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Still, Amazon doesn’t see shipping as a profit center, and is likely willing to accept lower shipping profit margins than UPS.Īmazon founder Jeff Bezos “has for a long time said, ‘Your margin is my opportunity,’” said Satish Jindel, president of shipment technology firm ShipMatrix. “Even if you don’t want to charge for it, it’s costing a lot.”

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“There’s no such thing as free shipping,” said Bill Seward, UPS’s president of global customer solutions. For consumers the cost of shipping becomes more opaque, wrapped into the total price of the product. On its website, Amazon suggests to e-commerce businesses that they increase prices to cover the cost of free shipping. Today, Amazon’s revenue is nearly five times that of UPS and its stock market capitalization nearly 10 times bigger.Īmazon’s retail strategy has succeeded in part by promoting two-day and next-day delivery, as well as free shipping. After it expanded its product offerings, other retailers like Circuit City, Sears and Toys “R” Us filed for bankruptcy protection. The company started as an online bookseller in 1994, partnering with national bookstore chain Borders Group in 2001 before driving it out of business. Through its own fulfillment network, it can ship products for the millions of businesses selling them on its website. By 2008 it had retreated, transferring air-parcel deliveries to UPS and slashing its ground network.Īmazon has proven a much tougher challenger because it is a giant online retailer. push after being acquired by Germany’s mail monopoly Deutsche Post, promising that “yellow is the new brown” in an advertising campaign. UPS’s massive global shipping network has long stood as a bulwark against competitors, because of the cost of building the infrastructure to move so many packages around the world so quickly. Explore From 2021: UPS zeroes in on most profitable packages to deliver The postal service also is a major player, but it focuses on slower delivery of mail. and started expanding internationally.įor decades, UPS and FedEx virtually have had a shipping duopoly across the country, with UPS becoming better known for its extensive ground network and FedEx for its overnight shipping by air. By 1975 it served every address in the U.S. The company began a messenger service in 1907 that became United Parcel Service in 1919. UPS has depended on the cash cow of package delivery for about a century. They include logistics for small and medium-sized businesses without their own warehouses or shipping departments, business-to-business shipments, and the specialized world of delivering pharmaceuticals and other temperature-sensitive medical shipments.Īmazon, for its part, says it is scaling its shipping network “to bring even faster delivery to more customers.” The competitive threat of “free” shipping Since she took the reins of the shipping giant, her rallying cry has been “better not bigger” - a marked shift in approach for a company that touts itself on its website as “the world’s largest package delivery company.”Īs part of that strategy, UPS is increasingly targeting areas with a minimal Amazon presence. 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,” UPS Chief Executive Carol Tomé told investors earlier this year.īut Tomé also recognizes the playing field is changing. “We have a great relationship with Amazon. Explore From February: UPS profit soared above $10B in ’21, sales to top $100B in ’22 Amazon and its affiliates represented about 11.7% of UPS revenue last year, more than any other retailer. Unlike FedEx, which cut ties with Amazon a few years ago, UPS continues to treat Amazon as a customer, not just a competitor. Its profit margins, while volatile, have remained generally strong. It expects its revenue to top $100 billion for the first time in its history this year. UPS has grown its own revenue by two-thirds since 2014, including a 15% increase last year.

That surge has gone into an even higher gear during the pandemic, with consumers ordering anything and everything to be shipped right to their doorsteps. That’s because the number of packages are rising amid the broader surge in e-commerce. So far, UPS’s revenue and profit have kept growing despite the competitive threat. 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. Marc Wulfraat, president of logistics consulting firm MWPVL International, believes Amazon will surpass UPS in U.S.

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