UPS Slashes Amazon Shipments, Sending Stock Down 14%
Atlanta, Georgia - United Parcel Service Inc. (UPS) has announced a strategic move to reduce shipments for Amazon.com Inc. by 50%. The decision, effective June 2026, is part of UPS's broader strategy to focus on more profitable clients and optimize its operations.
Rising Postal Service Fees Drive Decision
The primary driver behind UPS's decision is the recent increase in package delivery fees imposed by the United States Postal Service (USPS). As of January 1, 2023, USPS hiked rates by an average of 83%, significantly impacting UPS's ability to deliver budget-priced parcels.
Shifting Market Dynamics
The shift in the economics of package delivery has forced UPS to reconsider its reliance on USPS for last-mile delivery. Unlike rivals such as FedEx Corp. and Amazon, UPS operates with unionized drivers, resulting in higher operating costs.
Exposure to Commodity-Grade Parcels
UPS aims to reduce its exposure to commodity-grade parcels, including those delivered for Amazon, and focus on more profitable segments such as healthcare shipments. However, analysts remain cautious about the company's ability to make up for the lost volume.
Stock Plunges on Revenue Forecast
Investors have expressed unease with UPS's strategy and latest revenue forecast, which fell below analyst expectations and last year's results. The stock plummeted 14% on Thursday, marking its lowest level since July 2020.
Historical Relationship with Amazon
The decision marks the latest chapter in UPS's nearly 30-year relationship with Amazon. While Amazon has developed its own delivery network, it has also partnered with UPS and other couriers to handle shipments. However, the company's increasing self-sufficiency has led to a shift in the dynamic between the two entities.
Conclusion
UPS's decision to slash Amazon shipments is a significant move that highlights the evolving landscape of package delivery. The company faces challenges with rising costs and increased competition from alternative providers.