Amazon and USPS reach deal on 20% delivery reduction

Amazon and the U.S. Postal Service have reached a tentative agreement that will reduce postal deliveries for the e-commerce giant by 20 percent, averting a more drastic cut that threatened to cost the cash-strapped agency over $1 billion in annual revenue. The deal, which still requires approval from the Postal Regulatory Commission, represents a compromise from Amazon's earlier threat to reduce USPS volumes by as much as two-thirds. Amazon is the Postal Service's largest customer, accounting for approximately 15 percent of total volume and $6 billion in annual revenue. Negotiations had been tense since December, when the Postal Service abruptly withdrew from talks and opened a competitive bidding process for last-mile delivery services. Amazon had previously said its goal was to increase volumes with USPS, not reduce them. The Postal Service's decision to re-engage with Amazon came after bids from competitors failed to meet the agency's volume and revenue expectations, according to people familiar with the matter. The 20 percent reduction, while less severe than initially threatened, will still represent a significant financial blow to an agency that has struggled with declining mail volume and mounting losses. Amazon relies heavily on the Postal Service for deliveries in rural areas where building out its own logistics network would be economically challenging. The company had reportedly explored expanding its own delivery capabilities if negotiations with USPS collapsed. For the Postal Service, maintaining a scaled relationship with Amazon provides stable revenue even at reduced volumes, while the e-commerce giant retains access to the universal delivery network that reaches every U.S. address. The agreement highlights the complex interdependence between major technology companies and government infrastructure, as well as the financial pressures facing both parties in an evolving package delivery market.