Amazon is Breaking Itself Up Before the FTC Can

Amazon just made one of their biggest announcements in company history. The headlines are reading that they just destroyed UPS and FedEx in a single move. And yes, last week FedEx stock dropped 9% in a single day. UPS lost almost 11% and yes, Amazon hit a 52-week stock high. Now, you've seen the headlines, but most people are watching the wrong story. The real story is that Amazon might be signaling that they do not actually want to sell you stuff anymore because there's no profit in it. That's right. No more Amazon basic batteries and no more Amazon essentials t-shirts. So, if you only look at the headlines, the story kind of writes itself. Amazon is finally coming for UPS and FedEx. The problem is that story isn't the one that actually matters for your business or you as an Amazon shopper. The real story is what quietly landed on May 4th. So, before I tell you what Amazon is actually doing, let me tell you just how big UPS and FedEx are. I'll get into the whole shopping side of things in a second. Now, the size of UPS and FedEx is enormous. They control roughly 53 to 68% of all parcel shipping revenue in the US. In other words, two out of three packages that are shipped in America go via UPS or FedEx. And the amount of money that these two carriers generate is massive. UPS has revenue of about 90 to 95 billion dollars a year. FedEx has revenue of about 85 billion to 90 billion dollars a year. And together, that's more than 180 billion dollars. Now, let me give you some perspective on how big that is. The entire US movie box office is about 9 billion dollars a year. The entire US music industry is 17 billion dollars a year. And the NFL is only a measly 20 billion dollars a year. But all that money made by FedEx and UPS is about to crater because of what Amazon just announced. So, Amazon is releasing a product called Amazon Supply Chain Services or ASCS for short. Now, on the surface, it looks pretty simple. It's three things bundled together into one. You get ocean and ground freight, you get warehousing and fulfillment, and you get parcel delivery to anywhere in the US in two to five days. All right, one platform, one login, one bill. Cool. Now, none of these things are new, of course. Multi-channel fulfillment or MCF has been around for years. Amazon Global Logistics, the same story. And FBA Freight, well, you might have even used it in your own business. In fact, there's over 80 billion units that have been shipped through FBA for third-party sellers since 2006. Amazon has quietly run a sprawling logistics business for years. You know, if you've ever stepped out of your door in America, well, you probably have seen this. There are hundreds of Amazon warehouses across most major cities in America. The Ontario, California mega warehouse is one of the largest warehouses in the entire world with over 4. 5 million square feet of space. American streets are clogged with Amazon delivery trucks. In fact, Amazon owns over 80,000 trailers. Even the skies above are littered with Amazon logos as they operate over 100 planes. But, there's one massive change that was announced on May 4th. Actually, there were two major announcements. The first is that previously, you basically had to be an Amazon seller to use their logistics services. But, now Amazon's saying that any business can use these services. So, if you need to ship some products from your warehouse to a Walmart, Amazon can help. Do you need to ship some ocean freight from a supplier in Shanghai to your own warehouse in Buffalo? Amazon can do it for you. And do you absolutely despise Amazon the platform, but you just want to store your product at their warehouses and ship to your customers from Shopify or TikTok? No problem. Amazon's happy to take your money. You don't need to sell on the Amazon platform at all to use their services. But here's the bigger signal that Amazon just made. In the launch press release of Amazon Supply Chain Services, their VP made one very specific comparison about this new service. Their VP said that Amazon is bringing the infrastructure, intelligence, and scale of its supply chain services to businesses everywhere much like AWS did for cloud computing. All right, this part is massive. This comparison is the real tell because once you understand why he made that comparison, you'll understand exactly what's about to happen to America. First of all, what is AWS or Amazon Web Services? Well, AWS is Amazon's cloud computing platform that lets companies rent servers, storage, databases, and AI computing power over the internet instead of owning their own physical computers themselves. And AWS is massive. Roughly 1 in 20 websites on the entire internet use AWS. And when you look at high-traffic websites, that number is even bigger with AWS powering

roughly 30 to 34% of the top 100,000 websites in the world. And AWS produces the majority of Amazon's profits. Investors often even joke that Amazon is basically a cloud computing company with a side hustle of shopping. Now, to see what's about to happen with Amazon Supply Chain Services and their retail business, you have to understand how AWS got built initially because Amazon is running that exact same playbook here. So, decades ago, Amazon needed serious computing infrastructure to run its own retail business. So, Amazon spent billions of dollars and several years building this infrastructure for themselves. They went over to their local Kmart and they bought servers, data centers, and networking capacity. They bought the whole stack. Amazon didn't buy it to sell to anyone though. They bought it just to keep their own stuff running. But, once it was built, they noticed something. They had way more capacity than they actually needed day-to-day. So, people, when they're shopping on Amazon, they do it during certain hours of the day, and those servers that they own were sitting idle doing nothing the rest of the day. So, Amazon started selling the leftovers to anyone who wanted them. That's how AWS was born, and today AWS is Amazon's most profitable business by a huge margin. Now, AWS, in terms of revenue, is only about 17 to 20% of Amazon's overall sales. However, AWS is around 50 to 70% of Amazon's entire operating profit, and it's only increasing with AI demands. As my favorite saying goes, revenue is vanity and profits are sanity. So, basically, Amazon makes the majority of its money selling cloud computing services through AWS, not through selling Amazon Basics batteries. So, now let's apply that same story to logistics. — Amazon has spent the last two decades and billions of dollars building one of the most sophisticated logistics networks on the planet. That means warehouses, planes, trucks, ships, everything. It's exact same thing as data centers. They needed it to run their own retail business. Now, the cost has already been absorbed, and they've spent that money. And just like with AWS, they've now turned around and started selling that leftover capacity to anyone who wants it. The difference, and this is where it gets dangerous for anyone else, especially sellers, is that Amazon can sell that capacity at a price that traditional logistics companies, whether they're 3PLs, FedEx, or UPS, literally cannot match. And that's because every other logistics company had to build their own network from scratch and needed to make their money back on that build. Amazon though, they don't. They already built it for themselves. So, selling it to you is basically pure profit for them. Now, if you want proof that Amazon's running this exact same playbook, just look at what Bank of America said in their notes right after Amazon's launch. Amazon's capital expenditures, or CapEx, for things like warehouses and planes, did not change at all for the outlook of 2026. Not even slightly. Basically, Bank of America is recognizing that Amazon doesn't need to build anything else. They already have it. Amazon has a ton of warehouses. They have a ton of trucks, and they have the planes. Amazon is basically telling Wall Street in writing that they already have all of the capacity that they need to absorb a flood of third-party demand for logistics services. Sit with that for a second. Amazon doesn't need to invest any more money to compete in logistics. Everyone else, though, they do. So, when Amazon's VP made that AWS comparison in their launch press release, what he was basically saying to FedEx, to UPS, to your little mom-and-pop 3PL, was something like this. We're about to do to your industry what we did to data centers and cloud computing. And we're not going to win because we built something better. We're the marginal cost for us to serve a new customer is basically zero. And that's why FedEx and UPS investors panicked that same day. And honestly, your 3PLs should probably be panicking a little bit as well. Now, here's the good news and the bad news. I'm going to start with the bad news. So, if you're an e-commerce seller, you might be tempted to move all of your shipping and fulfillment to Amazon. But, just know that Amazon is doing the exact same FBA playbook again. And sellers who have lived through FBA fee hikes have already seen this movie. Amazon launches a service that solves a genuine pain point at a price that your competitors can't match. And then they built a critical mass of customers who depended on them. And then slowly, and somewhat quietly, they started raising the price. Over the last 5 years, Amazon FBA fees have almost doubled. You don't have to take my word for that. Just look at the FBA fee structure themselves. Since 2016, Amazon has introduced a ton of new fees. There's storage fees. There's long-term fees. There's removal fees. There's return processing fees. There's peak season surcharges. There's low inventory level fees. And there's inbound placement fees. Every year, like

clockwork, there's a new lineup. And not only is there a new line item, those new line items get more and more expensive each and every year. So, why does Amazon do it? Because they can. Once you're dependent and hooked, what are you going to do about it? That's the entire Amazon playbook in one sentence. There's no reason, none, to believe that Amazon Supply Chain Services is going to play out any differently. But fees shouldn't be your only concern. If your business competes with Amazon directly in a certain category, you know, private label in a saturated category, anything where Amazon already has an Amazon Basics or Essentials brand of its own, you should be careful. You're giving Amazon complete visibility into your brand. You're telling them who your suppliers are. You're telling them how much product you sell. And you're telling them when you sell that product. So, be careful, very careful about handing Amazon any more visibility into your operation than they might already have. But here's the good news. Now, I mentioned how investors joke that Amazon is a cloud computing platform with a shopping side hustle. Well, Amazon is about to become a cloud computing platform and a logistics firm with a shopping side hustle. Now, why is Amazon doing this? Well, the FTC is currently suing Amazon for having monopoly power in online retail and marketplace services. And the FTC is expected to hand a decision down in late 2026 or early 2027. And there is a very real chance that Amazon may get broken up. That's right. The FTC might say to Amazon that they are three separate businesses. They're a cloud computing company, they're a retailer and online marketplace, and they're a logistics company, aka Amazon supply chain services. Amazon might just be trying to get a step ahead of the FTC. And even if the FTC doesn't make Amazon break up, Amazon shareholders might be telling Amazon that they prefer the cloud computing company and the logistics company, but not so much the retail company with razor-thin margins. And there would be precedent here. eBay and PayPal split up many years ago due to shareholder pressure. And without the cloud computing division and the logistics division of Amazon to subsidize Amazon basic batteries and t-shirts, Amazon might just decide that they don't want to be in the business of selling physical products. And if that's the case, you no longer have to worry about competing with Amazon selling tens of thousands of items against you with razor-thin margins. So, what do you think? Is Amazon supply chain services maybe a good thing for sellers? Or is it just one more step by Amazon trying to dominate all of e-commerce? Drop a comment down below, and until the next one, happy selling.