Close on the heels of its decision earlier this month to cut ties between Amazon and its Express air delivery unit, FedEx is reportedly offering big discounts on the service to draw in more ecommerce business and take it away from rival UPS, according to the Wall Street Journal.
At the same time, FedEx is looking to replace the volume it will lose when Amazon’s Express contract expires on June 30, representing about 1.3% of its 2018 business.
The Journal reports that FedEx is offering two-day Express service for the same price as ground for some of its larger customers as an incentive to move some ecommerce volume over to the higher margin business. Two-day delivery has become a table-stakes standard based on Amazon’s Prime promise – which is being shortened to next-day delivery.
A FedEx spokeswoman told the Journal the company hasn’t changed its pricing strategy, also saying the two-day Express service “has been very successful and continues to deliver tremendous value to small and medium businesses competing in the e-commerce market.”
UPS meanwhile has been investing millions in automated sortation centers in an effort to increase its capability to deliver ecommerce orders faster, while expanding delivery to six days a week.
Some analysts have speculated that FedEx saying it was ending Amazon’s Express contract to focus on “serving the broader ecommerce community” signals it was unwilling to meet Amazon’s pricing demands. The ecommerce giant has been known to drive a hard bargain with partners.
The FedEx move could also be a reaction to Amazon’s growing in-house delivery capabilities, including expanding its new orders for leased Boeing cargo jets from 5 to 20. Plans call for an Amazon Air fleet of 70 craft by 2021, and the company already operates out of 20 U.S. air hubs.
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