Shares in UPS (UPS +0.68%) were down by 9.8% as of 11:45 a.m, as the market reacted negatively to the news that Amazon.com (AMZN +3.91%) had launched Amazon Supply Chain Services (ASCS), a business that offers a direct challenge to one of UPS's core end markets, namely small and medium-sized businesses (SMB).
UPS and Amazon
It's widely reported that UPS is voluntarily "gliding down" its delivery volumes for Amazon. UPS aims to lower its Amazon volumes by 50% from the start of 2025 to the middle of 2026. The move makes perfect sense, as many of the deliveries were low- or even negative-margin for UPS, and the company continues to migrate its network toward more profitable deliveries in its core end markets, such as SMBs and healthcare.
NYSE: UPS
Key Data Points
That said, it appears ASCS could pose a significant threat to UPS. The announcement couldn't have been any clearer. Just as Amazon developed cloud infrastructure to better run its business and then began offering its services to external customers as Amazon Web Services, so Amazon plans to sell its logistics and shipping capabilities to external customers as ASCS.
The threat to UPS
Amazon cited large enterprises such as 3M and Procter & Gamble as early customers the biggest threat to UPS comes from SMBs who already sell through Amazon, but more importantly, those that don't exclusively sell on Amazon, and SMBs that don't sell on Amazon at all.
Image source: Getty Images.
Given that Amazon is hardly a start-up in logistics and has established relationships with shippers, the threat could be significant for UPS, not least as the company seeks to offset weaker volumes in 2026 by raising prices. Amazon has deep pockets, and ASCS can win market share from UPS or at least reduce UPS's pricing power.
