Report: Credit Suisse says Amazon has its own holiday shipping issues

Dan Berthiaume
Senior Editor, Technology
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Is Amazon banning some FedEx ground deliveries a case of the pot calling the kettle black?

According to SeekingAlpha, multinational financial firm Credit Suisse has issued a note suggesting Amazon’s decision to block its third-party sellers from using FedEx ground shipment services (except for Prime deliveries) may be a diversionary tactic.

“We cannot help but wonder whether the news is symptomatic of broader delivery issues that Amazon’s own network might be facing as we approach the final days of what is an already compressed peak season – particularly given the added constraints of one-day shipping and fewer external carrier options (non-renewal of FedEx Express/Ground contracts)," Credit Suisse said.

"While weather was partly responsible for delays during Cyber week for most carriers, Amazon also cited high demand/record orders as resulting in longer than normal delivery times based on constrained fulfillment and delivery capacity in certain areas. In our view, this underscores the idiosyncratic challenges that Amazon’s less mature in-house delivery capabilities face relative to the well-established, end-to-end hub networks at both FedEx and UPS."

Amazon reportedly sent an email to third-party sellers informing them of the ban this week which said it will continue prohibiting them from using FedEx ground delivery until its performance improves. New data from last-mile delivery provider Convey Inc. indicates that since Thanksgiving 2019, FedEx has had an on-time delivery of 68.3% compared to 77.5% during the equivalent period in 2018.

In August 2019, FedEx decided not to renew its contract to deliver Amazon packages through its ground network. This followed a June 2019 announcement that FedEx would not renew its domestic air-shipping Express contract with Amazon. The company still has an agreement with Amazon for international deliveries.

Amazon, which has not yet publicly commented on reports of this new FedEx ground delivery ban, is pursuing several new proprietary delivery ventures. These include Delivery Services, a program that allows entrepreneurs to create their own local delivery networks with up to 40 vans each, a new delivery drone that can take off and land like a helicopter, and ongoing expansion of its air network.