Is Amazon to blame for FedEx drop?

The volume for FedEx's "SmartPost" service, which it operates with the U.S. Postal Service, dropped 8 percent in the shipping company's fiscal fourth quarter. However, volumes had actually increased 15 percent, if the numbers excluded the "changes in shipping patterns from one large customer," according to a FedEx statement.

Now, analysts are speculating that the large customer FedEx is referring to must be Amazon (NASDAQ:AMZN). "There aren't many SmartPost users whose volumes can move the overall volume needle so sharply. Nor are there many users with the clout to beat FedEx over the head on pricing so that their absence would send the provider's yields springing sharply higher," DC Velocity wrote in a recent article.

Amazon is the only shipper that "can affect that big a swing" in SmartPost traffic within such a compressed time period, according to Rob Martinez, president and CEO of Shipware LLC, a parcel consultancy.

Amazon also makes sense since Jeff Bezos, founder and CEO, has set in motion measures to lessen the massive retailer's reliance on third-party providers. The retailer is building a private delivery fleet to support expansion of its AmazonFresh business in its top 40 markets. The retailer's second-tier U.S. markets – around 60 – will be served by an array of regional delivery carriers and the remaining markets will be mostly served by USPS.

UPS and FedEx reportedly will not play a prominent role in the delivery restructuring program that Amazon is "aggressively" working on.

Meanwhile, analysts speculate that FedEx may not be sorry to see the loss of Amazon's business. In its fiscal 2014 earnings report, the shipper noted that the increase in its SmartPost revenue was due to the dual impact of rate increases and improvements in customer mix. The message from FedEx is that "our balance sheet is better off without low margin business" and that "we have no problem losing that customer," Martinez said.

For more:
-See this DC Velocity article
-See this DC Velocity article

Related stories:
Amazon could soon launch local services
Amazon expands Sunday delivery to 15 more cities
Target, Instacart see value of same-day delivery
Facebook, Amazon, PayPal duke it out
FedEx to start charging by package size

Suggested Articles

Costco changes up its menu items, and Alibaba and Guess partner for a physical store.

Janey Whiteside, Walmart's new chief customer officer, is well acquainted with the importance of customer service in modern retail.

Whole Foods will offer deals on Amazon's Prime Day, and tariffs against China are causing pricing hikes.