Amazon and USPS Negotiations Are Crumbling. Will This Hurt the eCommerce Giant's Stock?

Amazon (NASDAQ: AMZN) erstwhile relied heavy connected the United States Postal Service (USPS) to fulfill its "last mile" deliveries. That concern was mutually beneficial: Amazon secured bulk shipping discounts from the USPS, portion the USPS filled its unused transportation capacity. Amazon's transportation speeds besides accelerated aft the USPS started delivering its packages connected Sundays successful 2013. By delivering much packages, the USPS offset its declining missive message revenues.

But implicit the past decade, the e-commerce person has expanded its first-party logistics network, Amazon Logistics, to trim its dependence connected USPS, UPS (NYSE: UPS), and different third-party couriers. That enlargement transformed Amazon from a spouse to a competitor, giving the institution adjacent much leverage to negociate little transportation rates with its third-party partners.

Will AI make the world's archetypal trillionaire? Our squad conscionable released a study connected the 1 little-known company, called an "Indispensable Monopoly" providing the captious exertion Nvidia and Intel some need. Continue »

Amazon plans to trim its USPS shipments by astatine slightest two-thirds erstwhile its existent declaration with the postal work expires connected Oct. 1. The 2 parties were successful talks to negociate much favorable presumption for a caller declaration -- but Amazon precocious disclosed that those negotiations abruptly collapsed past December aft the USPS backed retired astatine the "eleventh hour". That retreat was surprising, since the USPS could tally retired of currency this twelvemonth arsenic its full deliveries decline.

Amazon generates astir of its gross from its e-commerce business, but astir of its profits travel from its unreality infrastructure platform, Amazon Web Services (AWS). Both businesses are nether unit close present arsenic the Iran War drives up vigor prices, throttles user demand, disrupts deliveries successful definite regions, and drives companies to rein successful their unreality spending.

Since Amazon's e-commerce concern already operates astatine little margins than its unreality business, it indispensable unafraid discounted bulk transportation rates with the USPS, UPS, and different logistics services to make unchangeable profits. Yet UPS -- which counts Amazon arsenic its apical lawsuit -- has already been reducing its deliveries for the e-commerce elephantine arsenic it prioritizes borderline stabilization implicit gross growth. The USPS seems to beryllium pursuing UPS' lead.

Amazon's enlargement of Amazon Logistics could yet trim its transportation costs, springiness it tighter power implicit its ain shipments, and curb its dependence connected third-party carriers. But for now, it inactive needs partners similar the USPS and UPS to fulfill its costly last-mile deliveries.