Forget Amazon: These Are UPS' 2 Biggest Threats


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Forget Amazon: These Are UPS' 2 Biggest Threats - Motley Fool

Here's what worries the shipping company, and what it's doing to try to counter the risk.

United Parcel Service over the years has gone from being an under-the-radar beneficiary of the growth of and e-commerce to a potential target for Jeff Bezos' rapidly expanding company.

Investors have been concerned that as Amazon expands into shipping and logistics, it will cherry-pick some of the most lucrative, urban deliveries that in years past have helped subsidize UPS' national network. Urban deliveries tend to be more profitable than rural ones because trucks travel less between stops, making the routes more efficient.

But for all of the concerns, Amazon isn't what keeps UPS execs up at night. The retail giant represents, at most, 10% of total UPS revenue, and is the part of the business that tends to generate the weakest margins. And even if Amazon continues to insource its deliveries, the e-commerce growth it has inspired is creating plenty of opportunities to build business-to-consumer shipping elsewhere.