Near the turn of the last decade, Amazon.com Inc. planned seriously to extend its delivery services to businesses outside its retail sphere. Then the pandemic hit, and those plans, which could have levied a big hit on FedEx Corp. (NYSE: FDX) and UPS Inc. (NYSE: UPS) by going right into their wheelhouse of business, were shelved.
The question is whether Amazon (NASDAQ: AMZN) has now begun to reengage in the process. If so, the catalyst could be the potential for a Teamsters union strike against UPS, whose actions could idle most of UPS’ U.S. operations, and put millions of packages out there for the taking. A strike by the Teamsters, which could occur when the current contract expires July 31, would likely result in permanent market share loss for UPS and permanent wins by others, experts say.
“All boats will rise except for UPS,” said Andrew Townsend, president and CEO of LSO, a regional parcel delivery carrier based primarily in the Southwest.
Amazon absolutely has capacity to tap into,” said Townsend. “In a pinch, I would be willing to bet that retailers would give in to using their longtime competitor as a carrier.”
Amazon is UPS’ largest customer by revenue, with a bit more than 11% based on the most recent annual data. If the Teamsters strike against UPS, Amazon would bring that business in-house for delivery via its delivery partners, according to Satish Jindel, head of consultancy ShipMatrix.
According to ShipMatrix data, that revenue translates into 1.85 million parcels per day, about 9% of UPS’ overall daily U.S. volumes.
Not only would that business go back to Amazon, but then so could shipments from third parties and other Amazon merchants that are handled by UPS, Jindel said.
As the days pass without an agreement, people will be looking for capacity, he said. Amazon declined comment for the story.
Jindel said a strike would be a timely way for Amazon to enter the door-to-door fray for non-Amazon online orders. Amazon already delivered 13 million parcels per day in 2022 using its network of contracted drivers. It will be ready with enough capacity, Jindel said, to handle UPS’ volume just as it tested door-to-door service prior to the pandemic, he said.
Dean Maciuba, head of U.S. operations at Crossroads Parcel Consulting, doesn’t buy any of this. “First of all, Amazon does not have the capability to pick up any slack as a last-mile delivery company. They would need to be an integrated carrier” — meaning being involved in the pickup portion of a move — “to make a difference and they are not,” Maciuba said. “Also, Amazon does not want to screw up their service by trying to deliver UPS packages before or during a strike.”
Josh Taylor, senior director of professional services at Shipware LLC, a consultancy, shares that view. “I don’t think Amazon is super-interested in doing all of this,” Taylor said. “They have the funds and experience to do it. It’s just that it has better places to spend the money.”
Taylor said Amazon will find a much more attractive return in continuing to market itself as a fulfillment/delivery partner to its third-party customer base and taking an estimated 15% cut from the services rendered.
Jeremy Tancredi, partner of the supply chain practice at management consultancy West Monroe, believes Amazon will make a play for UPS business on the outbound delivery side. However, because Amazon lacks the ability to make pickups, there will be no chance of it spinning out a service in time to manage what would be an integrated operation, he said.
“Still, from everything I see, it’s an opportunity,” Tancredi said in reference to Amazon pursuing UPS’ outbound deliveries.
Paul
Many UPS customers relay on UPS for middle mile and end to end visibility of their parcels. Amazon does not have that built for every UPS customer, Yet
Experienced-Expert Parcel Professional
Amazon will make a play for some of the UPS business. Specifically they will make a play for a portion of the UPS business which is specifically Amazon Marketplace business. During the pandemic Amazon was approaching Marketplace shippers which had at minimum a trailer lid of orders per day. This solves the pickup problem because they have an extensive TT fleet. They have the sortation capacity and the outbound linehaul capacity. Finally, as everyone knows, they have a contractor delivery model which will be able to accommodate the additional volume.
Simply put: Amazon will cherry pick UPS’ volume in a way which will protect the Amazon Marketplace shippers while at the same time improve their top line profits. Case in point: Amazon is already doing this in Great Britain
Fred
You don’t know what you’re talking about. Amazon can’t currently handle its own volume that’s why they use Ups and the Postoffice. If Ups strikes which I don’t see happening, you’re telling me Amazon will suddenly be able to pick up the volume it gives Ups plus more volume from outside customers. Good luck that volume will sit in its warehouse
Hossney Hafiz
Ups offers a real premium service regarding pick ups and realtime tracking and more you will not be able to replace the quality and quantity by such ailing operating system like for example FedEx or Amazon primitive operating system especially after the extreme downsizing after pandemic is over
CantonOhioTeamster
Anybody that thinks Amazon drivers are going to all of a sudden be able to handle delivering 140 pound diesel truck parts, 9 foot pipes, Twenty 50 pound boxes of bolts and other freight all before lunch and then do all their pickups and residential the next 6 hours of their 10+ hour day is delusional. I see UPSers do this everyday. Amazon drivers can’t even be bothered to walk 4 more feet to put a tiny box next to a door. They won’t even be able to handle all their own returns UPS currently picks up for them. If Amazon drivers had to do even a fraction of the labor Teamsters do they’d all go back to DoorDash.
James Smith
Amazon loses money on delivery and the contractor model has proven itself to be inefficient when faced against career employees making a living wage.
Amazon needs UPS more that UPS needs Amazon and there won’t be a strike, because the company wont sacrifice winning the long game against FedEx.
Midwest Teamster
Anybody paying the slightest attention to what has actually been happening at Amazon? Besides layoffs and contraction of their network, the only issue that actually matters here is AWS. For years they have used that highly profitable business to throw tens of billions of dollars at the part of their business that is barely and not consistently profitable.
In the past few quarters not only has Prime (the part that doesn’t make any money) pulled back, but AWS growth has slowed rapidly and is expected to actually contract this quarter for the first time ever. Oracle built their cloud slowly and is now growing faster than anybody else and no doubt taking share from AWS.
Add onto that the fact that borrowing costs are much higher, and as two of the people quoted have pointed out, they would have to borrow to even attempt to do what is proposed as they don’t remotely have the capacity.
Sounds exactly like the dumbest move ever by a CEO because it would guarantee activists like Elliot finally force them to spin out AWS. Which would be an even bigger disaster than what FedEx has been doing for years now.
Try again union busters.
Ms
Amazon drivers are already stressed to the max for their deliveries and the pay is not that great compared to UPS drivers, why would they that added pressure from their management to increase their output to get more stops per day.