FedEx to terminate its contract with Amazon

FedEx Corp confirmed on Wednesday it would terminate its contract with Amazon.com Inc for small-package ground deliveries, as the online retailer focuses on building out its own delivery network.

According to Reuters, the move by the U.S. package delivery company comes two months after it decided not to renew its contract with Amazon for U.S. cargo delivery through its plane-based express service.

“This change is consistent with our strategy to focus on the broader e-commerce market,” FedEx said in a statement as it looks to expand and serve companies that would include rivals of Amazon.

Reuters reports that Amazon has been expanding its own delivery network of planes, trucks and vans and is seen posing a potential long-term challenge to FedEx and rival United Parcel Service Inc, both of which have long counted the e-commerce company as a customer.

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Analysts have said Amazon has secured a better rate with UPS for package deliveries on planes, so it makes little sense for the company to partner with FedEx.

Amazon accounted for less than 1.3% of FedEx’s revenue last year, while UPS, which gets a relatively larger share of revenue from the online retailer, is widely expected to benefit from higher volumes following the latest move, according to analysts.

You would recall that FedEx already warned in June that U.S.-China trade tensions and the termination of its contract with Amazon would hurt its fiscal 2020 performance.

The company’s ground service provides low-cost package deliveries in the United States and Canada.