The news: Amazon is planning to reduce the number of packages it ships through the US Postal Service (USPS) by at least two-thirds when its current contract expires later this year, The Wall Street Journal reported. However, Amazon disputes that characterization, saying it had been negotiating to increase volumes and that the outcome remains uncertain.

The move, which was foreshadowed during negotiations in December, follows USPS’ introduction of a competitive bidding process for its last-mile delivery services. Amazon told the Journal it initially hoped to increase its volume with USPS, but it was caught off guard by the new process and began preparing contingency plans in case its bid wasn’t accepted. Amazon, in its own account, said it negotiated in good faith for over a year before USPS “abruptly” walked away in December and that it has since submitted a bid but not received a response.

The context: Amazon has long been USPS’ largest customer. The Postal Service delivered more than 1 billion Amazon packages last year, accounting for roughly 15% of its total parcel volume and an estimated mid-single-digit share of total revenues.

That business has been a stabilizing force for USPS, which has posted multibillion-dollar losses for nine of the past 10 years, including a $9 billion net loss in fiscal 2025.

At the same time, Amazon has steadily reduced its reliance on third-party carriers. Last year, it delivered 6.7 billion packages through its own logistics network—surpassing USPS’ 6.6 billion for the first time—giving it a 27.9% share of total US package volume, per ShipMatrix. The company continues to expand that footprint, pledging to invest over $4 billion last year to triple the size of its rural delivery network and expand to more than 200 delivery stations.

Even so, Amazon still depends on USPS for roughly 15% of its total packages and an estimated 30% to 40% of rural deliveries, making the relationship strategically important for both sides.

What happens next remains unclear, as the final allocation of volume will depend on USPS’ bidding process and whether the two sides reach a new agreement.

Implications for retailers: If Amazon significantly reduces its USPS volume, it could create downstream effects across the delivery ecosystem.

USPS’ economics could deteriorate quickly. The agency has invested heavily in parcel infrastructure as traditional mail volumes declined, and its network depends on high volume to stay efficient. Losing a large share of Amazon’s shipments would leave USPS with fixed costs while its utilization falls, which could force it to raise rates and/or cut services.

USPS’ service levels could suffer. For retailers—especially small and midsize businesses that depend on USPS to reach customers in rural areas where it plays an outsize role in ecommerce fulfillment—the fallout could mean higher shipping costs and deteriorating service. Slower speeds, reduced reliability, or fewer delivery days would be difficult at a time when Amazon, Walmart, and other large players are raising the bar on speed and reliability.

Some merchants may shift to more expensive carriers like UPS or FedEx. Others could turn to Amazon’s logistics network, increasing their dependence on a direct competitor.

For its part, Amazon has said it remains committed to partnering with USPS and hopes to continue the relationship, even if at a reduced level.