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I would be curious if Amazon is using Fedex for its deliveries which are the most expensive to perform (rural area) while delivering all the lowest cost deliveries themselves (urban areas, a few miles from the distribution center). Fedex maybe losing money on every delivery.

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This is the real reason. It's the same parasitic approach Amazon has to its 3rd party sellers that are basically doing its price discovery and are promptly replaced if some goods sell well by either making a deal with the producer themselves, undercutting them or by making an "almost-clone" and selling it under Amazon Basics or another label they own.

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