Why UPS is Slashing Amazon Shipping Volumes by 50%

UPS is making a bold move to reduce its reliance on Amazon, announcing plans to cut shipping volumes for the ecommerce giant by more than 50% under a new agreement. This change will take effect in the second half of 2026, reflecting UPS's strategy to focus on more profitable business segments.

Amazon contributed just 11% of UPS’s US$91.1bn revenue in 2024, a decline from 13.3% in 2020 when the pandemic boosted online shopping.

Even with previous efforts to reduce Amazon-related volumes, around 20% to 25% of UPS's US network volume still comes from Amazon, with the ecommerce giant accounting for 11.8% of the company’s revenue last year.

CEO Carol Tomé highlighted the rationale behind the decision during UPS’s fourth-quarter 2024 earnings call, stating that Amazon, despite being UPS's largest customer, is not its most profitable.

“We are making business and operational changes that, along with the foundational changes we’ve already made, will put us further down the path to becoming a more profitable, agile and differentiated UPS that is growing in the best parts of the market,” she added.

Amazon expands its own delivery network

While UPS is scaling back, Amazon has been busy strengthening its own logistics capabilities.

The company operates a vast delivery network, including its own fleet of vehicles and the Delivery Service Partner programme, which enables small and medium-sized businesses (SMBs) across the US to handle last-mile deliveries.

This strategy not only helps Amazon reduce its reliance on third-party carriers but also provides new revenue streams for these businesses.

It is reported that Amazon had offered to increase its shipping volumes with UPS to meet growing delivery demands.

However, UPS declined, opting instead to adjust its operations for higher profitability. “Due to their operational needs, UPS requested a reduction in volume and we certainly respect their decision,” said Amazon spokesperson Kelly Nantel.

“We’ll continue to partner with them and many other carriers to serve our customers.”

This isn’t the first time Amazon has seen changes in its relationships with delivery partners. In 2019, FedEx ended its contract with Amazon, a move that signalled the growing tension between the ecommerce giant and traditional carriers as Amazon’s in-house logistics capabilities expanded.

UPS prioritises profitability over volume

UPS’s decision to reduce Amazon volumes aligns with its broader strategy to focus on more profitable sectors such as healthcare and SMBs. The company is also working on cost-cutting measures to improve financial performance.

In January 2024, UPS laid off 12,000 workers, aiming to save US$1bn as part of its ongoing efficiency drive.

The impact of this strategic shift is already visible in UPS’s financial forecasts. For 2025, the company expects its annual revenue to drop to US$89bn from US$91.1bn in 2024.

Despite the anticipated decline in overall volume, UPS projects a more profitable business model, with revenue per package expected to rise by 6% even as average daily US volume drops by 8.5%.

“The results of this change will be lower overall volume levels, but an improved customer base at a significantly higher revenue per piece,” said Brian Dykes, UPS' Chief Financial Officer.

He also noted that UPS would continue to adjust its network to match capacity with demand, ensuring operational efficiency.

While UPS is reducing Amazon-related business, Carol doesn’t expect the relationship to disappear entirely.

Amazon still relies heavily on The UPS Store locations for customer returns, a critical part of its logistics ecosystem. “I don’t think it will go all away,” she said. “I think we’re landing at the right spot with this accelerated glide down.”

As part of its strategic plans, UPS has outlined several key initiatives: insourcing 100% of its UPS SurePost product starting January 2025, reconfiguring its US network and launching multi-year “efficiency reimagined” initiatives aimed at driving US$1bn in savings through end-to-end process redesign.

For 2025, UPS anticipates an operating margin of approximately 10.8%, with planned capital expenditures of about US$3.5bn. The company also expects dividend payments of around US$5.5bn, subject to board approval, alongside US$1bn in share repurchases. Its effective tax rate is projected to be around 23.5%.

Despite the reduced volume from Amazon, UPS remains confident in its future growth, focusing on high-margin sectors and operational efficiency.

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