Amazon is on the defensive after a Wall Street Journalrevealed that the e-commerce giant plans to significantly reduce shipments through the United States Postal Service (USPS), which this week said it was facing financial difficulties.
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In a lengthy statement released Wednesday, Amazon said it did not want to cut shipping with the USPS and that negotiations only collapsed when the service "abruptly withdrew" from talks on a new contract.
According to the WSJ report, Amazon plans to reduce the number of packages it ships via the USPS by at least two-thirds by the fall, around the same time its contract with the independent federal agency expires. Amazon says it had been working with the USPS for more than a year on a deal “ that would have brought it billions in revenue ,” but the agency pulled out of negotiations at the “ last minute ” last December
Despite Amazon investing billions to develop an extensive distribution and logistics network, it still partners with the USPS for “last-mile” deliveries — the final stage of a shipment — particularly in rural areas. The WSJ reports that the USPS currently handles about 30% to 40% of Amazon’s deliveries to more remote areas, where shipping costs are higher and where the service is required to deliver six days a week. However, according to the report, large companies like Amazon enjoy discounted shipping rates through the USPS, which the service no longer negotiates separately with businesses.
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The obligation of universal delivery, combined with reduced fees for large shippers, has significantly burdened USPS's finances.
In an effort to boost revenue, the USPS has introduced a new bidding process for “last-mile” deliveries. “One thing is absolutely certain — if we continue to operate as we are today, in about a year we will be broke. So we need to go out into the market and test this pricing to see if it is fair,” Postmaster General David Steiner.
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During a hearing on Tuesday, Steiner reiterated that the USPS will run out of money in less than a year if Congress doesn’t allow it to borrow more money and raise postage rates. “A simple move, increasing our borrowing limit, gives us time… time that we can use to determine how the Postal Service can best serve the American public,” he said, according to the New York Times.
