One of the more bizarre business relationships in the US is between Amazon and UPS.
UPS’s brown trucks have ruled the streets for decades, but did you know Amazon is both its biggest rival and its biggest customer?
It goes back to 2013, when the UPS shipping network was down, which resulted in millions of items not arriving in time for Christmas.
To appease irate customers, Amazon issued gift cards and refunds — and quickly built out a home delivery network to reduce its reliance on UPS.
The high-stakes competition is yet another striking example of how West Coast tech titans are disrupting traditional industries and putting pressure on old-economy stalwarts to reinvent themselves or risk being left in the dust.
The outcome of the battle could have a significant impact on how consumers shop, how quickly they receive their packages, and how much they pay to have goods delivered.
UPS’s 534,000 employees, including an estimated 15,000 in metro Atlanta, are also in jeopardy, as are lucrative UPS union jobs that pay drivers nearly $40 an hour.
Amazon’s warehouses, planes, and trucks aren’t the only ones causing havoc.
The e-commerce giant has also popularized the concept of “free shipping,” which poses a potentially existential threat to UPS, which has long been compensated handsomely for delivering goods to stores, offices, and homes.
In 2021, Amazon delivered more than 5 billion packages in the United States, while UPS delivered approximately 5.5 billion packages in the United States.
Amazon’s figures are imprecise because the company does not share all of its shipping data.
Amazon has mentioned that it will overtake UPS this year, and it is not alone in this prediction, despite the fact that UPS has a more extensive air and ground network than it has built up over a century.
Marc Wulfraat, president of logistics consulting firm MWPVL International, believes Amazon will surpass UPS in U.S. package volume in 2022 — and in five years have a logistics network large enough that it won’t need to rely on UPS or the U.S. Postal Service.
Despite the competitive threat, UPS’s revenue and profit have continued to grow. This is because the number of packages is increasing in tandem with the overall increase in e-commerce.
During the pandemic, that surge has accelerated, with consumers ordering anything and everything to be delivered right to their doorsteps.
UPS’s revenue has increased by two-thirds since 2014, including a 15 percent increase last year.
This year, it expects revenue to exceed $100 billion for the first time in its history. While volatile, its profit margins have remained generally strong.
Unlike FedEx, which cut ties with Amazon a few years ago, UPS stays to treat Amazon as a customer, not just a competitor. Amazon and its affiliates signified about 11.7% of UPS revenue last year, more than any other retailer.
UPS Chief Executive Carol Tomé said: “We have a great relationship with Amazon. And we have mutually agreed about the volume that we should take and the volume that they should keep that works best for both companies
Source: The Atlanta Journal-Constitution