Amazon reached a tentative agreement with the U.S. Postal Service that will reduce the number of packages the e-commerce giant ships through the beleaguered agency, concluding a tumultuous negotiations process.
Under the new deal, if approved, Amazon would ship 20 percent fewer packages through the Postal Service, according to a person familiar with the matter, who spoke on the condition of anonymity to discuss a confidential contract. Still, the deal would preserve guaranteed revenue for the Postal Service, which relies on Amazon, its biggest customer, for billions of dollars in income and has long struggled to stabilize its finances.
Amazon, the world’s biggest online retailer, relies on the Postal Service to deliver packages around the United States, including for the often tricky step of getting items from local warehouses to a customer’s home, known as last-mile delivery.
Nicole DeHoratius, a professor of professional practice at Columbia Business School, said it was unclear whether the deal could be considered a win for the Postal Service without seeing the terms of the agreement, including the price Amazon agreed to pay per delivery.
“My concern is whether U.S.P.S. is effectively pricing this valuable service,” said Dr. DeHoratius, referring to last-mile delivery. “A commercial logistics provider would determine the cost to serve a particular customer and price accordingly. Has U.S.P.S. done so effectively? Has U.S.P.S. taken into account the fact that it offers Amazon more options and additional resilience just by having this service?”
The Postal Service declined to comment. Reuters and The Wall Street Journal, which earlier reported the deal, said that the agreement would still have the Postal Service deliver more than 1 billion packages for Amazon a year. The Postal Service currently delivers 1.7 billion packages a year, David Steiner, the postmaster general, said in an interview with Reuters in December.
The Postal Service is in a precarious financial situation, having reported a $9 billion yearly loss in November. Mr. Steiner said at a hearing last month that the agency could run out of cash within a year with no major changes and asked lawmakers to increase its borrowing limits. The agency announced in December a bidding process for access to its last-mile delivery network as a way to diversify income streams.
The postal service has come up with a 10-year plan to shore up its finances, but the service continues to lose money: During the three-month period ending in December, it lost nearly $1.3 billion.
Amazon said that it and the Postal Service spent more than a year negotiating the new contract, which is subject to approval of the Postal Regulatory Commission, the federal agency that oversees the Postal Service. The agreement, if approved, would come into effect in October.
Terrence Clark, an Amazon spokesman, said Amazon had originally hoped to increase the volume of packages it mailed through the Postal Service with the new contract. But when the Postal Service announced in December that it was introducing a bidding process to open its last-mile delivery services to more companies, after nearly a year of negotiations with Amazon, the e-commerce company decided to invest more in its own logistics and fulfillment infrastructure to handle more of its own deliveries.
The Postal Service is required to deliver to nearly every address in the United States, including in rural areas. The final leg is generally the most expensive part of the delivery.
Jonathan Smith, the president of the American Postal Workers Union, which represents more than 200,000 employees of the Postal Service and workers in the private-sector mailing industry, said on Tuesday that no one could reach every U.S. home and business as reliably and affordably as Postal Service workers.
“But the anxiety around losing Amazon underscores that U.S.P.S. needs to do more to diversify its revenue sources,” Mr. Smith said. “Expanding services by partnering with government at every level, growing postal financial services, and finding new ways to leverage the Postal Service’s unmatched network will be vital to the Postal Service’s long-term success.”
Jenny Gross is a reporter for The Times covering breaking news and other topics.
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