Amazon Lifts Ban on FedEx Ground for Third-Party Prime Shipments--Update
15 January 2020 - 7:35AM
Dow Jones News
By Paul Ziobro
Amazon.com Inc.'s clampdown on FedEx Corp. is over.
The online retailer on Tuesday notified its third-party
merchants that they could once again use FedEx's Ground network to
ship orders placed under Amazon's Prime membership program, nearly
a month after imposing a ban on the service.
The move ends a standoff between Amazon and onetime shipping
partner FedEx, whose lower-priced Ground network was blocked for
the final rush before Christmas and several weeks thereafter.
An Amazon spokesman said FedEx Ground and Home have been
reinstated for Prime shipments fulfilled by third-party sellers now
that the services are consistently meeting the company's on-time
delivery requirements.
Amazon said in mid-December the ban was due to slipping on-time
marks for Prime orders, which generally are guaranteed to arrive in
one or two days.
Missing the delivery window sparks complaints to Amazon, which
sometimes extends a Prime member's subscription as compensation for
late deliveries. Amazon has monitored FedEx's performance since
then and only recently deemed it acceptable.
One reason for the delay in restoration was that Amazon tracks
FedEx's performance over a seven-day rolling window and FedEx
experienced some temporary disruptions at the beginning of January
during a busy time for returns, said a person familiar with the
matter.
"This is good news for our mutual customers who have come to
rely on the FedEx Ground offering," a FedEx spokeswoman said.
Overall, she said the Ground network performed well during the peak
shipping season, with average transit times of 2.4 days and around
18% of packages delivered early.
Amazon and FedEx severed business ties last year when they
allowed two major shipping contracts, totaling some $900 million in
revenue for FedEx, to expire. The change meant that Amazon no
longer used FedEx for products it shipped directly, but that
third-party sellers, which account for about 60% of all products
sold on Amazon, could continue to ship with the Memphis-based
shipping giant.
Some merchants and shipping consultants expected the ban would
be restored shortly after the peak shipping season ended and the
amount of packages moving around the country returned to normal
levels.
Until then, the merchants had to use other options to ship Prime
orders, including FedEx's higher-priced air delivery service or
services from rival United Parcel Service Inc. Amazon said
merchants were always free to use FedEx Ground for non-Prime
orders.
In December, FedEx said the temporary ban wouldn't affect its
finances but complained that it deprived small-business merchants
of an important shipping option during the busiest time of the
year.
The abrupt decision to block FedEx Ground in mid-December forced
Molson Hart to scramble during the busiest time of the year. The
owner of Viahart LLC sells building toys and large stuffed animals
on Amazon and other retailing sites.
He said that after switching to FedEx as his primary shipping
company in August, he had to reach out to UPS to see if he could
arrange pick-ups at his warehouse outside Dallas.
"We had a long-term plan in place and we had to throw it all out
the window and do the best we can," Mr. Hart said.
He said shipping with UPS was a couple dollars more per package
compared with the rates he negotiated when switching to FedEx --
which added up when he shipped as many as 600 packages a day during
peak season.
"We were literally having a party because we were saving so much
money by switching from UPS to FedEx," said Mr. Hart, who added
that he lowered prices with the money saved so he could sell more
products. "We wanted to get the flywheel going."
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
January 14, 2020 15:20 ET (20:20 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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