Amazon and USPS agree to new terms for package delivery

After a tense contract standoff, Amazon has struck a deal to cut 20% of its business with the US Postal Service, though USPS is still expected to handle more than 1 billion Amazon packages annually.

Amazon ran into problems with USPS after the government organization said in December that it planned to introduce a new bidding system for deliveries. The auction would have meant Amazon had to rely on a system wherein it competes with other vendors for USPS business.

To avoid the USPS auction process, Amazon made plans to run its own delivery service. However, USPS reportedly resumed talks with Amazon after bids from other vendors did not meet expectations.

“We’re pleased to have ​reached a new agreement with USPS that furthers our longstanding partnership and will ​let us continue supporting our customers and communities together," Amazon said in a statement to Reuters.

The new deal comes as higher fuel prices pressure carriers like USPS to raise prices on packages. Amazon has also raised its shipping fee temporarily to offset higher logistics expenses.

The deal with USPS will also support Amazon in its ambition to serve people in rural America, where it has been ramping up faster delivery speeds. Numbers show that rural Prime customers spend around $950 on Amazon per year on average, per data from Consumer Intelligence Research Partner (CIRP). And 16% of rural customers have reported same-day or one-day delivery of their most recent Amazon order, CIRP data showed.

In March, FedEx also introduced FedEx SameDay delivery services in partnership with last-mile delivery network and logistics platform OneRail.