FedEx Dumps Amazon as Package Delivery Continues to Evolve

NEW BRUNSWICK, NJ—This holiday season will be the first where Federal Express, better known as FedEx, won’t be delivering at least some packages for Amazon, the nation’s largest online retailer.

With more and more shipments being delivered amid online retail growth, parcel delivery and pick-up continues to evolve.

Increasingly, Amazon is delivering its own packages though a network of contractors, “access points,” and “lockers.”

Earlier this year, FedEx said it would not continue delivering Amazon’s US ground deliveries after their contract expired on August 31.

“Amazon’s economic reach has grown so great that the company has started to alienate not just rival retailer, but longtime business partners,” wrote the New York Times of FedEx’s decision to discontinue Amazon’s ground deliveries.

But Amazon is reportedly unable to find a qualified substitute for United Parcel Service (UPS), a key part to their massive United States supply chain.

UPS is also working closely with Amazon and said it will make most free-standing CVS, Advance Auto Parts and Michaels stores in New Jersey into “Access Points,” locations where packages can be received securely.

It’s just one way that Amazon is changing the entire delivery business.

In a statement, FedEx said its decision to sever its Amazon ties was “consistent with [its’] strategy to focus on the broader e-commerce market.”

The dilemma for FedEx? Continue helping its competitor Amazon grow or focus on serving the shipping needs of Walmart, Target, and other, smaller retailers.

The FedEx area inside of the Walgreens in Marlboro allows for pick up and drop off of FedEx Express and FedEx Ground packages.

Indeed, FedEx said in March 2018 that it would open stores-within-stores in 500 US Walmarts. The Old Bridge Walmart now has a FedEx store inside.

Amazon spokeswoman Rena Lunak said the company was “constantly innovating to improve the carrier experience and sometimes that means re-evaluating [its’] carrier relationships.”

“FedEx has made the decision that it no longer wants to sharpen its executioner’s sword,” Scott Calloway, a professor at NYU Stern School of Business told the NYT. “It’s another reflection of this winner-take-all ‘Hunger Games’ economy that is dominated by” fewer and fewer viable players.

Amazon said it anticipates fulfilling its orders through a combination of its own delivery infrastructure and outside carriers. A senior executive indicated in a recent tweet that the so-called “Everything Store” is appreciative of its “strategic partners who are part of [it’s] long term plan.”

With respect to the so-called “last mile,” the most complicated part of a package’s delivery, Amazon delivered more than three times of its own last-mile goods directly to consumers last year, an increase of 22% from 2016, according to a study by Rakuten Intelligence.

Amazon handled 30% of its last-mile shipments in 2018, according to Rakuten, an e-commerce data and analysis provider.

UPS said in July that it would double the amount of “access points” inside of brick-and-mortar retail stores, creating operations in about 12,000 new locations, nationwide.

There are currently about 9,000 access points at independent businesses such as banks, office buildings, gas stations, delis, florists or convenience stores, and many others.

A UPS Store recently opened on George Street in downtown New Brunswick.

In addition to the UPS “Access Points” coming soon to retail stores in the area, downtown New Brunswick recently became home to a new UPS Store on George Street.

“It’s all about taking convenience to the people,” said Dawn Wotapka, a spokeswoman for UPS, of the company’s initiative to build package pickup and drop-off sites inside of these chain stores.

“When people aren’t home… are busy and they want to get their packages on their terms… that’s kind of what this is all about,” she said.

UPS also offers pickups and drop-offs at 5,000 franchised stores nationwide.

There were 148 “traditional” UPS Store franchises in NJ at the beginning of 2018, not counting additional “non-traditional” UPS Store outlets that piggyback located within other businesses.

But the thousands of new access points are a key part of UPS’ strategy to capitalize on the growing need for mailing out and picking up packages.

What consumers does UPS anticipate will pick-up their packages at these retailers and what type of demographics does it hope to target, for example? Wotapka cited auto enthusiasts or consumers picking up prescriptions.

“You hit a nice wide swath of the population that way,” said Wotapka of the three chains’ geographic reach and long retail hours. 

Michaels, for instance, is excited about people who may be sellers on Etsy.com, an e-commerce website focused on handmade or vintage items and craft supplies. Customers will be able to purchase their supplies and also ship crafts on the spot at stores.

And since consumers are seeking reliable and convenient ways to receive their packages or return unwanted goods, demand for access points has grown rapidly, according to UPS executives.

The 7-Eleven at 286 George Street in New Brunswick is a so-called Amazon Hub. Amazon lockers are seen here.

New Brunswick is also one of some 9,000 cities in the US where Amazon Lockers have popped up.

The service and others like it are, in part, responses to so many consumers shopping on the web and also a popular type of crime.

The perpetrators are known as so-called “porch pirates” and they steal packages off of porches, out of hallways, and from entrances to buildings.

Amazon lockers may be useful to those worried about this type of theft at their homes or offices.

The “self-service kiosks” are now located in the 7-Eleven on George Street, among other bricks-and-mortar locations. Amazon lockers first sprung up in New York, City, London, and in Seattle, the city where Amazon is headquartered.

In one of its largest acquisitions to date, Amazon purchased “Ring” in early 2018. The purchase of the company, which sells video doorbell systems same name, represents another way that Amazon is hoping to combat package theft.