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United Parcel Service (UPS) has announced plans to reduce its business with Amazon by nearly 50% over the next couple of years, citing that the high volume but low margin of Amazon deliveries does not sufficiently benefit its bottom line. Despite this reduction, UPS will continue providing certain services to Amazon, particularly in handling returns.
In response to the shift, Amazon is investing up to $4 billion to enhance its rural delivery capabilities and has signed a deal with FedEx for larger package deliveries. This transition comes as UPS aims to improve its profit margins while stepping away from contracts that were less lucrative; UPS’s stock has seen a decline of over 50% from its peak in 2022.
The changes reflect a strategic pivot for both companies, with Amazon scrambling to maintain its delivery network while UPS seeks to strengthen its overall operations. Current stock performance indicates that UPS may actually benefit in the long run from this new approach.
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