USPS–Amazon Contract at Risk in 2026: "Reverse Auction" Plan Shakes Market
USPS–Amazon Contract at Risk in 2026: "Reverse Auction" Plan Shakes Market
One of the most critical commercial relationships in the U.S. parcel delivery sector, the USPS–Amazon contract, is mired in serious uncertainty as of December 2025. The current agreement expires in October 2026; however, reports that USPS Postmaster General David Steiner wants to conduct a reverse auction early in 2026 have galvanized both Amazon and the broader shipping industry. According to Washington Post reporting, USPS is considering a model that would grant access to postal facilities to the companies bidding highest, replacing Amazon's current privileged access. If implemented, Amazon would need to compete with national retail brands and new regional carriers, despite being USPS's largest customer.
The move comes as a surprise, as Amazon noted it has been in contract renewal discussions with USPS for nearly a year, and the change in direction adds uncertainty to its distribution network. Amazon's statement reads:
"We were surprised to hear they want to run an auction… we are evaluating all options."
Amazon generates an annual 6 billion USD in volume and accounts for 7.5% of USPS sales. Therefore, a potential split could create significant operational costs for both parties.
This development is directly tied to USPS's long-standing financial pressures. The agency reported a 9 billion USD loss in FY2025. Although USPS has achieved substantial capacity growth in package volume (60 million → 88 million packages/day), excess capacity during off-season periods and long-term volume declines in First-Class Mail are worsening revenue loss.
According to ShipMatrix's Robert Persuit, the crisis stems from three fundamental historical factors:
UPS–USPS relationship collapsed in 2025: USPS's attempt to sharply increase final-mile pricing for UPS led to UPS pulling its Surepost and Mail Innovations operations. This operational split caused UPS hundreds of millions of dollars in additional costs.
The same move resulted in revenue loss for USPS and contributed to the 9 billion dollar loss.
As a result, USPS has had to attempt to demand higher prices from Amazon while simultaneously being forced to discuss re-rapprochement with UPS — a two-way squeeze.
Amazon's complete withdrawal from USPS is not an easy option either. Persuit summarizes it this way:
"Amazon holds the leverage here, but is unlikely to make abrupt moves."
Amazon carries significant infrastructure risk for both USPS and its own operations. The "glide down" it experienced with UPS (a 1.9 million package-per-day average decline between 2024Q3–2025Q3) remains fresh in memory. An Amazon departure from USPS could produce a similar operational shock.
According to Persuit's analysis, the risk USPS faces today is not only Amazon's potential departure; it is also the rise of new micro-carriers such as DoorDash, Veho, Jitsu, Better Trucks. As major U.S. retailers increasingly shift to in-house delivery models, the risk of erosion in USPS demand grows.
LPF Spend Management founder Nate Skiver takes a cautious view of the reverse auction commentary. In his view, USPS trying to "squeeze" Amazon makes no sense, because USPS gains massive benefit from Amazon volume in both network density and margin contribution. Skiver says:
"There is no way the USPS is trying to squeeze Amazon… the idea of pushing Amazon out makes no sense."
Skiver also notes that Amazon is attempting to insource all its parcel volume in the long term, but this will not happen before 2026.
Because the Amazon volume USPS carries is 4–5 times the volume UPS carries, shifting this volume to other operators or Amazon Logistics could take years.
Therefore, as 2026 approaches, the picture remains unclear:
USPS, due to financial pressures, is considering higher rates and a competitive reverse auction.
Amazon, while having alternatives on the table, knows it cannot balance its system in the short term without USPS.
Potential "reconciliation" talks between UPS and USPS could shift bargaining dynamics.
Both parties are seeking to achieve a stronger contract position without losing the other side.
Key Takeaways:
USPS's reverse auction plan for the 2026 contract is generating discussion.
Amazon, with 6 billion USD in annual volume, is USPS's largest customer.
USPS reported a 9 billion USD loss in 2025; excess capacity and the UPS split are creating pressure.
Amazon knows a complete departure from USPS would be costly, but is "evaluating all options."
USPS is entering a period where it faces new competitors like DoorDash, Veho, and Jitsu.
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Author: SedatOnat.com
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