Amazon.com Inc. says third-party merchants will no longer be allowed to use the ground distribution network of FedEx Corp. this holiday season because it is too sluggish- reflecting the growing power of the e-commerce giant over how goods reach customers.
According to Bloomberg, Amazon sent a message to sellers Sunday night advising them about the switch. Many Amazon sellers reported that when holiday spending peaks, they are informed of the adjustment less than two weeks before Christmas.
"To do this on such a short notice is crazy for them," said Molson Hart, whose company Viahart is selling toys on Amazon. "If we raise prices, we are going to lose money on every order we're forced to route away from FedEx."
In an emailed statement, the company said Amazon's decision "affects a a very small number of shippers restricts the choices for those small businesses on some of the highest demand delivery days in history and may threaten their ability to meet customer demands."
Couriers are under extra pressure because of this holiday shopping the season there are six fewer days, so package size is expected to increase.
The ban on third-party shippers using FedEx by Amazon follows a the dispute between the two firms that refused to extend a contract for distribution.
"Both companies have a lot of bad blood," said Haber, who runs Spend Management Experts, a consulting firm located in Atlanta. He said the dispute would help UPS, which would have more power to negotiate with Amazon.
In New York, FedEx shares fell by about 1 percent. UPS was up a little bit. More than half of all items sold on Amazon come from third-party sellers who pay commissions from Amazon on each sale.
Many of these retailers are also paying Amazon for distribution services such as warehousing and shipping, placing Amazon in competition with FedEx.
Merchants also protested to antitrust regulators that the firm is forcing them to use its distribution products using its e-commerce supremacy.
Many retailers claim it is faster and cheaper to use Amazon warehouses and trucks than to do the job themselves. But during peak holiday shopping months, Amazon raises storage fees in its warehouses, and some retailers tend to supervise shipments on their own to prevent these fees.
Meanwhile, sellers have so far been able to use the ground service of FedEx during the season to meet Amazon's promise to deliver millions of goods in one or two days.