Amazon Lifts Ban on FedEx Ground for Third-Party Prime Shipments--Update

Date : 01/14/2020 @ 8:35PM
Source : Dow Jones News
Stock : United Parcel Service (UPS)
Quote : 115.6204  0.2504 (0.22%) @ 4:55PM

Amazon Lifts Ban on FedEx Ground for Third-Party Prime Shipments--Update

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By Paul Ziobro 

Amazon.com Inc.'s clampdown on FedEx Corp. is over.

The online retailer on Tuesday notified its third-party merchants that they could once again use FedEx's Ground network to ship orders placed under Amazon's Prime membership program, nearly a month after imposing a ban on the service.

The move ends a standoff between Amazon and onetime shipping partner FedEx, whose lower-priced Ground network was blocked for the final rush before Christmas and several weeks thereafter.

An Amazon spokesman said FedEx Ground and Home have been reinstated for Prime shipments fulfilled by third-party sellers now that the services are consistently meeting the company's on-time delivery requirements.

Amazon said in mid-December the ban was due to slipping on-time marks for Prime orders, which generally are guaranteed to arrive in one or two days.

Missing the delivery window sparks complaints to Amazon, which sometimes extends a Prime member's subscription as compensation for late deliveries. Amazon has monitored FedEx's performance since then and only recently deemed it acceptable.

One reason for the delay in restoration was that Amazon tracks FedEx's performance over a seven-day rolling window and FedEx experienced some temporary disruptions at the beginning of January during a busy time for returns, said a person familiar with the matter.

"This is good news for our mutual customers who have come to rely on the FedEx Ground offering," a FedEx spokeswoman said. Overall, she said the Ground network performed well during the peak shipping season, with average transit times of 2.4 days and around 18% of packages delivered early.

Amazon and FedEx severed business ties last year when they allowed two major shipping contracts, totaling some $900 million in revenue for FedEx, to expire. The change meant that Amazon no longer used FedEx for products it shipped directly, but that third-party sellers, which account for about 60% of all products sold on Amazon, could continue to ship with the Memphis-based shipping giant.

Some merchants and shipping consultants expected the ban would be restored shortly after the peak shipping season ended and the amount of packages moving around the country returned to normal levels.

Until then, the merchants had to use other options to ship Prime orders, including FedEx's higher-priced air delivery service or services from rival United Parcel Service Inc. Amazon said merchants were always free to use FedEx Ground for non-Prime orders.

In December, FedEx said the temporary ban wouldn't affect its finances but complained that it deprived small-business merchants of an important shipping option during the busiest time of the year.

The abrupt decision to block FedEx Ground in mid-December forced Molson Hart to scramble during the busiest time of the year. The owner of Viahart LLC sells building toys and large stuffed animals on Amazon and other retailing sites.

He said that after switching to FedEx as his primary shipping company in August, he had to reach out to UPS to see if he could arrange pick-ups at his warehouse outside Dallas.

"We had a long-term plan in place and we had to throw it all out the window and do the best we can," Mr. Hart said.

He said shipping with UPS was a couple dollars more per package compared with the rates he negotiated when switching to FedEx -- which added up when he shipped as many as 600 packages a day during peak season.

"We were literally having a party because we were saving so much money by switching from UPS to FedEx," said Mr. Hart, who added that he lowered prices with the money saved so he could sell more products. "We wanted to get the flywheel going."

Write to Paul Ziobro at Paul.Ziobro@wsj.com

 

(END) Dow Jones Newswires

January 14, 2020 15:20 ET (20:20 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.

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