Amazon cuts off FedEx Ground for Prime holiday shipments

Amazon.com Inc. says third-party merchants can no longer use FedEx Corp.’s ground delivery network this holiday season because it’s too slow — highlighting the e-commerce giant’s growing power over how products get to shoppers.

Amazon sent a message to sellers Sunday night instructing them of the change, according to notifications reviewed by Bloomberg. Some Amazon sellers complained about receiving the change less than two weeks before Christmas when holiday spending is peaking. Their alternatives include United Parcel Service Inc.’s ground service.

“It’s insane for them to do this on such short notice,” said Molson Hart, whose company Viahart sells toys on Amazon. “Unless we raise prices, we’re going to lose money on every order we are forced to route away from FedEx.”

FedEx said in an emailed statement that Amazon’s “decision affects a very small number of shippers, it limits the options for those small businesses on some of the highest demand shipping days in history and may compromise their ability to meet customer demands and manage their businesses.”

Still, logistics expert John Haber said FedEx has struggled to deal with seasonal demand and has been handing off some of the load to the U.S. Postal Service.

Couriers are under extra pressure because there are six fewer days this holiday shopping season, and package volume is forecast to grow.

Amazon’s FedEx ban follows a dispute between the two companies, which failed to renew a delivery contract.

“There’s a lot of bad blood between the two organizations,” said Haber, who runs Spend Management Experts, an Atlanta consulting firm. He said the feud will benefit UPS, which will have more bargaining power with Amazon.

FedEx shares fell 1% on Monday. UPS shares rose 0.4%.

More than half of the products sold on Amazon come from third-party merchants that pay Amazon commissions on each sale. Many of those merchants also pay Amazon for logistics services such as warehousing and delivery, which puts Amazon in competition with FedEx. Merchants have complained to antitrust regulators that Amazon uses its e-commerce dominance to push them to use its logistics services.

Some merchants say using Amazon warehouses and trucks is faster and cheaper than doing that work themselves. But Amazon increases storage fees in its warehouses during peak holiday shopping months, and some merchants prefer to oversee deliveries on their own to avoid these charges.

Until now, sellers could use FedEx’s ground service during the season to meet Amazon’s pledge to deliver millions of products in one or two days. They can still use FedEx’s express service for Prime packages, but that’s a costly option.

Amazon examines its delivery providers’ performance each year to determine order cut-off times for the holidays.

The Wall Street Journal reported the FedEx ban earlier.