After ending its express delivery contract with Amazon, FedEx sought to increase competitiveness by forming a strategic alliance with Dollar General . This partnership allows FedEx to offer drop-off and pickup services at thousands of Dollar General stores, enhancing service access particularly in rural areas . As of late summer 2019, the service was available in over 1,500 stores and was to expand to over 8,000 by the end of 2020, extending FedEx's Retail Convenience Network to more than 62,000 locations . This expansion ensures that over 90% of Americans live within 5 miles of a FedEx service location, broadening its reach .

Amazon's approach to handling the 'last mile' involves building a fleet of delivery vans and cargo airplanes, thereby reducing its reliance on traditional shippers like USPS, FedEx, and UPS . This strategic move allows Amazon to save on costs and exert greater control over its logistics, ensuring timely deliveries for Prime members . As a result, FedEx decided to cancel its express delivery contract with Amazon, choosing instead to focus on its ground delivery service and establish new partnerships with other retailers . UPS, however, has chosen to deepen its ties with Amazon, remaining neutral and relying more on USPS for certain deliveries .

The partnership between FedEx and Dollar General aligns with FedEx's long-term strategic goals by expanding access to its services, thereby addressing a broader e-commerce market . By tapping into Dollar General's extensive rural footprint, FedEx creates more convenient service points for package drop-off and pick-up, enhancing customer accessibility . This move is part of FedEx's strategy to fill the void left by reducing its cooperation with Amazon and to strengthen its position as a leading e-commerce delivery service provider .

Amazon's logistics expansion impacts traditional retail businesses by setting higher standards for delivery times and customer service expectations, prompting these businesses to reevaluate their supply chains to remain competitive . Retailers may need to invest in more sophisticated logistics solutions or partnerships to enhance delivery efficiency and customer satisfaction . The pressure to offer comparable shipping options as Amazon could drive increased collaboration with logistics providers or direct investments in proprietary delivery systems to ensure similar or superior service levels .

The introduction of FedEx's seven-day delivery service likely raises customer expectations for constant availability of delivery services, aligning more closely with Amazon's known rapid delivery options . This service innovation may enhance FedEx's competitiveness by catering to the increasing demand for faster shipping and extended delivery hours . It suggests a further alignment with the needs of e-commerce consumers and positions FedEx to vie more aggressively against Amazon, although it will still need to address the cost and efficiency challenges inherent in meeting these heightened service expectations .

The growth of Amazon Air introduces significant competitive dynamics within the e-commerce logistics industry by allowing Amazon to internalize a large portion of its air shipping needs . With a planned fleet of at least 70 cargo aircraft operating at over 20 air gateways, Amazon Air enables more efficient control of shipping times and enhances operational flexibility . This capability may pressure traditional shippers like FedEx and UPS to innovate or reduce costs to remain competitive, as Amazon's logistics efficiency becomes a critical differentiator in the market .

Logistics control is central to Amazon's value proposition, allowing precise management of delivery times and costs, which enhances customer satisfaction and loyalty through reliable and rapid shipping options such as those available to Amazon Prime members . The control facilitates efficiency in tracking and resolving delivery issues, contributing to superior customer service . This strategy places competitive pressure on traditional shippers and e-commerce platforms to match or exceed Amazon's logistics efficiency, potentially altering market competition by setting a high standard for delivery speed and cost-effectiveness .

By choosing to remain neutral, UPS may face challenges related to managing its dependence on Amazon for a significant portion of its business, especially as Amazon continues to build its own logistics capabilities . Unlike FedEx, which has pivoted to establish new partnerships, UPS's strategy could expose it to potential shifts in Amazon's shipping preferences, possibly affecting package volumes and revenues . Additionally, maintaining neutrality might limit UPS's ability to aggressively pursue other opportunities that could mitigate the impact of Amazon's logistics expansion .

FedEx's strategy to increase self-managed package volume aims to optimize its operational capabilities by making use of its over 600 sorting and delivery facilities across the United States . By reducing reliance on the U.S. Postal Service for last-mile delivery, FedEx seeks to improve delivery speed and control costs . However, analysts express skepticism about the profitability of this increased volume of short-haul deliveries, suggesting that achieving the desired financial returns may be challenging .

Amazon's investment in its own logistics operations is justified by significant cost savings and improved customer experience. By using its own delivery fleet, Amazon saves $2 to $4 per package, amounting to $2 billion annually . This not only reduces dependency on third-party shippers but also provides Amazon with total control over logistics, leading to better customer experience by facilitating easier package tracking and faster responses to inquiries . Additionally, it ensures reliable delivery even during high demand periods such as holidays or adverse weather .