New Amazon Shipping Service May Mean Big Changes for the Traditional Carriers – and Your Business

FedEx Third Party Billing Fee

Earlier this year Amazon began testing Shipping with Amazon (SWA), a new service that would directly compete with major shipping carriers such as FedEx and UPS. Since then tensions have escalated between Amazon and FedEx in particular, which this month announced that it would not be renewing one of its shipping contracts with the online retailer. The discontinued contract is for FedEx Express, which handles airplane shipments. The decision does not affect Amazon’s two-day Prime shipments, which are handled by the USPS, or last-mile ground deliveries.

Although this was apparently not a huge loss for FedEx (according to CNBC, Amazon accounted for only 1.3% of the carrier’s total revenue in 2018, and FedEx stock dropped less than 1% following the announcement), it’s just one more indicator that Amazon is going to be a formidable rival in the shipping race going forward. In recent years the company has been expanding its fleet of delivery aircraft and is currently building a $1.5 billion air cargo hub attached to the Cincinnati/Northern Kentucky International Airport. But not all of these developments spell doom for the traditional carriers, at least not in the short term. According to Reuters, analysts say that the ending of this FedEx contract will likely benefit UPS, which has already gotten a boost from Amazon’s shift to one-day shipping for its paying Prime customers. Furthermore, UPS is making its own moves, having recently begun its new eFulfillment service for small businesses—a program reminiscent of FedEx Fulfillment, launched in 2017. Unsurprisingly, both of these services mimic Amazon’s own fulfillment program, Fulfillment by Amazon.

When you read the descriptions of these and other programs you see language such as “help,” “simplify,” and “cut costs.” But as we’ve discussed in past posts, what companies like FedEx and UPS are really concerned with is keeping up with their competition, which increasingly means Amazon, and protecting their own bottom line. They take advantage of how busy you are and assume you won’t notice the various rate increases, fees, and other expenses that can add up over time—and they’re not wrong. You have day-to-day operations to manage and orders to fill, leaving little extra time to unearth and examine shipping data and fight to reclaim those dollars and cents that slip through the cracks. That’s why having a partner like Franklin Parcel is more important than ever before.

Amazon’s increasing presence in the shipping sphere could mean big changes to come, but the specific impact of those changes depends entirely on the nature of your business and the products you ship. The ending of the FedEx Express contract is just one example of what’s in store as Amazon encroaches further on territory long dominated by the traditional carriers. Only time will tell if those carriers will rise to Amazon’s challenge or begin to falter, and how those responses will affect the industry as a whole. In the meantime you can protect your business by having a vigilant partner like Franklin Parcel on your side.

Predicting the Impact of the 2019 Rate Increases on Your Shipping

Want to get an idea of how the 2018 shipping rate increases have already affected your bottom line? Franklin Parcel can help. Request a 15-minute consultation through the form below to streamline costs and Ben will help you show you how Parcel Auditing works.

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