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USPS Rate Hikes Risk Losing Amazon Business, Experts Warn

  //business-finance.news-articles.net/content/202 .. es-risk-losing-amazon-business-experts-warn.html
  Published in Business and Finance on Saturday, December 27th 2025 at 15:14 GMT by ABC12

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USPS Plan to Raise Cash Risks Losing Key Amazon Business, Experts Warn

The United States Postal Service (USPS) is facing a significant financial crisis and is proposing a controversial plan to generate revenue that could inadvertently jeopardize its lucrative relationship with Amazon, according to recent reports from ABC12 News and industry analysts. The proposed changes involve increasing rates for package delivery services – particularly those offered to large commercial customers like Amazon – in an attempt to shore up the agency’s dwindling finances. While intended as a lifeline, the move is raising concerns that it could push Amazon towards alternative shipping solutions, ultimately impacting USPS revenue even further.

The Financial Crisis and Proposed Solutions

For years, the USPS has struggled with declining mail volume (due to the rise of digital communication) and increasing operational costs. A 2021 report from the Government Accountability Office (GAO) highlighted these challenges, noting that the USPS's financial situation is unsustainable without significant reforms. The agency’s current business model relies heavily on first-class mail, which has seen a dramatic decline. While package delivery revenue has increased thanks to the e-commerce boom, it hasn't been enough to offset losses in other areas and the burden of legacy obligations.

The proposed plan, part of Postmaster General Louis DeJoy’s ambitious 10-year “Delivering for America” initiative (detailed here: [https://about.usps.com/strategic-plans/delivering-for-america.pdf]), aims to modernize the USPS and achieve financial stability. The core of this plan involves gradually increasing shipping rates, particularly for commercial customers who utilize its services extensively. DeJoy argues these rate increases are necessary to bring USPS pricing in line with private carriers like FedEx and UPS, which have generally seen more profitable operations. He has repeatedly stated that the current pricing structure is artificially low and unsustainable.

Amazon's Dependence on USPS & The Potential for Shift

The crux of the problem lies in Amazon’s significant reliance on the USPS. While Amazon utilizes a mix of its own delivery network (including Amazon Logistics) and partnerships with other carriers, it still ships an estimated 30-40% of its packages via USPS, particularly for last-mile delivery to residential addresses. This represents a substantial portion of USPS revenue – approximately $25 billion annually according to some estimates.

The proposed rate hikes are expected to disproportionately affect large commercial clients like Amazon because they typically negotiate lower rates based on volume. While the increases will be phased in over several years, the cumulative effect could become significant enough for Amazon to reconsider its reliance on USPS. According to ABC12 News sources and industry analysts, Amazon has already begun exploring alternative shipping options, including expanding its own delivery network and increasing partnerships with regional carriers.

"Amazon is extremely cost-conscious," explains logistics consultant Bill Jablewski in the ABC12 report. “They’re not going to absorb these rate increases indefinitely. They'll look for ways to mitigate those costs, and that means finding cheaper alternatives." The article notes that while Amazon has invested heavily in its own delivery infrastructure, it still benefits from USPS’s extensive network, particularly in rural areas where establishing a dedicated delivery presence is costly. However, the financial incentive to reduce reliance on USPS will only grow stronger as rates increase.

Beyond Amazon: Ripple Effects Across E-Commerce

The impact isn't limited to just Amazon. Many smaller e-commerce businesses also rely heavily on USPS for affordable shipping options. Significant rate increases could put a strain on their operations, forcing them to either absorb the higher costs (reducing profit margins) or pass them onto consumers (potentially impacting sales). This creates a broader challenge for the entire e-commerce sector.

Criticisms and Concerns Surrounding the Plan

The USPS plan hasn't been without its critics. Consumer advocates express concerns that the rate increases will disproportionately impact individuals sending small packages, while businesses worry about the potential disruption to their supply chains. Some members of Congress have also voiced opposition, arguing that the plan could further harm the USPS’s financial stability by alienating key customers like Amazon.

Furthermore, legal challenges remain a possibility. The Postal Regulatory Commission (PRC) has oversight authority over USPS rates and can review proposed changes to ensure they comply with regulations. The PRC's approval is required for rate increases exceeding certain thresholds, creating another layer of uncertainty surrounding the plan’s implementation.

Looking Ahead: A Delicate Balancing Act

The USPS faces a precarious situation. It needs to generate revenue to address its financial woes, but doing so risks losing the very business that currently sustains it. The success of DeJoy's "Delivering for America" initiative hinges on finding a delicate balance – raising rates enough to improve profitability while avoiding driving away key customers like Amazon. The next few years will be critical in determining whether the USPS can navigate this complex challenge and secure its future as a vital component of the nation’s infrastructure. The potential loss of Amazon's business would represent a significant blow, potentially triggering a downward spiral that could further jeopardize the agency's long-term viability.

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