By Esther Fung and Dana Mattioli
After a high-profile split, FedEx and Amazon.com have explored doing more business with each other.
The two companies last year discussed FedEx accepting returns of Amazon packages at its retail locations, bringing the delivery giant a share of the business, according to a person familiar with the matter. Amazon has partnerships with a number of companies, including FedEx rival United Parcel Service, to handle the millions of returns it has annually.
The two sides didn’t reach a deal, but the developments come as FedEx has sought to boost parcel volumes amid an industry slump and Amazon seeks to improve the experience its customers have in returning items.
The talks with FedEx happened last spring, around the same time that Amazon introduced a fee for some customers who bring their returns to UPS stores.
In October, UPS signed a $465 million deal to buy Happy Returns, which has partnerships with several retailers and thousands of return drop-off sites in its network. The deal enabled UPS to reduce its exposure to Amazon and handle returns from other online retailers.
Happy Returns included FedEx Office locations as a drop-off point for packages prior to being purchased by UPS and now no longer does so. It doesn’t accept drop-offs of Amazon returns.
Ties between FedEx and Amazon began to fray in 2019 when FedEx, then led by founder Fred Smith, said it would end delivery contracts to move Amazon’s boxes. Since then FedEx has tried to fill its trucks and planes with parcels from other companies.
At that time FedEx saw Amazon as a growing competitive threat since the e-commerce giant was developing its own delivery capabilities. Amazon’s ground network, for example, uses local contractors to get parcels to customers, similar to FedEx.
After the breakup announcement, Dave Clark, Amazon’s then-senior vice president of operations, called it a “conscious uncoupling at its finest.”
The breakup was a gamble for FedEx at the time, and since then, Amazon’s daily shipping needs have only increased. Amazon accounts for nearly 40% of U.S. ecommerce sales, the largest share, according to estimates from eMarketer.
Amazon’s heavy investments in its logistics network have helped it become less reliant on the likes of FedEx and UPS. In 2022, Amazon surpassed UPS as the largest nongovernmental carrier of parcels in the U.S. It eclipsed FedEx in 2020, The Wall Street Journal reported.
The risks of relying on one customer are well known. UPS has said that it wants to reduce its exposure to Amazon but the partnership still drives a substantial part of its business. Amazon accounted for 11.8% — or about $11 billion — of UPS’s revenue last year, up from 11.3% in the year prior.
Amazon represented 1.3% of FedEx’s total revenue in 2018, or less than $1 billion. FedEx still delivers items for some merchants that sell items through Amazon’s marketplace but use their own warehouses.
FedEx is now fighting for business amid a downturn in demand after a pandemic-fueled surge. Daily package volumes for FedEx have fallen year over year for several quarters in a row. It has had to park planes and furlough workers, and it embarked on a corporate restructuring to combine its air and ground networks.
The parcel-delivery giant is slated to release its quarterly earnings report March 21.
Write to Esther Fung at esther.fung@wsj.com and Dana Mattioli at dana.mattioli@wsj.com