Earlier this year, Amazon threatened to cut US Postal Service deliveries by as much as two thirds. Now, the parties have reached tentative a deal that will see USPS deliveries reduced by 20 percent, The Wall Street Journal reported. While not as drastic as first menaced, the reduced volume will still deal a financial blow to the USPS.
“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,” an Amazon spokesperson told the WSJ.
Amazon is the USPS’s largest customer, accounting for 15 percent of its volume and $6 billion in revenue. A two-thirds cut would have been a disaster for the USPS, but a 20 percent reduction could result in more than $1 billion in lost revenue nonetheless. Amazon would have needed to scramble as well, as it relies heavily on the post office for rural and last-mile deliveries.
Amazon’s contract with the USPS was set to expire in September 2026, and in October Amazon said it wanted to strike a deal by December 2025. However, the USPS abruptly pulled out of negotiations, according to Amazon, and implemented a new bidding process for last-mile deliveries. “Our goal was to increase our volumes with USPS, not reduce them — until USPS abruptly walked away at the eleventh hour in December,” Amazon said at the time.
Amazon was reportedly considering expanding its own delivery network if the USPS deal fell through, though the company may have started those rumors itself to prod negotiations. The Postal Service decided to re-engage with Amazon after bids from several Amazon rivals fell short of its volume and revenue expectations, according to the WSJ‘s sources. The new agreement is still subject to approval by the federal Postal Regulatory Commission.
This article originally appeared on Engadget at https://www.engadget.com/general/amazons-new-usps-deal-will-see-postal-deliveries-cut-by-20-percent-054608944.html?src=rss