Apparently as yet unable to reach a satisfactory deal with the Postal Service, Amazon reportedly is making plans to ditch the agency and instead build out its own rural delivery network. According to an article by Jacob Bogage in the December 4 Washington Post,
“Amazon is preparing to expand its nationwide delivery network and give up its long-standing partnership with the US Postal Service as talks stall with the mail agency, according to three people with knowledge of the matter, a move that could make the e-commerce goliath the most ubiquitous delivery service in the country and wreak havoc on the postal agency’s long-term financial viability. …
“The company had hoped to come to a new agreement that would have locked in favorable rates and set higher benchmarks for package volume, but formal talks have largely concluded without a deal, the people said, speaking on the condition of anonymity to share confidential business information. … In response, Amazon is readying plans to pull the billions of packages it sends through the Postal Service by the end of 2026, the people said.
“They cautioned that the plans are not final and could change. Postmaster General David Steiner met virtually with Amazon chief executive Andy Jassy on Nov. 14, and the company hopes to reach an agreement, the people said. … Amazon had sought a four-year extension of its contract, two of the people said. Its agreement expires Oct. 1, 2026.
“Amazon spokesperson Steve Kelly in a statement called the Postal Service a ‘long-standing and trusted partner’ and said the company remained committed to working with the agency. The company was seeking ways to ‘extend our partnership’ and ‘increase our spend’ with the Postal Service as part of the recent negotiations, he said. The Postal Service declined to comment. …
“The negotiated package service agreements have prioritized major corporations and other large parcel shippers, rather than individual retailers and small businesses. Steiner said at the Postal Service’s most recent public meeting that he aims to democratize those agreements and open them to regional shipping firms, traditional brick-and-mortar retailers, and midsize and small businesses.”
He plans to hold a reverse auction in early 2026, the people said, selling access to postal facilities to the highest bidder, rather than directly to Amazon, and making the company compete with national retail brands and regional shipping firms. That proposal largely ended the Amazon negotiations, which had been ongoing since February, two of the people with knowledge of the talks said. … Amazon was ‘surprised to hear [the Postal Service] want to run an auction after nearly a year of negotiations,’ Kelly said.
“’Given the change of direction and the uncertainty it adds to our delivery network, we’re evaluating all of our options that would ensure we can continue to deliver for our customers,’ the spokesperson said.”
However, a report the next day by MSN indicated Amazon was more patient that its negotiations with the Postal Service will result in their relationship continuing.
“Amazon has told Newsweek it is not exploring the possibility of ending its longstanding partnership with the US Postal Service (USPS) as it weighs a dramatic transformation in its Prime delivery operation. A spokesman for the company made the remarks following a Washington Post article about how Amazon will go about exploring and expanding its own coast-to-coast delivery network.
“Steve Kelly told Newsweek: ‘We are not planning to cut ties with the USPS – in fact, it’s the opposite. Without a doubt, our goal is to continue working with the USPS, as we have done for the past 30+ years, and are going to continue to push to reach an agreement.’
“The USPS told Newsweek it had no comment ‘at this time.’”
Regardless of whether Amazon eventually parts ways with the Postal Service, the company can’t wait until next October to prepare to replace the services now provided by the USPS. Timely preparation for a potentially disruptive situation is simply good management.
In addition, the difference between the two reports may not be that confusing. First, the Post and MSN likely have different sources, with different levels of access and information, able to provide the respective reporters with comments based on what they feel they can disclose.
Second, the Post likely found sources that were more insightful about the developing situation, while MSN secured a less definitive statement from Amazon saying simply that the company wasn’t planning to cut ties, without commenting on what it might do if an acceptable deal weren’t reached.
Negotiating
All of the Postal Service’s currently active domestic negotiated service agreements involve the types of mail collectively known as competitive products. As that term implies, these are categories wherein the participating mailer/shipper has true choices between the USPS and other carriers like UPS and FedEx. The shipper’s choice is usually based on service, price, preparation and entry requirements, or other criteria that distinguish the preferred carrier from the rest.
It’s likely that all negotiated service agreements involve a bit of back-and-forth. Shippers of less volume than Amazon – which is just about everyone else – lack the leverage to get the most favorable terms and have to settle for they best they can get. Amazon, of course, is in a far stronger bargaining position; carriers know that Amazon can both walk away and do its own delivery work and, in doing so, cause a serious financial impact on the rejected carrier.
With that in mind, it’s difficult to understand why the USPS wouldn’t be anxious to get the deal done. The agency needs revenue to help institutional cost coverage; it needs volume to provide delivery stops and support carrier routes; and it needs the stability that a contract with a shipper of Amazon’s size would represent. Moreover, it’s obvious that the USPS needs Amazon more than Amazon needs the Postal Service – or any other carrier – to get its shipments in-home.
Deferring a deal to secure Amazon’s continued business just to run it through a “reverse auction” like any other shipper seems like an unnecessary risk; Amazon is not “any other shipper.” It’s willing to extend its business relationship with the Postal Service, so the purpose of any delay is obscure.
It’s not cost coverage (whether the rates charged cover USPS attributable costs and contribute positively to its institutional costs) or entry requirements. All NSAs – with Amazon and anyone else – are reviewed and approved by the Postal Regulatory Commission to ensure compliance with regulatory and statutory requirements – including cost coverage. And Amazon already deposits shipments directly at delivery units.
Trust but verify
If PMG David Steiner is confident that there’s other business out there than can fill a hole left by Amazon it might be prudent for him to double-blind validate the bases for his belief.
The nation’s other large retailer – Walmart – is reportedly not interested in expanding whatever business it may now be giving the USPS. Though UPS is talking with the Postal Service about resurrecting SurePost, that still needs to be put on paper. Whether FedEx would want to set-up its own version of a SurePost arrangement is unknown, but it’s not visibly in the offing. So the obvious sources of significant volume are not really in-hand.
By the same token, if what Steiner is being told about potential business is derived from outside consultants – of which the USPS has many – that information needs to be taken with grains of salt, regardless of whether it’s coming straight to him or through staff in contact with those consultants. All he needs to do to verify such caution would be to examine the advice given Louis DeJoy during preparation of his 10-Year Plan to see that a degree of skepticism is appropriate.
It’s axiomatic in the consulting business that data presented to a client should support the client’s thinking, not caution that they’re off in a dangerous direction. Accordingly, the PMG might not be adequately warned about the seriousness of Amazon’s ability to quit the USPS, the potential consequence on USPS finances, or that alleged untapped shipping business may not be as large or as easily won as the rosy forecasts he’s getting from consultants (or staff) may imply.
Steiner appreciates the value of the agency’s last mile capability and wants to monetize that as much as possible – which is good – but he and his advisors might want to realize the limits to which the Postal Service can play that card in negotiations with a shipper that has options. Such a customer’s perception of the USPS may not be that it’s an essential carrier, nor align with the agency’s self-image. In this particular game of negotiation poker, the USPS must be careful to not overplay its hand; Amazon, not the USPS, has the better cards.