3 min read
Pricing the Last Mile: Amazon, USPS, and the Fight for Profitability
Kelly Barner : April 30, 2026
If you listened to last week’s episode of Art of Supply, you know all about the current situation between UPS, Amazon, and the Teamsters.
Here is the short version of the story by the numbers:
- At the start of 2025, Amazon packages represented 20-25% of UPS's package volume, but only 11% of their revenue.
- UPS made the decision to cut half of their Amazon volume, dropping a million packages per day in 2025 and another million packages per day in 2026.
- By the end of 2025, UPS’s revenue per piece had increased by 8.3%, and, as of today, their stock value is up over 7% year over year.
UPS made the decision to reorient around profitability rather than volume, and that means delivering fewer Amazon packages.
The United States Postal Service is taking a different route. They are fighting to keep Amazon’s volume, but they are also doing their darndest to get paid more for it, through a series of really interesting moves that may or may not work.
Cash Flow Collision Course
The Amazon - USPS partnership dates back 30 years, to when the USPS delivered Amazon’s first packages in and around Seattle. The current Amazon - USPS agreement expires on September 30, 2026, and it is straining under the pressure of Amazon’s volume and the USPS’s profitability problems.
The USPS lost $9 billion in FY 2025, and they have accumulated $118 billion in net losses since 2007.
The dire reality is that they may run out of the cash required to operate by October 2026, days after the end of the current Amazon contract. The USPS and Amazon seem to be on a collision course. Making matters worse, as of 2026, USPS has hit its statutory borrowing limit and can no longer take on additional debt.
Amazon has signaled that they would prefer not to be dependent on the USPS. In late 2025, Amazon announced a plan to invest $4 billion into rural delivery capabilities. The news was generally interpreted as a shot across the bow of the USPS.
The USPS has to deliver to all 169 million addresses in the United States, 6 days a week, at “uniform and affordable prices.” Profit doesn’t enter into the picture, even if they are supposed to generate it.
Shippers like Amazon have been able to leverage the fact that the USPS has to go to avoid carrying the cost of going themselves. Instead, Amazon is able to focus on building their network in more densely populated areas that are more cost effective to serve.
The USPS may have seen their willingness to cover these expensive areas as a moat around their value as a shipper more generally, but Amazon’s investment announcement suggests that the moat wasn’t as deep as the USPS thought. What they needed to do was create a fairly priced market for their final mile services.
Opening the USPS for Bidding
In January, the USPS opened a bidding portal for shippers to negotiate market rates for their services.
The portal allows shippers to reserve final-mile capacity through a bidding process. Bidders can propose a combination of pricing, volume, and tender times. They can also bring their volume directly to the locations, and access same-day or next-day delivery speeds.
According to a USPS press release, “The Postal Service expects to formalize accepted bids for its Parcel Select product through a negotiated service agreement, or NSA. Customers will be able to arrange an NSA to fit their needs, including length of contract, critical entry times, and other terms and conditions.”
Postmaster David Steiner said that the intent of the bidding process is to determine the true market value of the USPS’s services. Unfortunately, the initial bids they received fell short of expectations, leaving the USPS with nowhere to go but back to Amazon.
On the other hand, the USPS did manage to negotiate some benefits. Amazon will accept the higher market rates negotiated through the bidding framework, but they will have a guaranteed "safety valve" that will apply during peak seasons.
Balancing Volume and Profitability
UPS and USPS are taking different approaches to the same problem: Amazon volume drives scale but dilutes profitability.
UPS chose to walk away from Amazon’s low-margin volume, and they are already seeing the financial upside of that decision. The USPS is trying to renegotiate the value they provide by delivering Amazon’s volume without losing it entirely.
Amazon continues to leverage its scale and optionality, and will likely grow their in-house logistics network to influence pricing and terms across the market - rural areas included. From their perspective, ‘build vs. buy’ doesn’t have to be a binary choice; it can also be a strategic lever.