UPS Gets a Big Boost from Amazon in Q4

UPS Gets a Big Boost from Amazon in Q4

Amazon Carrier

As companies begin to report their Q4 results, it seems that the machinations that occurred within the shipping space in 2019 have serious consequences from the established players. Based on their Q4 report, UPS found themselves firmly in the winner’s column, while other players suffered.

UPS’s revenue increased by 3.6% in Q4, buoyed by its relationship with Amazon, particularly during the holiday season. In addition, UPS disclosed that Amazon makes up nearly 12% of its revenue – likely due to the severed relationship between Amazon and FedEx.

The positive results were largely driven by:

  • 9% increase in domestic daily volume
  • ~26% increase in Next Day Air volume
  • 7.5% increase in overall volume

Why UPS Benefitted

2019 was a rollercoaster ride for the shipping industry. As the year progressed, it became increasingly clear that Amazon was aggressively pursuing its long-suspected goal – to become a full-fledged carrier in its own right.

In September 2019, FedEx shared a graphic during its earning call that was very telling – it made clear that Amazon was beginning to take on more and more of its own last-mile deliveries. At the time, it was clear that USPS was the biggest loser. However, later in the year, FedEx announced that it was severing its contractual relationship with the eCommerce giant.

In addition, as the holiday season approached, Amazon announced that it would no longer allow its third-party sellers to use FedEx Ground for Prime shipments until “delivery performance…improves.” While the ban was eventually lifted, it clearly benefitted UPS.

The Future Looks… Complicated

The windfall that UPS reaped from Amazon in Q4 is unlikely to be sustained. It’s likely that the holiday season bump UPS received is an anomaly, and Amazon will continue to drive towards its ultimate goal of phasing out all of its third-party shipping relationships. For example, in late 2019 Amazon launched a low-rate ground service option for certain shipments.

The phasing out of legacy carriers from Amazon’s eco-system is likely to increase in the coming year. As a result, we’re likely to see other interesting developments in the space – perhaps even Amazon purchasing a legacy player in order to speed up its plans.

Whatever happens in the coming year, it’s probable that the shipping space as we know it today will not be the same.

Intelligent Audit provides its clients with a global, all-mode transportation audit, recovery, freight payment, and business intelligence reporting partner.

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