Amazon on Sunday, Dec. 15, sent an email to its merchant partners to inform them that it will not allow third-party sellers to use FedEx’s ground delivery to ship Prime packages—a change that could affect small businesses and pricing for customers.
According to the Wall Street Journal, the main reason for the decision to block FedEx Ground was because of its delivery performance. The ban will reportedly take effect this week and last “until the delivery performance of these ship methods improves.”
Another reason was as Amazon continues to grow its own delivery force, and FedEx grows its relationship with Amazon rivals Walmart and Target.
As of September, Amazon does not use FedEx for its own deliveries in the United States but had allowed third-party sellers—whose wares account for more than 50% of Amazon’s merchandise sales—to use it.
Amazon did not release a statement but will still allow merchants to use FedEx’s more expensive Express service for Prime orders and non-Prime orders can be sent via Ground, Bloomberg reported that UPS is another alternative.
In June, FedEx chose not to renew a contract with Amazon to transport packages on FedEx planes. In August, FedEx announced it would end ground ship contract with Amazon at the end of the month. Such moves cost FedEx $900 million in revenue, according to the Journal. FedEx shares fell 1.5% heading into Monday’s markets close.
Amazon’s move comes as the holiday season hits its peak. CNBC reported Thursday that Amazon already delivered half of its own packages this year, and will soon surpass FedEx and UPS in total package volume.