FedEx Corp. will stop shipping packages for Amazon.com Inc., the logistics company has said.

FedEx told Bloomberg today that it will allow its ground delivery contract with the online retail giant to expire at the end of the month. The move comes weeks after the company in a surprise announcement revealed plans to stop flying air cargo for Amazon.

“This change is consistent with our strategy to focus on the broader e-commerce market, which the recent announcements related to our FedEx Ground network have us positioned extraordinarily well to do,” the company said in a brief statement distributed to the press. 

Amazon has long relied on outside logistics providers to ferry packages to customers, with FedEx one of its main partners for so-called last mile delivery at the final leg of the journey. But nowadays, the online retail giant is actively working to reduce its dependence on external carriers. Amazon spent more than $8 billion on logistics in the second quarter alone, including more than $800 million to expand single-day delivery options.

One analyst firm estimated in February that the company now handles shipping for 26% of orders on its marketplace. Packages are transported by a growing delivery fleet that includes Amazon-branded trucks, vans, planes and even the rare robotic rover.

The online retail giant is also fostering an ecosystem of small businesses to supplement its in-house fleet. In June, Amazon launched a program that encourages employees to strike out on their own and create delivery companies to transport Amazon packages under contract.

The online retail giant’s fast-expanding logistics network is seen as a growing threat to traditional players such as FedEx. As far as the FedEx leadership is concerned, that threat is evidently big enough to forfeit the roughly 1.3% of the company’s annual revenues that Amazon accounted for last year.

Amazon does not yet compete directly in the delivery industry, but that may be poised to change. Early last year, reports emerged that the company started piloting a logistics service for businesses selling products through its marketplace. Amazon has also entered the freight brokerage segment with an online platform that matches companies to third-party shipping providers.

Even with its aggressive investments in logistics, it will take some time until the company can fully meet its transportation needs internally. As a result, Amazon will likely continue relying on outside logistics providers for the foreseeable future. One of Amazon’s biggest current partners, FedEx rival United Parcel Service Inc., generates an estimated 5% to 10% of its annual revenues from its contract with the company. 

Photo: Amazon