22/09/2020

Weeks after Christmas rush, Amazon says FedEx service levels have improved; FedEx says its network performed well during peak season

The online retailer on Tuesday notified its third-party merchants that they could once again use FedExs Ground network to ship orders placed under Amazons Prime membership program, nearly a month after imposing a ban on the service because of performance issues.The move ends a standoff between Amazon and onetime shipping partner FedEx, whose Ground network was blocked for the final rush before Christmas and several weeks thereafter.
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An Amazon spokesman said FedEx Ground has been reinstated for Prime shipments fulfilled by third-party sellers now that the services are consistently meeting the retailers on-time delivery requirements.
This is good news for our mutual customers who have come to rely on the FedEx Ground offering, a FedEx spokeswoman said. Overall, she said the Ground network performed well during the peak shipping season, with average transit times of 2.4 days and around 18% of packages delivered early.
Amazon said in mid-December the ban was due to slipping on-time marks for Prime orders, which generally are guaranteed to arrive within a day or two.
Missing the delivery window sparks complaints to Amazon, which sometimes extends a Prime members subscription as compensation for late deliveries. Amazon has monitored FedExs performance since imposing the ban and only recently deemed it acceptable. Merchants were always free to use FedEx Ground for non-Prime orders, Amazon said.
Some merchants and shipping consultants expected the ban would be lifted shortly after the peak shipping season ended and the number of packages being moved around the country leveled off.
One reason for the delay in restoring the shipping option was that Amazon tracks FedExs performance over a seven-day rolling window and the service experienced some disruptions at the beginning of January during a busy time for returns, said a person familiar with the matter.
Amazon and FedEx severed direct business ties last year when they let expire two shipping contracts totaling some $900 million in revenue for FedEx. The change meant that Amazon no longer used FedEx for products it shipped directly, but that third-party sellerswhich account for about 60% of all products sold on Amazoncould continue to ship with the Memphis-based shipping giant.
With FedEx Ground off limits, the merchants had to use other options to ship Prime orders, including FedExs higher-priced air delivery service or services from rival
United Parcel Service Inc.
UPS 0.45%
In December, FedEx said the temporary ban wouldnt affect its finances but complained that it deprived small-business merchants of an important shipping option during the busiest time of the year.
The abrupt decision to block FedEx Ground in mid-December forced Molson Hart to scramble during the busiest time of the year. The owner of Viahart LLC sells building toys and large stuffed animals on Amazon and other retailing sites.
He said that after switching to FedEx as his primary shipping company in August, he had to reach out to UPS to see if he could arrange pickups at his warehouse outside Dallas.
We had a long-term plan in place and we had to throw it all out the window and do the best we can, Mr. Hart said.
He said shipping with UPS was a couple dollars more per package compared with the rates he negotiated when switching to FedExwhich added up when he shipped as many as 600 packages a day during peak season.
We were literally having a party because we were saving so much money by switching from UPS to FedEx, said Mr. Hart, who added that he lowered prices with the money saved so he could sell more products. We wanted to get the flywheel going.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
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