UPS and Postal Service to Reunite for Delivery of Low-Budget Shipments

UPS has announced plans to resume a strategic last-mile partnership with the U.S. Postal Service (USPS), aimed at salvaging its budget-focused Ground Saver shipping product after volumes dropped by nearly 33% year-over-year.

Ground Saver, designed for e-commerce retailers shipping low-value packages, suffered major setbacks in 2025 after UPS ended its USPS final-mile delivery arrangement late last year. The move had been triggered by USPS rate increases, prompting UPS to attempt internal delivery of Ground Saver shipments using its own network. However, rising delivery costs and decreased shipment density led to operational inefficiencies and margin pressure.

Now, in an effort to contain costs and regain lost volume, UPS is reengaging the Postal Service to manage final-mile deliveries. Company executives say they’ve reached a preliminary understanding on revenue and rates, with a formal deal expected before year’s end.

Why the USPS Partnership Matters

Ground Saver typically delivers one to two days slower than standard UPS Ground, but its appeal lies in price—especially for large e-commerce shippers focused on reducing cart abandonment due to shipping fees. With over 90% of e-commerce shipping costs borne by retailers, Ground Saver’s value proposition was crucial. But when UPS attempted to handle final-mile internally, it saw delivery costs balloon by $85 million in a single quarter.

The return to USPS allows UPS to tap into the Postal Service’s nationwide residential delivery network, which remains cost-effective for deferred shipments. As CEO Carol Tomé noted, "The way to create a win-win-win is to leverage what [USPS is] best at—final mile—and what we're best at—middle mile."

Amazon, Temu, and the Global Shipping Landscape

Part of Ground Saver’s volume decline stemmed from UPS's planned phase-out of about 50% of Amazon shipments by mid-2026. Tomé also cited reduced volumes from overseas marketplaces like Temu and Shein, which have been hit hard by the removal of duty-free status on low-value imports under the Trump administration.

What This Means for Shippers

Retailers that rely on low-cost shipping methods should see improved service consistency and potentially more competitive pricing once the USPS agreement is finalized. UPS hopes the move will revive demand for both Ground Saver and Mail Innovations—its lightweight parcel service also affected by pricing changes and USPS partnership loss.

Challenges Still Ahead

While the new USPS partnership is a tactical win, long-term structural challenges remain. UPS’s unionized delivery network carries significantly higher labor costs than competitors, making it difficult to compete on price in the booming business-to-consumer (B2C) segment.

According to logistics analyst Satish Jindel, “UPS is paying twice as much per delivery stop as its non-union competitors. This new arrangement may save Ground Saver, but the cost structure problem remains."

Mail Innovations Gets a Boost

As part of the revived relationship, USPS will also resume last-mile delivery for UPS Mail Innovations—a service tailored for letters, documents, and lightweight parcels. Last year, Mail Innovations was hit hard by the loss of USPS discounted rates, forcing UPS to hike prices by 20% to 40%. The resulting drop in competitiveness saw customers defect to other carriers.

UPS now hopes to stabilize both Ground Saver and Mail Innovations through more favorable USPS terms under new Postmaster General David Steiner, who replaced Louis DeJoy earlier this year.

When Will Shippers See the Impact?

UPS aims to implement the USPS last-mile agreement in 2026, with financial benefits expected to materialize in the second half of the year. Until then, the carrier will continue refining the agreement and rebalancing its product portfolio to meet the demands of modern e-commerce logistics.

For shippers looking to understand how this move could impact their delivery costs, transit times, and insurance needs, Allcom Insurance is here to help. Contact us at 866-277-9049 or email info@allcomins.com to ensure your fleet and freight are covered for what’s next in the evolving parcel delivery landscape.