The U.S. Postal Service (USPS) was built to move letters across the country, but it now finds itself trying to survive in an economy dominated by online shopping. For years, one of the few bright spots in the Postal Service’s finances has been a massive contract with Amazon. The deal brings in roughly $6 billion a year by letting Amazon use USPS for the most expensive part of delivery: the last mile to customers’ doors. But with mail volume collapsing and losses mounting, the Postal Service is now considering the risky move of opening that same last-mile network to more customers. The plan could generate billions in new revenue but also risks angering Amazon, the government agency’s biggest customer.

Postal leaders believe they may be undercharging for last-mile delivery, a service that few others can match. USPS is legally required to deliver to every address in the country at the same price, including rural and hard-to-reach areas that private carriers often avoid. That universal service makes the Postal Service invaluable to companies like Amazon, which find it cheaper to hand off packages for the final stretch. But it also makes USPS extraordinarily expensive to run. With package volumes slipping and first-class mail in long-term decline, the agency has been burning through cash and warning it could go bankrupt by 2027.

Faced with a cash crunch, the Postal Service is testing the market, even if it risks losing its contract with Amazon. By auctioning access to its delivery network, USPS hopes to find out what its last-mile service is really worth. The risk of testing the market is that losing Amazon would leave a significant hole in postal finances. More broadly, the situation highlights a deeper problem. USPS was built for a world of letters, not e-commerce giants, and the funding model that once worked no longer does. The challenge now is figuring out how to act more like a business without abandoning the public mission that makes the Postal Service indispensable in the first place.

Questions: 

  1. Why is the U.S. Postal Service’s last-mile service so valuable for companies? 

  2. What are the potential benefits and drawbacks of the U.S. Postal Service auctioning its last-mile service?