A partnership between the U.S. Postal Service and Amazon.com Inc (NASDAQ:AMZN) that generates an estimated $6 billion in annual revenue for the federal agency could be at risk.
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Amazon Could Move On From USPS
Shipping millions of packages around the U.S. each year, Amazon has relied on having its own delivery network and business relationships with the likes of the USPS, FedEx Corp. (NYSE:FDX) and United Parcel Service Inc (NYSE:UPS) to ensure timely deliveries to its customers.
Reports of a reverse auction from the USPS to see companies bid on mail facility access has upset Amazon to the point of preparing to end its partnership with the federal agency and expand its nationwide delivery network.
Amazon has been in ongoing discussions with the USPS over "negotiated service agreements" and rates for delivery, according to the report.
The report said Amazon is looking for a four-year extension of the existing contract, with the current contract set to expire on Oct. 1, 2026. A new agreement has not been reached on rates, which could see Amazon end its partnership by the end of 2026.
Amazon spokesperson Steve Kelly told The Washington Post that the USPS is a "long-standing and trusted partner" and that the e-commerce giant wants to extend its partnership and "increase our spend' with the federal agency.
A report from The Washington Post says that the USPS collects around $6 billion in annual revenue from Amazon, making the e-commerce giant the agency's top customer. The revenue from Amazon represents around 7.5% of the federal agency's annual revenue. While the USPS does not disclose all of its financial relationships, the federal agency has posted annual losses in many years.
This includes losses of billions of dollars in nine of the last 10 years, a situation that could get worse if it loses its biggest customer.
The Postal Service received financial assistance from Congress in 2022 and has been criticized in the past by President Donald Trump.
During his first presidential term, Trump referred to the USPS as Amazon's "delivery boy" and called the federal agency "a joke." The president previously threatened to block emergency funding for the postal service during the COVID-19 pandemic unless it raised its rates for Amazon.
With Trump encouraging the USPS to double rates on Amazon at the time, some saw the move as a way to punish then Amazon CEO Jeff Bezos, who was viewed as an enemy of the president at the time. Bezos attended Trump's inauguration and has been viewed as an ally in the second term. Bezos is the owner of The Washington Post, which shared the report.
Trump has also suggested privatizing the Postal Service or merging the agency with the Commerce Department in the past.
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Amazon Could Change Shipping Sector
The Postal Service currently prioritizes large shippers such as Amazon, a move it could be looking to undo. Regional shippers and smaller retailers could be among the keys for the Postal Service's efforts moving forward, a move that could cost it huge revenue and its key customer.
Extending its own delivery system could help Amazon dominate another area of the e-commerce sector and also put pressure on UPS and FedEx, alongside the USPS.
Amazon ended a partnership with FedEx in 2019, but signed a new partnership earlier this year. The move came after UPS said it would reduce deliveries from Amazon.
The e-commerce giant has had conflicts with both major shipping companies and could look to do away with as many of those relationships as possible if it can handle shipping everything itself.
Amazon currently utilizes a network of independent contractors and gig workers for most of its last-mile delivery to customers’ houses.
The e-commerce giant also stocks and ships some merchandise for smaller retailers, a move that could expand if Amazon's delivery business grows.
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