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On its face, this seems a little like sour grapes from FedEx. "You're going to leave us, so we're going to leave you first." While Amazon is _absolutely_ becomi

by basseq 7y ago

On its face, this seems a little like sour grapes from FedEx. "You're going to leave us, so we're going to leave you first." While Amazon is _absolutely_ becoming a last-mile competitor—I see their blue vans all over the place now—they aren't there yet, and still worth 1.3% of 2019 sales now. Why not take the money and extend your runway to "reduce dependence"? So then to answer my own question, I'd hypothesize that it's a combination of bad-deal economics (e.g., Amazon contract isn't that profitable in aggregate) and strategic focus to spend time and energy on the post-Amazon _future_ rather than the present. Which I get.

ceejayoz 7y ago
I'd suspect that as Amazon's volume falls, the discounts and special treatment they've been getting cease to make economic sense.
- sverhagen 7y ago
  Years ago I worked for one of Amazon's shipping operators, whatever we wanna call them, and the rumor was that Amazon had already squeezed contracts to the point that on their own merit these contracts were not or only barely profitable, depending on the math. It was said to be still interesting to have the contracts, for scale and reputation. But then it may just not be sour grapes for FedEx, but rather that the numbers weren't compelling them to stay in a relationship likely to be dumped from anyway, sooner or later.
  - londons_explore 7y ago
    I bet amazon exploited the weaknesses in the contracts... Delivery to San Fransisco - amazon delivers. Delivery to an island off Alaska - Fedex has to take it for a flat rate that nowhere near covers costs.
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meee 7y ago
I was in this field for just over 15 years and specifically during the Amazon deal times. The idea was that Amazon was mapping the FedEx and UPS networks to clone. FedEx and UPS decided to take the easy money while Amazon was getting started (because they would get there anyway) and get out when it became more direct competition. Amazon distribution centers started popping up within a few miles of the traditional players and it seems like that time to diverge is here. This has been the plan for awhile and the timing with FedEx seems less sour grapes (to me) and more of a competitive jab.
mcphage 7y ago
> While Amazon is _absolutely_ becoming a last-mile competitor [...] thy aren't there yet > Why not take the money and extend your runway to "reduce dependence"? Maybe they're trying to catch Amazon flat-footed? Rather than waiting until Amazon doesn't need them anymore, if they drop Amazon before Amazon is ready, they might be able to get them to come crawling back on better terms.
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badgers 7y ago
You're on point about the strategic focus. Think long term, who these shipping companies want to align with: Target, Walmart, other companies with physical presence and a need to grow their e-commerce to compete with Amazon. By not renewing the Amazon contract you can focus on helping your long term partners and let Amazon deal with figuring out how to continue providing the same level of customer service with it's relatively young last mile delivery portion of shipping. And any bad Amazon customer experiences that result due to the last mile delivery damage their brand, and can result in lost sales, hopefully a gain then to one of these shipping companies long term partners.

by basseq 7y ago

ceejayoz 7y ago

I'd suspect that as Amazon's volume falls, the discounts and special treatment they've been getting cease to make economic sense.

sverhagen 7y ago
Years ago I worked for one of Amazon's shipping operators, whatever we wanna call them, and the rumor was that Amazon had already squeezed contracts to the point that on their own merit these contracts were not or only barely profitable, depending on the math. It was said to be still interesting to have the contracts, for scale and reputation. But then it may just not be sour grapes for FedEx, but rather that the numbers weren't compelling them to stay in a relationship likely to be dumped from anyway, sooner or later.
- londons_explore 7y ago
  I bet amazon exploited the weaknesses in the contracts... Delivery to San Fransisco - amazon delivers. Delivery to an island off Alaska - Fedex has to take it for a flat rate that nowhere near covers costs.

deleted 7y ago

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meee 7y ago

I was in this field for just over 15 years and specifically during the Amazon deal times. The idea was that Amazon was mapping the FedEx and UPS networks to clone. FedEx and UPS decided to take the easy money while Amazon was getting started (because they would get there anyway) and get out when it became more direct competition. Amazon distribution centers started popping up within a few miles of the traditional players and it seems like that time to diverge is here. This has been the plan for awhile and the timing with FedEx seems less sour grapes (to me) and more of a competitive jab.

mcphage 7y ago

> While Amazon is _absolutely_ becoming a last-mile competitor [...] thy aren't there yet > Why not take the money and extend your runway to "reduce dependence"? Maybe they're trying to catch Amazon flat-footed? Rather than waiting until Amazon doesn't need them anymore, if they drop Amazon before Amazon is ready, they might be able to get them to come crawling back on better terms.

deleted 7y ago

[deleted]

badgers 7y ago

You're on point about the strategic focus. Think long term, who these shipping companies want to align with: Target, Walmart, other companies with physical presence and a need to grow their e-commerce to compete with Amazon. By not renewing the Amazon contract you can focus on helping your long term partners and let Amazon deal with figuring out how to continue providing the same level of customer service with it's relatively young last mile delivery portion of shipping. And any bad Amazon customer experiences that result due to the last mile delivery damage their brand, and can result in lost sales, hopefully a gain then to one of these shipping companies long term partners.