Amazon Seeks to Ease Ties With UPS — “How do you make sure that you’re guarding against the potential outcome where your customers might increasingly become competitors?”

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Amazon Seeks to Ease Ties With UPS – WSJ.

The average cost to handle a parcel was about $8 last year, up from roughly $6.50 in 2000, according to the company. Much of the increase was attributed to a growth in e-commerce, as UPS has invested more than $11 billion over the past five years to upgrade and expand its network.

It hasn’t helped relations that Amazon was a factor in UPS’s last two back-to-back Christmas snafus—each of which cost UPS an unexpected $200 million. Two years ago, Amazon overwhelmed UPS with hundreds of trailers of last-minute Christmas orders. It later got UPS to help underwrite millions in customer refunds.

Last year, UPS increased capital spending by 10% to be ready for a prolonged holiday surge that never came.

This year, the company is expecting record volumes and has already seen parts of its network strained from a surge of online holiday spending over the days before and after Thanksgiving.

Wow! If you’re a shipping geek, this is super interesting… more tidbits…

Amazon has poached more than 40 UPS supervisors..

Amazon also fears that UPS’s hub-and-spoke system—moving a package from shipper to sorting hub to brown van to your home—is growing obsolete, according to the executives. So the retailer is building regional distribution and package sorting centers, while adding thousands of truck trailers. It is even trying delivery by newspaper carriers.

UPS and Amazon have also been engaged in a rare public debate over low postal rates. In government filings, UPS has argued that the U.S. Postal Service calculates some pricing incorrectly; Amazon defends the model.

Some customers have already complained about missed or late deliveries from Amazon’s in-house service, known as Amazon Logistics.

Ok, so here’s what we think is happening – UPS really likes the 10%+ of revenue from Amazon, but their costs keep going up (margins decreasing) – so they’re trying to find some way to make this work and it’s not, Amazon at the same time is building their own delivery service and getting as much UPS data and team members as possible, UPS is noticing. USPS is trying hard to survive so they’re doing low rates that might not be correct, but the service isn’t great and they need to do “something”. The customer in some way pays, either realistic costs of shipping, or bad service. Amazon managed to get a lot with UPS including getting UPS to help underwrite millions in customer refunds when there was holiday delays. But this is all coming to an end, 2016 is going to be interesting.