Amazon blocks sellers from using FedEx for some Prime shipments

Amazon.com is temporarily blocking third-party sellers from using FedEx Corp’s ground delivery network to handle Prime shipments as it strives to hit accelerated delivery deadlines this holiday season.

This is likely to affect only a small number of sellers but “limits the options for those small businesses on some of the highest-demand shipping days in history,” a FedEx representative said.

Amazon and FedEx did not say how many packages would be affected by the restriction. Amazon declined to say how long the move would last. The Wall Street Journal earlier reported that the ban was due to FedEx’s on-time performance.

Amazon said sellers can still use FedEx’s pricier and faster Express services, including air transport, for Prime deliveries. The FedEx Ground and Home delivery options that are temporarily restricted for sellers’ Prime shipments remain available for non-Prime shipments. Third-party sellers offer more than 50% of the goods on Amazon’s site.

Amazon Prime members pay $119 per year for fast, “free” delivery.

Tensions between Amazon and FedEx became public this summer. FedEx canceled its delivery agreements with the world’s leading online retailer just months after Amazon announced plans to speed up Prime shipping to one day from two days on millions of items.

On-time delivery rates during the record-setting Cyber Monday sales week were 90.4% for FedEx Corp, 92.3% for the U.S. Postal Service and 92.7% for United Parcel Service Inc, according to consultancy ShipMatrix.

Amazon van drivers delivered 93.7% of U.S. packages on time during that week.
ShipMatrix President Satish Jindel said the performances were not directly comparable because Amazon vans handle short-distance “last-mile” deliveries from fulfillment centers to customer doorsteps.

Major shippers like FedEx and UPS move packages great distances - at times from factories on one U.S. coast to customer doorsteps on another - and are more exposed to weather and other disruptions.

News of the FedEx restrictions hit just ahead of FedEx’s quarterly financial report on Tuesday.

“It’s not about service, it’s about being irritated with the relationship,” Jindel said of Amazon’s decision.

And it could have unintended consequences for Amazon, which is under increasing scrutiny from regulators, labor groups and consumer protection advocates.

“It will create more ill will toward Amazon and drive more third-party sellers to re-evaluate how they are managing their brands and if they want to be dictated to by Amazon,” said Evan Armstrong, president of supply chain consulting firm Armstrong & Associates.