Amazon.com plans to sharply cut the number of packages it sends through the U.S. Postal Service after failing to agree business terms, a person briefed on the matter told Reuters.
The e-commerce major, widely considered the Postal Service’s biggest customer, has been reducing postal shipments and aims to cut them by at least two-thirds by September when its contract ends, the person said.
The Wall Street Journal reported the plan earlier on Tuesday.
U.S. Postmaster General David Steiner told Reuters on the sidelines of a congressional hearing on Tuesday that USPS is still negotiating with Amazon.
“I couldn’t tell you where that’s going to end,” Steiner said, declining to comment on the size of any reduction, citing a confidentiality agreement.
Steiner said at a U.S. House hearing on Tuesday that USPS could be out of cash within 12 months, or as early as October if it makes required retirement payments.
Amazon and USPS have been in talks for more than a year about extending their relationship. However, Amazon package volume has begun to come down with full reduction likely by fall, the person said, declining to be identified as the information was private.
USPS in January began taking proposals for access to its last-mile delivery network, opening up more than 18,000 destination delivery units and local processing centers nationwide through an auction process aimed at raising funds.
Amazon last year said, after a 30-year relationship, it was “surprised” USPS wanted to run an auction and that given the uncertainty it was evaluating options.
On Tuesday, Amazon said in a statement it had “wanted to increase our volumes with the USPS. We negotiated with them 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 said it submitted a bid and, though it hopes “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.”
In April, Amazon said it would spend more than $4 billion to expand its U.S. rural delivery network by year-end, doubling down on faster shipments to increase demand from shoppers in small towns and the countryside.
Steiner noted in December that Amazon used USPS 1.7 billion times a year to handle packages.
Steiner in December told Reuters that without USPS “Amazon wouldn’t be what it is today… We would love to continue that relationship. We just want to make sure we continue at a fair price.”
(Reporting by Juby Babu in Mexico City; Editing by Shilpi Majumdar, Chris Reese and Christopher Cushing)
