Inside Amazon's delivery business and its ambitions, which FedEx and UPS privately fear
For UPS and FedEx, Amazon's been great for business. Now it's taking business away from them. — Photographs by Jake Stengel for Bloomberg Businessweek — Last fall, when he was running for mayor …
Context & Ripple Effects
The arc here starts with volume: by late 2015, Amazon's package growth had strained its ties with UPS, pushing the retailer to hunt for alternative delivery routes rather than lean harder on its carriers. By February 2016, Bloomberg had already framed the effort as a global delivery build-out aimed at Alibaba, not just domestic cost control.
This Businessweek feature is the moment the story turns from cost-avoidance into competitive threat: the report lays out Amazon's delivery ambitions in detail and surfaces that FedEx and UPS privately fear the very customer that has been great for their business. It matters because it converts a supply-chain efficiency story into a market-share story.
First-order effects
- Amazon's own shipment volume begins migrating onto its in-house network, directly reducing the parcel revenue FedEx and UPS earn from their largest customer.
- FedEx and UPS face a two-sided problem at once: shrinking Amazon volume today and a subsidized competitor bidding for the same last-mile work tomorrow.
Second-order effects
- With Amazon pulling volume in-house, FedEx and UPS must backfill capacity from smaller shippers, giving those customers new leverage over parcel pricing and contract terms.
- Other large e-commerce sellers watch the Amazon playbook and gain bargaining chips of their own, pressuring carriers to defend share with rate concessions.
Third-order effects
- If the pattern holds, the parcel industry restructures around vertically integrated shipper-owned networks — validated three years later when FedEx declined to renew its ground-delivery contract with Amazon outright rather than keep feeding a rival.
- Carriers are pushed to diversify away from e-commerce concentration, since their biggest growth segment now produces its own logistics infrastructure.
The trend: The largest shippers are internalizing logistics, converting their carriers' best customers into direct competitors and forcing parcel networks to rethink who they serve.