USPS Financial Struggles Intensify with Amazon's Major Delivery Reduction
The United States Postal Service (USPS) is grappling with a deepening financial crisis as Amazon, its largest customer, plans to significantly cut the number of packages it ships through the agency. According to sources speaking to The Wall Street Journal, Amazon intends to slash its USPS shipments by at least two-thirds this autumn, a move that could further destabilise the already cash-strapped postal service.
Amazon's Critical Role in USPS Operations
In 2025, nearly 15 percent of all packages delivered by USPS originated from Amazon, providing crucial stability for an agency that has long operated at a substantial loss. U.S. Postmaster General David Steiner informed Congress on Tuesday that this Amazon business offered some financial relief, but with the impending reduction, USPS faces heightened uncertainty. The agency reported a net loss of $9 billion in 2025 and Steiner warned that it would "run out of cash" in approximately one year without intervention.
Last-Mile Delivery Auction and Contract Expiry
In January, USPS initiated an auction process to allow companies to bid for access to its last-mile delivery network, which transports packages from 18,000 post offices and delivery hubs to final destinations. This service is particularly vital for reaching remote and rural areas, where Amazon has heavily relied on USPS. The last mile accounts for up to 53 percent of total shipping costs, according to the Association for Supply Chain Management, making it a critical yet expensive component of logistics.
Amazon expressed surprise at the auction concept last year and has been evaluating alternative options. The existing contract between Amazon and USPS is set to expire in October. An Amazon spokesperson stated, "We negotiated with [the Postal Service] in good faith for over a year to try and reach a deal that would bring them billions in revenue and believed we were heading toward an agreement, when the USPS abruptly walked away at the 11th hour and introduced the auction concept."
Amazon's Strategic Shift and Broader Industry Trends
Despite submitting a bid for the auction, Amazon has announced plans to invest over $4 billion to expand its own rural delivery network, which is expected to create more than 100,000 jobs and enable the delivery of over a billion additional packages annually. This strategic shift comes as other major carriers, including FedEx and UPS, have also reduced their package volumes for Amazon to focus on more profitable parcels.
Data from ShipMatrix, a parcel-analytics firm, reveals that Amazon delivered 6.7 billion packages in 2025, slightly outpacing USPS's 6.6 billion deliveries. The auction has attracted bids from more than 20 companies, each specifying estimated package volumes and pricing for last-mile access, but Amazon's reduced participation could significantly impact USPS's revenue projections.
USPS's Broader Financial Challenges and Proposed Solutions
Steiner has urged lawmakers to consider lifting restrictions on the agency's ability to raise prices for stamps and other services, arguing that "the market should set the rates." Since 2007, USPS has accumulated net losses totalling $118 billion, driven largely by a decline in first-class mail volume to its lowest level since the 1960s.
During the congressional hearing, Steiner proposed additional measures to curb losses, including reducing deliveries to five days a week, which could save about $3 billion annually, and closing smaller post offices in remote areas, potentially saving $840 million. However, he acknowledged that these ideas "may not be palatable to Congress or the American public."
As the October contract expiry approaches, the future of the USPS-Amazon partnership remains uncertain, with both entities preparing for potential shifts in the delivery landscape that could reshape rural logistics and further strain the postal service's finances.
