FedEx ends Amazon ground delivery contract as shipping wars heat up

FedEx is ending its ground shipping relationship with Amazon, according to Bloomberg News.

In recent months, FedEx has made it clear that it views Amazon as a competitor rather than a partner.

Amazon, meanwhile, has been rapidly scaling up its own logistics infrastructure in a way similar to its Web Services unit.

Visit Business Insider's homepage for more stories.

FedEx is ending its ground delivery contract with Amazon when it expires at the end of August, Bloomberg News reported on Wednesday, citing a statement from the shipping service.

The move comes as Amazon works to scale up its own logistics and delivery services, including hiring its own fleet of full-time drivers to deliver packages to Prime customers.

“This change is consistent with our strategy to focus on the broader e-commerce market,” FedEx said in the statement to Bloomberg. The company previously ended its US air contract with Amazon in June.

Read more: FedEx no longer will fly your Amazon packages — and now pressure is mounting on the company as it gears up its in-house air-freight network

FedEx and Amazon were not immediately available for comment. This post will be updated if statements are received.

Amazon was responsible for just over 1% of FedEx's sales in 2018. Over the past year, FedEx's leadership has made it clear that it viewed Amazon as a competitive threat, and not a collaborative partner.

“[We] look at Amazon as a wonderful company and service and they're a good customer of ours,” Smith said in a December earnings call. “We don't see them as a peer competitor at this point in time. For many reasons, we think it is doubtful that will be the case.”

Amazon, meanwhile, is hoping to do the same thing for logistics that it did with cloud computing and web hosting services. Currently, the company's network is used only for in-house goods, using a massive shipping network that's already grown fifteen fold — double the rate of sales — over a ten-year period from 2008 to 2018.

Industry experts say that eventually Amazon would love to offer that network to third-party customers for shipment of any number of other goods, not just those sold on its own platform.

As of now, however, Amazon's network may not be much of a threat, according to Wall Street analysts. Goldman Sachs estimated in early July that — despite the company's 70 planes and 10,000 trucks — it could take another $122 billion worth of investment to catch up to the infrastructure leaders UPS and FedEx have built over past decades.

Shares of FedEx and Amazon were largely unchanged in early trading Wednesday following the news.

More logistics news:

FedEx stopped flying your Amazon Prime packages in June because the partnership wasn't profitable enough — and UPS has the same problem

Goldman Sachs says Amazon's logistics network is hardly a threat to FedEx or UPS. It needs years of new construction and a whopping $122 billion just to catch up.

FedEx is officially sounding the alarm bells on Amazon after years of laughing off the retail giant's rapidly building package-delivery empire