Amazon reportedly plans to slash its USPS delivery volumes by at least two-thirds, threatening billions in revenue for an already cash-strapped postal service
Bloomberg / Getty Images
Amazon $AMZN plans to dramatically pare back the parcel volume it sends through the U.S. Postal Service before the two companies' current contract lapses this fall, The Wall Street Journal reports. Amazon has long supplied more parcel volume to USPS than any other shipper, and it has already begun pulling back.
The move to cut volume by at least two thirds threatens billions in revenue for an agency that lost $9 billion last year and is on pace to run out of cash within 12 months.
Of all the parcels USPS delivered across the country last year, Amazon's alone numbered more than one billion — close to 15% of the agency's total throughput. That volume has served as a financial backstop for an institution that has been losing money for the better part of 20 years. The agency's fiscal 2025 net loss came in at $9 billion.
The conflict stems from a structural shift Postmaster General David Steiner made after assuming leadership of the agency: moving large shippers out of one-on-one contract negotiations and into a competitive open-bid process. Amazon said it had spent more than a year negotiating what it expected would be a finalized deal before USPS introduced the auction approach.
"We negotiated with [the Postal Service] in good faith for over a year to try and reach a deal that would bring them billions in revenue and believed we were heading toward an agreement, when the USPS abruptly walked away at the 11th hour and introduced the auction concept. While we've submitted a bid and hope to continue our partnership, even at a reduced level, we now have to prepare to meet our customers' delivery needs regardless of the outcome of the auction," an Amazon spokesman told The Journal.
The company has entered a bid and indicated it would accept a scaled-back arrangement with the agency. The auction's calendar compounds Amazon's difficulty: with winners named no earlier than midyear and binding agreements not locked in until late in the third quarter, the company says it would have almost no runway to adapt before the October cutoff.
A failed bid would leave Amazon weighing its next move: going back with a higher offer, leaning on UPS, FedEx $FDX, or other private carriers for the displaced volume, doubling down on its own logistics build-out, or threading some combination of those paths. The transition would be most difficult in rural areas, where USPS handles between 30% and 40% of Amazon's deliveries and is often the only carrier serving low-density routes.
The financial consequences for USPS could be severe. Testifying before Congress this week, Steiner warned that USPS could deplete its cash reserves within roughly 12 months. Before Congress, Steiner outlined three changes he wants lawmakers to make: updating a debt ceiling that has been frozen at $15 billion for over 30 years, reforming the agency's pension funding structure, and lifting the price controls that stop USPS from setting rates at competitive market levels.
In recent years USPS has poured money into its package-handling capacity, opening new sorting hubs and upgrading its equipment. The agency's newly expanded package-processing infrastructure — built on the assumption of continued high volumes — could sit largely idle if Amazon walks away.
Join 500,000+ readers who start their day with Quartz.
By subscribing, you agree to our Terms of Service and Privacy Policy.
