Dropping ‘Abandon Two-Thirds’ Threat, Why Amazon Leaves 80% of Parcel Business to USPS?
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Amazon and USPS reached a new package delivery agreement, with USPS retaining approximately 80% of Amazon's delivery volume. This significantly alleviates financial pressure on USPS, which faces mounting losses and operating deficits. The partnership remains crucial due to USPS's extensive network, especially in remote areas, which Amazon cannot fully replicate. Despite this, Amazon continues expanding its own logistics network. Concurrently, rising fuel costs have prompted Amazon to implement a 3.5% fuel surcharge for third-party sellers, mirroring similar actions by USPS, UPS, and FedEx to manage increased transportation expenses. The agreement awaits regulatory approval.
TradingKey - Amazon ( AMZN) officially announced on Monday that it has reached a new package delivery partnership agreement with the United States Postal Service (USPS).
According to people familiar with the matter, the cash-strapped USPS will retain about 80% of its current delivery volume from Amazon, its largest customer, facing only a 20% reduction. This outcome is significantly better than reports last month that Amazon planned to cut USPS orders by two-thirds or more, providing much-needed relief for the financially distressed agency.
The USPS warned last month that its operating funds could be exhausted as early as October, and Amazon's earlier threat to cut volume had threatened to be the 'final straw' for the storied postal institution.
Data shows that Amazon generates approximately $6 billion in annual revenue for the USPS, accounting for 7.5% of the agency's $80 billion total budget. Meanwhile, the USPS delivers about 1.7 billion packages for Amazon annually, representing nearly 15% of its nationwide package delivery volume.
The financial health of the USPS has long been deteriorating, with cumulative net losses reaching $118 billion since 2007. Delivery volume for First-Class Mail, its primary profit driver, has plummeted to its lowest level since the late 1960s.
To bridge the deficit, the USPS has recently introduced a series of self-rescue measures. It has applied for a temporary 8% rate hike for Priority Mail and package delivery starting April 26 and plans to raise the price of First-Class Mail stamps from 78 cents to 95 cents to curb operating losses.
Amazon’s Negotiations with USPS
It is worth noting that reaching this new agreement was far from smooth sailing.
In December 2025, the USPS opened bidding to external firms to assess the market value of its "last-mile" delivery network; however, as the bids failed to meet expectations, it was ultimately forced back to the negotiating table with Amazon.
It was during that bidding process that Amazon proposed cutting its parcel volume through the USPS by two-thirds.
However, Amazon itself faces the reality that it cannot completely decouple from the USPS. As the postal service with the broadest coverage in the United States, the USPS's delivery network in remote areas is a core advantage that Amazon cannot replace—its vast network does not levy additional remote area surcharges, helping Amazon efficiently cover remote regions such as Alaska and Hawaii while reducing last-mile delivery costs. If USPS business were significantly reduced, Amazon would be forced to urgently find alternative ways to fill the capacity gap in rural areas, which would be difficult to achieve in the short term.
Ultimately, the two parties reached a preliminary agreement under which the USPS will retain 80% of Amazon's parcel delivery business, with an annual delivery volume exceeding 1 billion items.
"We are pleased to have reached a new agreement with the USPS, which will further solidify our long-standing partnership and enable us to continue working together to support our customers and communities," an Amazon spokesperson said in a statement. The agreement currently awaits review and approval by the Postal Regulatory Commission (PRC) before it can officially take effect.
Amazon's Strategic Layout
Despite reaching a new delivery agreement with the U.S. Postal Service (USPS), Amazon is continuing to push forward with its plans to expand its own logistics network. As early as April 2025, Amazon announced that it would invest over $4 billion by the end of 2026 to improve delivery infrastructure in rural areas across the United States, in an attempt to fill capacity gaps in remote regions.
However, according to industry insiders, Amazon’s proprietary network is still unable to replicate the USPS's universal delivery capability of "covering every residential address" in the short term. Particularly in sparsely populated rural areas, the "last-mile" delivery system established by the USPS over decades remains a core resource that is difficult for Amazon to replace at this stage.
For a long time, the USPS has been a critical component of Amazon’s logistics network, handling a large volume of parcel deliveries for end-users. Especially during holiday seasons when e-commerce orders surge, the USPS's nationwide network has alleviated significant fulfillment pressure for Amazon.
Looking back at the history of their cooperation, Amazon was heavily reliant on FedEx ( FDX) and United Parcel Service ( UPS) and other traditional logistics providers in its early years, but their partnerships have undergone significant changes in recent years. FedEx suspended some Amazon parcel delivery services in 2025 before restoring certain bulk business segments, while UPS proactively scaled back its cooperation with Amazon to allocate more resources to higher-margin corporate clients.
The cautious stance of these traditional logistics giants stems primarily from two considerations: on one hand, the concern that over-reliance on a single client would lead to a concentration of business risk; on the other hand, they view Amazon as a direct competitor—Amazon’s logistics division not only serves its own e-commerce platform but is also actively expanding third-party parcel delivery services, competing for market share with FedEx, UPS, and the USPS.
Fuel Surcharges Rise in the Logistics Industry
Meanwhile, the escalation of the U.S.-Iran conflict has caused severe volatility in global energy supply chains. Disruptions in the Strait of Hormuz have directly driven up international oil prices, triggering a chain reaction across the logistics industry.
Starting April 17, Amazon will temporarily levy a 3.5% fuel surcharge on third-party sellers using its fulfillment and return services. This follows moves by UPS, FedEx, and the United States Postal Service (USPS), which have already implemented fuel surcharge mechanisms to pass on soaring transportation costs.
Dr. Dima Leshchinskii, a finance professor at Menlo College, noted that logistics companies facing rising fuel costs must either absorb the costs themselves and compress profit margins or pass them downstream; Amazon’s decision to do the latter is consistent with industry norms. He remarked, "Amazon was bound to make this decision sooner or later, as they cannot absorb all the additional costs alone."
In fact, the USPS has announced a temporary 8% rate increase for Priority Mail and other parcels effective April 26. UPS and FedEx, however, had established automatic fuel surcharge mechanisms well before the conflict began, which are triggered when oil prices reach a specific threshold.
This content was translated using AI and reviewed for clarity. It is for informational purposes only.
