June, FedEx stopped its express US shipping contract with Amazon. The reason for this was because the company wanted to put all of its attention on the e-commerce market since this one had more reach than the other. 

Amazon has been working on coming up with its own courier service provider to create its own delivery service network. Jeff Bezos stated that it was planning to invest $1.5 billion on an air hub in Kentucky that would open in 2021. The air hub would have capacity for 50 planes and it would put Amazon on an advantage since it wouldn’t have to completely rely on its usual service provider, namely, the US Postal Service, UPS, and the aforementioned FedEx. 

Also, Amazon talked about a special Delivery Service Partners program in June 2019. In this program, entrepreneurs would be able to set up local delivery networks and be able to transport packages from their initial destination to their client’s homes or businesses. Prime members would be benefited since Amazon put into work a new delivery drone to drop shipment times to a bare minimum. 

Amazon experiences an increase in share value when they have revenue growth not earnings growth like almost all other companies. Their business model works that way. Amazon’s employees are benefited when this happens since they receive an incentive for this event. With revenue growth, Amazon doesn’t have to incur in additional cost of capital and it becomes more liquid and have more money to spend on different projects of its own. This is why on-time delivery is so important to them. Providing an excellent customer services that fit their clients’ needs will help them achieve this purpose. Also, by investing in their own shipping system, these additional funds will be invested in such as way that will proof profitable to them. 

Third-party sellers make up 58% of the total of Amazon’s sales. Third-party sellers work by buying products, whether new or used, from sources such as clearance sales, flea markets, and official distributors and then selling them on the platform.