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The e-commerce giant wants to reduce its postal volume by at least two-thirds by this fall

Amazon.com AMZN 1.63%increase; green up pointing triangle is planning to sharply cut the number of packages it ships through the U.S. Postal Service, a move that could cost the agency billions of dollars in much-needed revenue.

The e-commerce giant, long the Postal Service’s biggest customer, has already begun ratcheting down its postal volume and wants to reduce it by at least two-thirds by this fall, when its current contract with the agency expires, according to people familiar with the matter.

USPS delivered more than a billion packages for Amazon last year, close to 15% of all the packages that the Postal Service delivered in the country. Amazon’s guaranteed volumes have been a source of stability for the agency, which has operated at a loss for most of the past two decades. In fiscal 2025, it reported a net loss of $9 billion.

The Postal Service has expanded its parcel-delivery capacity in recent years, building bigger facilities and buying new machines to process boxes, which replaced aging equipment that focused on letter mail. If the decline in volumes from Amazon isn’t adequately managed, the new equipment and facilities could end up being underutilized. The Postal Service may also have to find more ways to cut costs.

According to people familiar with the matter, Amazon disclosed the plan to the Postal Service in a confidential bidding process for its so-called last-mile delivery service, in which USPS handles the last leg of delivery for businesses. Under new Postmaster General David Steiner, the Postal Service solicited bids from Amazon and other businesses for the service for the first time. Steiner has said the bidding will help the quasigovernmental agency determine the true market value of the last-mile service.

Amazon’s existing contract with the Postal Service expires in October. Results of the last-mile bidding competition will be released in the second quarter, and contracts will be finalized by the end of the third quarter. That left Amazon concerned that it would have little time to make changes to its network if its bid weren’t accepted, the people said.

An Amazon spokesman said the retailer initially wanted to increase its volumes with the Postal Service and was surprised by the new bidding process.

“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. While we’ve submitted a bid and hope to continue our partnership, even at a reduced level, we now have to prepare to meet our customers’ delivery needs regardless of the outcome of the auction,” the spokesman said.

If Amazon’s bid is rejected by the Postal Service, it could attempt to raise its bid, seek other carriers to handle its final-mile deliveries, invest more in building out its own delivery network or some combination of those options. The final-mile deliveries are typically the costliest part of supply chains, and in rural areas, costs go up due to the lack of density. Amazon and other businesses typically rely on the Postal Service to deliver parcels to harder-to-reach areas.

USPS currently delivers approximately 15% of Amazon packages. That number reaches 30% to 40% in rural areas.

Amazon has already been expanding its one- to two-day delivery capabilities in rural areas but has said previously that it isn’t trying itself to deliver to 100% of its customers in the U.S.

The Postal Service’s losses stem in part from its mandate to deliver to more than 170 million addresses six days a week. The six-day-a-week statutory obligation leads to 71% of delivery routes being financially underwater, the agency has said. Roughly three in five post offices don’t cover the cost of their operations.

Businesses that bring in bulk volumes typically get a rate discount from the Postal Service. The biggest shippers have negotiated directly with the agency for contracts with even bigger discounts. Until this year, those large contracts have been negotiated individually.

In February, more than 20 companies submitted bids to have the Postal Service bring packages from 18,000 local post offices and delivery hubs to their final destinations, Steiner said in an interview last month. Each bid includes a projection of the number of packages they expect to ship through the Postal Service, and the price they are willing to pay for this access.

During a congressional hearing Tuesday, Steiner said the Postal Service was on pace to “run out of cash” in about a year—and asked lawmakers to consider lifting regulatory restrictions on the Postal Service’s ability to raise prices for stamps and other services.

“I am a firm believer that the market should set the rates. And the market isn’t setting the rates,” said Steiner.

Steiner is asking Congress to raise the Postal Service’s $15 billion debt limit, a number that was established more than three decades ago, to allow reforms to its pension payments and to modify regulations that limit its ability to raise prices.

Amazon now handles a substantial chunk of its own deliveries. It delivered 6.7 billion packages last year, while the Postal Service delivered 6.6 billion, according to data from ShipMatrix, a parcel-analytics firm. It was the first year Amazon’s parcel volumes exceeded the Postal Service’s volumes. Amazon had already overtaken the parcel volumes of United Parcel Service and FedEx in recent years.

Both FedEx and UPS, which have historically delivered vast volumes of Amazon parcels to people’s homes, have cut back the number of packages they deliver for the e-commerce giant to focus on more profitable parcels.