Amazon strikes a new partnership with FedEx after UPS pullback

• Amazon has partnered with FedEx to fill some delivery gaps left by UPS.
• UPS announced earlier this year that it would significantly reduce deliveries for Amazon.
• FedEx and Amazon had cut ties in 2019 due to rising competition between the two companies.

Amazon is going back to FedEx after falling out with UPS.

According to an internal document obtained by Business Insider, Amazon signed a new partnership deal with FedEx in late February to handle some parts of its package deliveries.

The FedEx deal gives Amazon "cost favorability" compared to UPS, the document said, indicating the retail giant stands to save money from the transition.

The document doesn't specify the extent of the deal or which Amazon packages will be handled by FedEx.

"Securing FedEx capacity is our primary solution for these capacity constraints," the internal document said.

FedEx shares popped in after-hours trading on Monday, following BI's exclusive reporting.

Amazon comments

In an email to BI, Amazon's spokesperson confirmed the new partnership.

"We've reached an agreement with FedEx to serve as one of several third-party partners to deliver packages to our customers," the spokesperson said in an email statement. "FedEx joins our other third-party partners like UPS and the USPS, that work alongside our own last mile delivery network to help us balance capacity to best serve customers."

Amazon's spokesperson told BI that the company regularly works with third-party delivery partners to "balance capacity," and the FedEx deal is not meant to replace UPS entirely.

FedEx weighs in

A FedEx spokesperson told BI the company remains "focused on driving profitable growth,'" and that the two companies have been discussing this partnership for more than a year.

"FedEx has the global network, capacity, and expertise to serve the shipping needs of thousands of retailers in the e-commerce space," FedEx's spokesperson said in a statement. "We have reached a mutually beneficial, multi-year agreement to provide residential delivery of select large packages for Amazon."

This new deal will be "net positive" for FedEx's average system yields, the company added. That's an industry metric that measures the efficiency and profitability of a shipping network.

A twist

The renewed alliance between Amazon and FedEx adds a notable twist to the broader shipping industry.

FedEx and Amazon cut ties in 2019 as the two companies increasingly competed in the logistics and delivery space. At the time, FedEx said it would focus on other e-commerce customers instead. Amazon's then-operations lead Dave Clark downplayed the fallout, writing on X that FedEx was a "very small piece of our network and vice versa."

Logistics consulting firm MWPVL estimates FedEx currently handles no Amazon packages in the US. (Third-party sellers on Amazon's marketplace are still able to use FedEx as a shipping option).

The FedEx deal follows UPS's announcement earlier this year that it would reduce its shipping volume for Amazon packages by more than half by the end of 2026. Despite Amazon being its largest customer, the company cited profitability concerns as the reason for slowly winding down the partnership.

According to the internal document obtained by BI, Amazon's Extra Large delivery network, which ships bulky items like TVs and furniture, expects to get some delivery support from FedEx through this new deal. In the second half of this year, Amazon's Extra Large delivery team plans to "leverage FedEx for 100%" of any capacity risks, it added.

Amazon's spokesperson told BI that the Amazon document's reference to the extra-large delivery team's plans was "premature at this point."

Meanwhile, Amazon's in-house logistics service has since surpassed FedEx and UPS in shipping volume.

According to Pitney Bowes, Amazon shipped 6.3 billion parcels in 2024, up 7.3% from the year before, and far ahead of UPS's 4.7 billion and FedEx's 3.7 billion. USPS was the only carrier ahead of Amazon at 6.9 billion packages.

Amazon previously disclosed that more than two-thirds of its packages are delivered through its own logistics network in the US.

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