CONSUMERS could see their packages in limbo after a failed contract agreement between Amazon and the United States Postal Service.
The situation comes amid significant concern from Americans as USPS confirmed recently that it could run out of money in as little as a year.
Amazon is considered to be the biggest customer that USPS has, according to an anonymous source close to the matter who spoke with Reuters.
Except, the e-commerce giant has been reducing shipments through the Postal Service and allegedly plans to cut them by about two-thirds.
This drastic reduction would take place by September, when the current contract between the e-commerce giant and USPS ends.
Should that happen, packages ordered by Amazon customers could be drastically affected.
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NEGOTIATIONS CONTINUE
However, according to US Postmaster General David Steiner, negotiations with Amazon remain ongoing.
“I couldn’t tell you where that’s going to end,” Steiner told the publication.
He also cited a confidentiality agreement when asked about the size of shipment reductions.
Discussions between Amazon and USPS about a contract extension have been happening over the past several months.
AMAZON SPEAKS OUT
Amazon also said in a statement in March that it had “wanted to increase our volumes with 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.”
The “auction concept” refers to the USPS bid solicitation platform, launched in January at more than 18,000 post office locations.
It’s an online portal that allows businesses of any size to bid for access to what’s known as the last-mile delivery network, which offers them priority access at delivery destination units (DDUs) or processing centers (LPCs) for same-day and next-day delivery.
This had been previously limited only to giants like Amazon.
Amazon did submit a bid, but said it hoped to “continue our partnership, even at a reduced level” as it still has “to prepare to meet our customers’ delivery needs regardless of the outcome of the auction.”
Postmaster General’s statement on the USPS change
Postmaster General David Steiner shared the following statement on the Post Office’s move to expand its last-mile delivery network for major retailers and shippers:
“In the logistics business, the most expensive part of delivery is generally the ‘last mile’ portion of a route. As part of our universal service obligation, we deliver to more than 170 million addresses at least six days a week, so we are the natural leader in last-mile delivery.
“We want to make this valuable service available to a wide range of customers that see the worth of last-mile access — other logistics companies and retailers large and small.
“We see this initiative as a compelling value proposition for many shippers who we know are wrestling with the need to deliver to their customer as quickly and reliably as possible. Our solution is to establish a fair bidding process that enables the marketplace to find the best mix of local shipping attributes for the best volume-driven pricing.
“Because our delivery operations are already visiting every home and business daily, we can help shippers reduce their costs while generating much-needed revenue for the Postal Service.”
Source: USPS
Steiner has also been vocal in the past about USPS being crucial to Amazon’s operations, saying that the company “wouldn’t be what it is today” without USPS and that the Postal Service would “love to continue that relationship.”
“We just want to make sure we continue at a fair price,” he added.
According to the Postmaster General, Amazon has used USPS 1.7 billion times yearly in the past to handle packages.
Amazon has pledged to spend around $4 billion to expand its own rural delivery network in the US by the end of 2026, however.
USPS also recently confirmed that it must make three major changes to survive “beyond next year.”
Six-day-a-week deliveries could even be a thing of the past soon as the Postal Service makes radical cost-cutting measures.
