Can FedEx Keep Delivering Without Amazon?

NASDAQ: AMZN | Amazon.com, Inc. News, Ratings, and Charts

AMZN – FedEx (FDX) has dropped its shipping contract with retail giant Amazon (AMZN). But can the former keep delivering without Jeff Bezos’ company’s backing? Read for more details.

Get Free Updates

Join thousands of investors who get the latest news, insights and top rated picks from StockNews.com!

There is a dynamic tension between FedEx (FDX), the world’s largest packaged goods delivery company, and Amazon (AMZN), the single largest shipper. For years, the former garnered low margins and stresses to its system as even as the latter was building its own internal delivery infrastructure to compete and make it less reliant on FedEx.  

If you didn’t follow that confusing sentence structure don’t worry, this week, FedEx clarified the situation by dropping its contract with Amazon, like a soggy box, when the ends in August. 

Amazon delivery share chart

(Source: Amazon.com)

The announcement comes on the heels of its decision in June to stop providing air shipments.  Now, FedEx is severing ties with one of the world’s biggest and will no longer offer ground transport.  The last mile is the most costly and logistically difficult parts of the system. 

The moves are evidence of escalating tensions between the longtime partners as the e-commerce giant builds its own delivery network, including leasing cargo planes, buying trucks and funding local delivery drivers.

Amazon delivery share chart

(Source: Amazon.com)

Essentially, FedEx is gambling that it’s better off filing its trucks with other customers’ goods, letting Amazon build its own system or increasingly rely on stressed-out competitors such as United Parcel (UPS) and the U.S Postal System. I certainly scratch my head on how it makes any economic sense whenever.

If I order items such as batteries or some tennis balls, they show up the next day, which reminds me, I need new balls.

amazon buyer order page

(Source: Amazon.com)

What? Three days? That’s outrageous! 

Anyway, while FedEx is walking away from the largest e-commerce player in the U.S., they are positioning themselves as a go-to carrier for Wal-Mart (WMT) and  Target (TGT), who’ve both aggressively ramped up their online platform to compete with Amazon.

FedEx’s CEO explained it this way: “This change is consistent with our strategy to focus on the broader e-commerce market.”  And the reality was Amazon.com, Inc. (AMZN - Get Rating) represented less than 2% or of FDX’s overall business. 

The decision of FDX to focus on more profitable, and less conflicted customers, also puts pressure on Amazon to find a new way to handle millions of packages ahead of the critical holiday shopping season. At the same time, Amazon is looking to speed many home deliveries to one-day shipping.

While Amazon has accelerated the build-out of its own shipping system faces a steep climb if it wants to match FedEx or United Parcel Service, Inc. (UPS) in shipping prowess. Analysts have estimated it will take upwards of $100 billion dollars in investments to come close to matching the number of planes, trucks, and people required to deliver its billions of packages per year. 

I applaud FedEx’s move. While nearly everything can be bought online, these items still need to be physically delivered. FedEx is the leader and its shares should do the same.   

 

 


Amazon.com, Inc. (AMZN - Get Rating) shares were trading at $1,803.61 per share on Friday morning, down $29.28 (-1.60%). Year-to-date, Amazon.com, Inc. (AMZN - Get Rating) has gained 20.08%, versus a 17.01% rise in the benchmark S&P 500 index during the same period.


About the Author: Steve Smith


Steve has more than 30 years of investment experience with an expertise in options trading. He’s written for TheStreet.com, Minyanville and currently for Option Sensei. Learn more about Steve’s background, along with links to his most recent articles. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
AMZNGet RatingGet RatingGet Rating

Get Free Updates

Join thousands of investors who get the latest news, insights and top rated picks from StockNews.com!

Top Stories on StockNews.com

NYSE: NRZ | New Residential Investment Corp.  News, Ratings, and Charts

Top 20 High Yield Dividend Stocks Paying 11% Plus

Now is the time for stocks like NRZ with 12.99% dividend yield and POWR Rating of A (Strong Buy). Find 20 great looking income stocks in total in this new article.
NYSE: SPY | SPDR S&P 500 News, Ratings, and Charts

Is this Stock Rally for Real?

Great rally this week...but is the market (SPY) truly prepared to head higher? And is the partial deal good enough to remove lingering concerns? Let's review it all in this week's commentary.
NYSE: BAC | Bank of America Corporation  News, Ratings, and Charts

Earnings Season: What to Know Right Now Before Making a Trade

It’s that time of year again — earnings season. Things will officially kick off next week. With that said, continue reading to find out what you need to know right now before you make a trade.
NYSE: SPY | SPDR S&P 500 News, Ratings, and Charts

Trade Wars: Muted Expectations & Unknown Outcome

The market (SPY) has bounced the last two sessions, but is that wise given the strong possibility the deal falls apart like it did back in late July? Get Steve Reitmeister's take on these events along with his portfolio strategy.
: ogi | Organigram Holdings Inc. News, Ratings, and Charts

A Positive Sign For Pot Stock OrganiGram Holdings Inc. (OGI)

Despite the terrible move the cannabis sector is experiencing today, we started to see some positive signs for certain marijuana stocks. 

Read More Stories


More Amazon.com, Inc. (AMZN) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All AMZN News
Page generated in 1.3719 seconds.