FedEx Price Increases To Hurt Smaller Internet Businesses More Than Amazon

May 10, 2014
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While FedEx’s recent announcement that it will raise its prices will hurt all shippers, it will affect small businesses a lot more than the giant online merchant, Amazon.

The reason is that Amazon is so big that it negotiates more favorable rates than the smaller firms.

“FedEx needs Amazon more than Amazon needs FedEx. Instead, FedEx’s price increase – which happens in January and which analysts say U.P.S. is likely to match — could further cement Amazon’s power over retailing by striking a bigger blow to small Internet retailers, the same ones that are already losing the battle with Amazon. The Internet might have made it possible for the smallest of businesses to sell their wares, but the price of delivering cardboard boxes highlights just how powerful an advantage size can be in the Internet economy,” writes the New York Times.

“The main reason is that standard shipping rates simply do not apply to Amazon. The company negotiates its own rates with FedEx and other shipping companies, and gets an enviable deal because of the huge volume of business it supplies. Put another way: FedEx would rather give Amazon a sizeable discount than lose Amazon as a customer altogether.”

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