Amazon Blocks Sellers From Using FedEx Ground for Prime Shipments -- 3rd Update
December 16 2019 - 7:41PM
Dow Jones News
By Paul Ziobro
Amazon.com Inc. is blocking its third-party sellers from using
FedEx Corp.'s ground delivery network for Prime shipments, citing a
decline in performance heading into the final stretch of the
holiday shopping season.
The ban on using FedEx's Ground and Home services starts this
week and will last "until the delivery performance of these ship
methods improves, " according to an email Amazon sent Sunday to
merchants that was reviewed by The Wall Street Journal.
Amazon has stopped using FedEx for its own deliveries in the
U.S., but third-party merchants had still been able to use FedEx.
Such sellers now account for more than half of the merchandise sold
on Amazon's website, including many items listed as eligible for
Prime.
FedEx said the decision impacts a small number of shippers but
"limits the options for those small businesses on some of the
highest shipping days in history." The carrier said it still
expects to handle a record number of packages this holiday season.
"The overall impact to our business is minuscule," a FedEx
spokeswoman said.
An Amazon spokesman said the policy change is to ensure
customers receive their packages on time and the e-commerce company
is managing delivery cutoffs so that orders arrive by Christmas. He
said the ban is temporary and will be lifted once FedEx service
levels improve.
In its email to merchants, Amazon said sellers can use FedEx's
speedier and more expensive Express service for Prime orders or
FedEx Ground for non-Prime shipments.
Daily package volumes double during the holiday season compared
with the average volume throughout the year, and carriers have
battled difficult weather in recent weeks. FedEx, United Parcel
Services Inc. and Amazon are facing a challenging calendar this
holiday season, with six fewer days between Thanksgiving and
Christmas to deliver millions more packages than last year.
During the week after Black Friday, UPS deliveries were on time
92.7% of the time, while FedEx's deliveries were 90.4% on time and
deliveries that Amazon made itself were 93.7% on time, according to
ShipMatrix Inc., a software provider that analyzes shipping
data.
The carriers handle tens of millions of packages a day, so even
small drops in on-time rates can affect many customers.
FedEx said it is experiencing weather challenges and some of the
highest-volume days in its history, but "our networks are flexing
as designed to accommodate the surge of packages." When packages
have been delayed, FedEx said it is working to get them quickly
delivered with a focus on ensuring holiday deliveries make it on
time.
UPS said it has faced delays due to winter storms in Colorado,
Utah, the Upper Midwest and the Northeast, and has deployed
resources and extended work schedules as a result. A spokesman said
that a "vast majority" of UPS packages are meeting service-level
commitments and that the network overall is performing well. On
Monday, UPS also said it had temporary problems with online
shipping software at its UPS stores.
Amazon, too, has dealt with delivery and logistics issues as it
handles more of its own deliveries and ramps up spending to match a
plan to offer free one-day delivery for many Prime orders.
Typically, Amazon has offered free two-day delivery with Prime.
ShipMatrix said customers may be experiencing delays with Amazon
fulfilling orders and getting all parcels on its vans for the
last-mile delivery.
On Dec. 6, Amazon Senior Vice President Dave Clark replied to
customer complaints of delivery problems. He wrote on Twitter that
some of the company's deliveries were impacted by weather earlier
that week "but we quickly rebalanced capacity and it's all systems
go now."
Earlier this year, Amazon and FedEx ended two major shipping
contracts, totaling some $900 million in revenue for FedEx. The
overnight-delivery pioneer is shifting its focus to retailers such
as Walmart Inc. and Target Corp. that compete with Amazon.
The breakup came as Amazon is increasingly building up its own
delivery network, buying cargo jets and thousands of vans or
trucks. The Seattle giant is poised to deliver twice as many
packages to homes during the holiday season compared with last
year, according to parcel research firm SJ Consulting Group
Inc.
Jerry Kozak, owner of Ann Arbor T-Shirt Co., which sells about
10,000 items through Amazon, said it is common for third-party
sellers to use both UPS and FedEx for shipments, so adjusting to
Amazon's order this week shouldn't be too burdensome. Mr. Kozak's
company primarily uses UPS when shipping to consumers but has used
FedEx in the past.
"My biggest concerns as a seller are that my products that I
send are getting there in the time frame customers expect and are
in good shape," Mr. Kozak said. "After that, it doesn't matter to
me too much which carrier is taking it."
Morgan Stanley recently estimated that Amazon is already
shipping nearly half of its U.S. packages on its own, and estimates
that Amazon is poised to launch a third-party shipping option that
will pose a greater threat to the incumbent delivery giants.
The firm adds that Amazon's promise to deliver more product in
one day is resetting expectations for fast shipping and putting
pressure on other retailers to match that. As such, the analysts
view the move "as a potential trojan horse to drive long-term
adoption of an eventual" shipping option provided by Amazon.
FedEx is slated to report its latest quarterly results on
Tuesday.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
December 16, 2019 19:26 ET (00:26 GMT)
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