In a significant shift in its business relationship with Amazon, UPS announced plans to reduce its delivery volume for the e-commerce giant by 50% by the latter half of 2026. This strategic decision comes as the global shipping leader reassesses the profitability of its partnership with the world’s largest online retailer.
During a recent investor call, UPS CEO Carol Tomé acknowledged the complex dynamics of the relationship, noting that while Amazon remains their largest customer by volume, it isn’t their most profitable one. The decision highlights the challenging economics of handling Amazon’s massive package volume under existing large-volume pricing agreements, which yield lower per-package revenue compared to deliveries for other clients.
The announcement comes at a time when UPS faces mounting pressure from its shipping operations with Amazon. The company reported revenue of $92 billion from shipping fees in 2024, but has projected a decrease in this figure for 2025, even accounting for the planned reduction in Amazon deliveries.
The move underscores a broader industry challenge related to the costs associated with providing free or low-cost shipping options to consumers. When customers make purchases on Amazon or other e-commerce platforms, they often remain unaware of the significant operational costs shouldered by shipping providers to maintain these convenient delivery services.
This strategic pivot by UPS represents a significant realignment of its business priorities, suggesting a shift toward focusing on more profitable shipping partnerships rather than maintaining high-volume, lower-margin relationships. The decision could have far-reaching implications for both companies and potentially reshape the landscape of e-commerce delivery services.
The announcement coincides with broader economic developments, as recent data indicates the U.S. economy concluded 2024 without entering a recession, achieving a growth rate of 2.8 percent compared to 2.9 percent in the previous year. Additionally, the job market has shown resilience, with unemployment claims experiencing a
larger-than-expected decrease in recent weeks.
This development in the UPS-Amazon relationship highlights the evolving dynamics between major logistics providers and e-commerce platforms. As online shopping continues to grow, shipping companies are increasingly evaluating the balance between maintaining high delivery volumes and ensuring profitable operations.
The gradual implementation of this reduction over the next two years suggests a carefully planned transition that allows both companies to adapt their operations and explore alternative arrangements. For UPS, this could mean redirecting resources toward more profitable customer segments, while Amazon may need to further develop its own delivery capabilities or strengthen partnerships with other carriers.
The move reflects a broader trend in the logistics industry where companies are becoming more selective about their partnerships and focusing on profitability over pure volume. This shift could potentially influence how other shipping providers approach their relationships with major e-commerce platforms and impact the future of delivery service pricing structures.
As the transition unfolds, the effects will likely ripple through the e-commerce ecosystem, potentially affecting shipping costs, delivery times, and the competitive landscape of the package delivery industry. The decision by UPS demonstrates how major logistics providers are adapting their strategies to maintain profitability in an increasingly complex and competitive market environment.