Dive Brief:
- The U.S. Postal Service and Amazon reached a deal on a scaled-back agreement, which will result in a 20% reduction in package delivery volume the agency receives from its top customer, Reuters reported Monday.
- Despite the reported reduction, the agreement secures more packages for the Postal Service than the planned two-thirds volume cut from Amazon outlined by a Wall Street Journal article in March.
- "We're pleased to have reached a new agreement with USPS that furthers our longstanding partnership and will let us continue supporting our customers and communities together," Amazon spokesperson Terrence Clark said in an emailed statement to Supply Chain Dive. The Postal Service did not provide comment on the deal as of Tuesday morning.
Dive Insight:
The agreement wraps up a lengthy negotiations process between the two package delivery giants and longtime partners on their future together. Despite continued investments in its own in-house delivery network, Amazon still relies on the Postal Service's extensive network to reach many customers and has spent over $5 billion annually with the agency in recent years.
"Together, we've innovated to better support customers, launching services like Sunday delivery that improved the customer experience while generating additional revenue and operational efficiencies for USPS," Amazon said in a March news post.
But talks hit a snag in December amid negotiations between the two parties on a renewed agreement. Amazon said in the post its goal was to increase USPS-bound volume, but the Postal Service "abruptly walked away at the eleventh hour." That same month, the agency announced a bidding process for customers like Amazon to compete with each other to secure last-mile facility capacity, an initiative that surprised Amazon and spurred the company to evaluate potential alternatives.
"That detour introduced real uncertainty into our network planning and ultimately didn’t deliver for USPS as intended," John Rosato, a senior manager for public policy at Amazon, said in a LinkedIn post Tuesday. "Trust was significantly strained in the process."
Amazon and the Postal Service were ultimately able to reach a new deal despite the speed bumps. But the scaled-back agreement means packages that would have been covered under the previous deal need to be delivered through other means, such as Amazon's own network. Amazon has been pushing to expand its in-house delivery coverage, including in rural areas, as it looks to meet consumer demand for faster shipping. In the process, Amazon surpassed the Postal Service as the top delivery provider by volume in 2025, according to ShipMatrix.
The new Amazon deal offers some certainty for the Postal Service as it navigates financial tumult, with the agency warning that it will run out of cash in about a year if reforms aren't made. However, the volume reduction means the Postal Service will need to find other avenues to grow revenue, such as delivering higher-value packages or building upon its bid process for last-mile facility access.
"The USPS averts disaster, for now," LPF Spend Management founder Nate Skiver said in a LinkedIn post about the Postal Service-Amazon deal. "And Amazon buys more time to insource delivery of most of its package volume."
