FedEx is dumping Amazon! The delivery giant has ended it’s ground shipping contract with Amazon shortly after they terminated their air shipping contract in June. FedEx will continue to sparingly ship products internationally for the company.

The public’s reaction to the break up has caused both companies’ stocks to drop slightly. Amazon is down around 1% and FedEx is down almost 2%, which does not seriously affect either company.

While Amazon has improved their ability to deliver their own packages by building new distribution centers around the U.S., the online retail powerhouse struck a new contract with UPS to make up for the lost man power. UPS has offered more aggressive rates, while FedEx has decided to part ways with Amazon to pull in more business from other retailers.

This situation reminds us of when Costco and American Express broke ties. At the partnership’s peak, American Express had 10% of its card distribution and 20% of its spend coming from their Costco branded credit cards. When American Express pulled out of the deal, their stock dropped dramatically, but the company has become a trusted brand since. Ending that contract slowly created more consumer trust for American Express, and worked out in their favor in the long run.

Relying on one customer for over 10% of your business revenue is a risky move. If they fail, you fail with them. Amazon was only 1.3% of FedEx’s business, but they saw an upward trend that needed to be eliminated before they became too reliant on the online retailer. While these examples involve large companies, this is something small and midsize businesses owners also need to be mindful of. Diversifying your customers will keep your business running strong!

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