Amazon is cracking down on sellers outside of the retailer's shipping network, and it could be a blow to the USPS

• Amazon released new delivery performance requirements to its third-party sellers, who comprise 60% of the retailer's physical sales, according to a Tuesday Bloomberg report.
• Sellers who use a fulfillment option that allows them to ship Prime orders without Amazon's extensive fulfillment network will now have to meet new metrics, including Saturday delivery.
• It may put more sellers onto the Amazon fulfillment network, which also uses USPS and UPS for delivery, and potentially take volume from USPS, UPS, or FedEx.
• As Amazon moves more of its own packages and guides third-party sellers into its network, it could undercut the USPS — which depends on e-commerce volumes to stay profitable.
• Amazon did not provide a statement for this story. The USPS did not respond to a request for comment.
• Are you an Amazon seller who has been affected by the Tuesday policy change or USPS delays? Email rpremack@businessinsider.com.

As if the US Postal Service didn't have a challenging enough week, Amazon just handed them another potential blow to their volumes.

On Tuesday, Amazon told its third-party merchants that they must meet certain delivery requirements — or else lose the coveted Prime label next to their products, Business Insider's Eugene Kim reported. These include Saturday deliveries and adherence to new one- or two-day delivery metrics.

The email was directed at sellers who have their own warehouse and use UPS, FedEx, the US Postal Service, or other carriers to deliver online orders in a program called Seller Fulfilled Prime. According to the email, fewer than 16% of products sent through Seller Fulfilled Prime meets the retailer's two-day delivery promise.

Several options exist for Amazon sellers to deliver their products. But the most popular is Fulfillment by Amazon, in which the massive retailer stores, picks, packages, and ships third-party merchants' wares in its in-house logistics network.

Amazon became its own largest package carrier last year, according to data from Rakuten Intelligence. Bank of America says it is the No. 4 largest delivery company in America, delivering 6.8 million packages per day in 2019.

Merchants told Bloomberg on Tuesday that the new requirements around Seller Fulfilled Prime may prompt more of them to switch to Amazon's in-house fulfillment network.

"Amazon is holding these sellers to a very high standard that Amazon itself doesn't even follow," Shaoul Sussman, who is a legal fellow at the Institute for Local Self-Reliance, told Bloomberg. "It looks like the decision is to kill this program. The way to kill it is with very high cost of operating and forcing those who want to do their own delivery into Fulfillment By Amazon."

It's unclear how many sellers use Seller Fulfilled Prime, though Business Insider's Kim reported that the program is no longer open for enrollment, or how many of them depend on the USPS for their final mile delivery. Seller Fulfilled Prime users may use UPS, USPS, FedEx, or other companies for home delivery. Amazon's own network also uses UPS and USPS (though, increasingly less so). Sellers who make the switch to the retailer's logistics network may not divert volume from either carrier.

But broadly, as Amazon moves more of its own packages and guides third-party sellers into its network, it's a move from the retailer that could undercut the USPS — which depends on e-commerce volumes to stay profitable.

Amazon did not provide a statement for this story. The USPS did not respond to a request for comment.

The USPS has struggled for years, in large part because of a Bush-era law that requires the quasi-governmental agency to pre-fund its pension plan for the next 75 years. The COVID-19 pandemic has further slashed at the USPS' budget, triggering national alarm that President Donald Trump's hesitancy to provide funding for the Post Office could threaten mail-in voting this November.

This summer, the USPS was forced to make drastic budget cuts, and bizarrities followed. The USPS started hawking $20 crop tops to save itself. Farmers who get their chicks delivered via USPS say they've received thousands of dead birds in the mail.

Amid these policy struggles is the USPS' unique relationship with Amazon. The Post Office is key for Amazon's delivery capabilities in rural areas, where the retailer has not built out a robust shipping network. Right now, it's cheaper for Amazon to go to the USPS to deliver to more far-flung regions. R.J. Hottovy, a Morningstar consumer-equity analyst, preiovusly told Business Insider that delivering a package to a rural home over an urban home costs Amazon anywhere from 1.5 to 4 times as much.

But CEO Jeff Bezos is starting to back away from the USPS — knocking a key revenue source for the quasi-governmental agency. In the spring of 2019, USPS' package volume declined for the first time in nine years. Those year-over-year declines continued until the coronavirus kept Americans indoors and ordering online in March of this year.

That decline was largely thanks to moves at Amazon, as well as at FedEx, to in-house more of their delivery networks, experts previously told Business Insider. From January 2017 to January 2019, Amazon slashed USPS' percent share of its own last-mile deliveries by 20 percentage points, according to Rakuten Intelligence data.

It's not clear yet how Amazon's latest guidance to its sellers will change who they ship with, and if Bezos' quickly-expanding delivery network will be the beneficiary. But, sellers who are keen to keep the Prime tag on their goods and don't want to navigate the new Seller Fulfilled Prime world might just switch to the in-house network.

In general, analysts predict that Amazon will continue to in-source its delivery away from the USPS simply because its own network can deliver a package for cheaper — particularly in urban areas, said Nicholas Farhi, a partner at OC&C Strategy Consultants.

"Amazon's shipping costs will be cheaper because it's using non-unionized labor and labor that works more entrepreneurially, shall we say, than unionized labor at USPS or UPS," Farhi previously told Business Insider.

"You could make lots of arguments about whether that's right or not, whether we should be enjoying our speedy and cheap Amazon delivery on the kind of Uber-driver-equivalents of parcel or package delivery," Farhi added. "But, that will be a big factor in why it's cheaper in dense areas."

Are you an Amazon seller who has been affected by the Tuesday policy change or USPS delays? Email rpremack@businessinsider.com.