Amazon Set to Shift Billions of Parcels, Threatens Postal Service Revenue

Amazon is preparing to pull the vast majority of the parcel volume it currently routes through the U.S. Postal Service into its own expanding delivery network, The Washington Post reported on Thursday, in a plan that could be implemented by the end of 2026 if negotiators do not finalize a new service agreement. People familiar with the discussions told The Post the company has accelerated investments in last mile capacity and rural delivery options to ensure it can meet customer expectations without relying on USPS routes.

The prospective shift would be a dramatic alteration in the relationship between the nation’s biggest online retailer and the federal mail carrier. For decades the Postal Service has taken billions of parcels from retailers, leveraging its universal delivery network and access to neighborhoods that private carriers serve selectively. Removing Amazon as a major customer would deprive the Postal Service of volume and revenue at a time when the agency has posted multibillion dollar losses in recent years and relies on package business to offset steep fixed costs tied to universal service.

At the center of talks between Amazon and USPS is a proposal from Postmaster General David Steiner to open postal facilities to outside carriers through a reverse auction mechanism. That idea is a key point of friction in negotiations, and sources say it has contributed to Amazon’s assessment of alternatives. Discussions are continuing, and neither side has finalized a deal.

For Amazon, the move is the latest step in a long term strategy to control more of its logistics chain. The company has invested heavily in air and ground fleets, fulfillment centers, and local delivery contractors. Bringing Amazon’s parcels wholly onto its own network would give the company greater control over timing, costs, and the customer experience, while insulating it from postal rate changes and contractual uncertainty.

The impact on other logistics players will be mixed. UPS and FedEx would lose competitive pressure in some routes while potentially facing more aggressive Amazon last mile operations in residential areas. Small local carriers that contract with Amazon could see expanded business, even as the Postal Service’s losses deepen. The net effect for consumers will depend on whether Amazon’s network maintains reliability and price competitiveness in rural and low density areas that the Postal Service is mandated to serve.

Policy implications are substantial. A significant reduction in USPS parcel volume would increase pressure for congressional action on postal finances and reform of the agency’s business model. Lawmakers have previously debated relief measures and structural changes for USPS, and a sudden drop in revenue from a single major customer could accelerate those deliberations. The reverse auction proposal and broader questions about access to postal infrastructure highlight tensions between preserving universal service and opening government owned facilities to private operators.

Longer term, the episode reflects a broader economic trend toward vertical integration by large digital retailers and the commercialization of last mile delivery. As Amazon builds out its logistics footprint, policymakers and market participants will have to weigh the efficiency gains against the financial stability of longstanding public and private carriers and the broader implications for competition and service to sparsely populated areas.