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It’s Complicated: Amazon and Its Shipping Partners

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FedEx’s Fulfillment to take on FedEx’s FBA

Amazon’s (AMZN) third-party delivery program, Fulfillment by Amazon (or FBA), is set to run into tough competition from a similar service from FedEx (FDX) called FedEx Fulfillment. Through FBA, Amazon handles everything from storing products to delivering them to customers on behalf of enrolled vendors on its retail platform. 

Amazon doesn’t disclose FBA revenues or exact numbers of enrolled vendors, but the company reported a 70% increase in the number of active users of the service during the recent holiday season. It also said that more than 2 billion items were delivered through FBA during the quarter. The chart below shows Amazon’s total quarterly revenue trend.

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Serving small and midsized vendors

As a growing number of small and midsize vendors take advantage of the FBA program, Amazon said that more than 55% of the third-party sales on its retail site were fulfilled through FBA during the holiday season.

Amazon has portrayed FBA as a promising initiative, and it has invested in expanding its fulfillment network so it can serve additional vendors.

FedEx seems to have taken a cue from Amazon’s utilization of FBA and is expanding into this space with FedEx Fulfillment. With the exception of Prime, FedEx Fulfillment is a replica of FBA. FedEx Fulfillment also targets small and midsize online retailers that are increasingly relying on the Internet for their sales but lack an adequate in-house delivery infrastructure.

FedEx would store, package, and deliver goods on behalf of FedEx Fulfillment vendors. That’s a threat to Amazon because some FBA merchants could defect to the rival service.

Shipping partners pushing against Amazon

Amazon still relies on FedEx and United Parcel Service (UPS) to deliver orders to customers. However, the company is building its own delivery systems as part of its efforts to fend off competition from Walmart (WMT) and Target (TGT).

In the next article, we’ll take a closer look at Amazon and Chime.

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