Amazon's Relationships with Carriers Further Frays over the Holiday Season

On Monday, the Wall Street Journal reported a rather shocking development - Amazon is now blocking its third-party sellers from using FedEx ground for Prime shipments. The reason for this seemingly extreme directive has been attributed to FedEx's poor performance during the holiday shopping season. The ban will be instituted this week and remain in place until such time as Amazon feels that FedEx's "delivery performance...improves."There's been a history of delivery issues for Amazon's carrier partners during the holiday season - they have often been a source of embarrassment and frustration for the company. In addition, this is just the latest in a slew of events that have put a strain on Amazon's relationship with carriers and has hastened its separation from carriers in general and start to take on more and more of its own deliveries. FedEx's response has been tempered - stating that it "limits the options for those small businesses on some of the highest shipping days in history." But "The overall impact to our business is minuscule." This response is another indicator of the continued focus of carriers on preparing for a time when Amazon is no longer a partner.

Deliveries off to a Rough Start

By early December, it was clear that Amazon's "record-breaking start to the holiday season" was having an impact on deliveries. According to a spokesperson for the company "We are off to a record-breaking start to the holiday season and on peak shopping days, delivery promises vary and may be longer than normal based on order volume and the fulfillment and delivery capacity available in a given area." While one of the reasons stated was winter storms, it's clear that high-volume of purchases and the pressures that puts on carriers is the primary cause.

A History of Poor Delivery Performance

Back in 2013, Amazon experienced what has been called a "fiasco" by some: Due to higher demand and more ambitious promises about delivery times, social media ended up being inundated with stories of people whose gifts arrived after Christmas. The years following also saw significant issues with delivery times around the holidays, as carriers were dealing with more and more volume from Amazon, as well as other retailers.

Fraying Carrier Relationships

This latest move comes in the context of eroding relationships between Amazon and carriers.

According to this graphic from FedEx, Amazon is now doing over 50% of its own last-mile deliveries. Over the course of the last year, they have effectively ended their relationship with FedEx for their own deliveries (up until now, third-party sellers were free to use FedEx), as well as been part of a nasty lawsuit with a small carrier. By blocking third-party sellers from using FedEx, Amazon is not only hoping to mitigate late deliveries but is laying the groundwork for a world in which the only carrier that will deliver Amazon purchased items (whether directly or through third-parties) is Amazon itself.