FedEx, Amazon Had Talks on Returns Partnership Last Year, Report Says

FedEx and Amazon ended their ground delivery partnership back in 2019, but a recent report from the Wall Street Journal indicates that the logistics networks entertained the idea of a reunion.

Both companies last year discussed FedEx accepting returns of Amazon packages at its more than 2,000 FedEx Office retail locations, which would have brought the delivery giant a share of the business.

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Amazon already has partnerships with a number of companies, including FedEx rival UPS, Kohl’s and Staples, to handle in-person returns for the e-commerce giant. The company also collects returns within its more than 500 Whole Foods Market stores.

The talks reportedly happened last spring, around the same time that Amazon introduced a fee for some customers who bring their returns to UPS stores. The two sides were unable to reach a deal, the WSJ report said.

A FedEx spokesperson called the talks “a normal course of business.”

“We are always open to having commercial conversations when approached with an opportunity by current or potential customers,” the FedEx representative said. “As a reminder, we still do business through Seller Fulfilled Prime and Marketplace.”

Sourcing Journal reached out to Amazon.

The developments come amid a rough 2023 for package demand in general amid weakened consumer spending resulting in a wider freight recession. On the backs of the lingering weak demand, FedEx had to cut its full-year 2024 revenue forecast in December due to fewer-than-expected sales and income. The Memphis, Tenn.-based parcel delivery giant will report earnings on Thursday.

The companies first went their separate ways due to the competition brought to the table by Amazon, which was developing its own delivery capabilities. Amazon’s ground network uses local contractors to get parcels to customers. Last year, after the supposed FedEx talks, Amazon relaunched its Amazon Shipping ground delivery service for shippers who don’t sell on its marketplace—bringing a direct threat to FedEx that it could take on more parcel share on the ground.

Regardless of the relationship between FedEx and Amazon, talks of a deal speak to how returns management has gained a wider role in the logistics conversation as pandemic-era e-commerce purchasing habits shifted.

Retailers endured $743 billion in returned merchandise in 2023, or 14.5 percent of total retail sales, according to a report from the National Retail Federation (NRF) and Appriss Retail.

Companies like Amazon, FedEx and UPS are still trying to help retailers not just develop a successful returns ecosystem, but ultimately contain costs. According to a survey from e-commerce fulfillment provider Radial, 60 percent of retailers cited the high costs to repackage and restock the goods as a challenge.

And with that in mind, 43 percent said they struggled with maintaining healthy profit margins.

FedEx had already widened its pool of customers in 2023 when it expanded its Consolidated Returns solution to smaller merchants who may struggle with these costs, Ryan Kelly, vice president of e-commerce and digital marketing at FedEx, told Sourcing Journal in December.

With Consolidated Returns, shoppers who buy an item from a participating retailer can drop off the purchase without a box or label at 2,000 FedEx Office locations. The returned items are then consolidated with other returns from a variety of merchants in an effort to save materials and space. The items are then processed through FedEx Logistics and sent back to the merchants via a less-than-truckload option.

Kelly said he wanted to expand Consolidated Returns to more retail categories in 2024.

“A lot of times this consolidation ends up being apparel, so we’ll want to make it available for more things than just apparel,” Kelly said. “It’s about working with our customers to understand ‘what is the problem we’re trying to solve? And then how do we solve that problem?’ That’s what we’re going to spend a lot of 2024 looking at. We feel great about our portfolio, I don’t know that we need to build something incremental. It’s more so using the Swiss army knife that we have and tailoring it to meet the needs of the of the market and the merchant.”

UPS saw so much value in the reverse logistics conversation that it acquired Happy Returns last October, bringing Happy Returns’ box-free, label-free returns capabilities to 5,200 UPS Stores nationwide. Ironically, Happy Returns ended its partnership with FedEx as part of the deal.

The consolidated returns software will help cut customers’ handling costs and improve UPS’s delivery density, the company said at the time. At the time, UPS acknowledged that bringing Happy Returns into the fold could help the firm bring back some of the package volume that customers had diverted away last year when there were concerns a potential Teamsters strike.

And DHL perhaps wants to have a bigger say in the returns management conversation as well. The company recently partnered with online fashion resale platform Reflaunt to scale the firm’s re-commerce capabilities. But DHL may be also be in the running for a new acquisition of a returns-specific business, CEO Tobias Meyer hinted in an earnings call earlier in March.

Citing that there are “certain sectors where we’re lacking the expertise, we want to do…more in returns management,” said Meyer in the call. “That’s something we’re looking at because we can leverage what we already have and provide such an acquisition with a significant positive growth momentum.”