Amazon Sellers Deny Use of FedEx Ground for Prime Shipment | Financial Buzz

Amazon Sellers Deny Use of FedEx Ground for Prime Shipment

Amazon.com, Inc. (NASDAQ: AMZN) is reportedly no longer allowing its third-party sellers to use FedEx (NYSE: FDX) ground delivery to ship Prime packages, according to an email obtained by The Wall Street Journal that was sent to Amazon’s merchant partners on Sunday.

The email obtained by Journal highlights that the move was due to performance declines. The suspension of FedEx is expected to take effect this week and last “until the delivery performance of these ship methods improves.”

The decision by Amazon will likely impact small businesses as well as pricing for consumers.

As of September, Amazon decided to no longer use FedEx for its own deliveries, but allow third-party sellers to continue using the carrier. Amazon will reportedly still allow merchants to use FedEx’s higher-end Express service for Prime orders and Ground for non-prime shipments, said CNN.

FedEx said in a statement to CNN Business that the decision only affects a small number of shippers, but the Company noted the decision may impact the small sellers’ ability to manage their business.

Amazon’s decision to also ban FedEx’s ground shipment for Prime orders also highlights its move to continue expanding its own delivery service.

Last week, Morgan Stanley analysts estimated that Amazon is already delivering nearly half of its own packages in the U.S.

Amazon Logistics is the tech giants in-house logistics operation. Morgan Stanley said Amazon Logistics “more than doubled it shares” of U.S. package volumes from about 20% a year ago and is now shipping at a rate of 2.5 billion per year. 

For comparison, Morgan Stanley estimates UPS (NYSE: UPS) and FedEx have U.S. shipping volumes of 4.7 billion and 3 billion packages per year, respectively. 

Morgan Stanley’s estimates would assume that Amazon Logistics would increase its shipping rate to nearly 6.5 billion packages per year by 2022, far exceeding its estimates for UPS at 5 billion packages per year and FedEx at 3.4 billion packages per year.