The Post Office has lost its £8m contract for Amazon.co.uk's second class deliveries.
The key contract will be a big loss for the Royal Mail.
In a statement, Royal Mail said: "We're very proud to work with Amazon and the loss of such a significant piece of their business demonstrates very clearly that Royal Mail's higher costs, directly caused by our failure to fully modernise our operations, are costing us business. It's vital that we urgently change and modernise if we are to be able to compete against more efficient rivals who have already done so.
"At the same time our customers are being threatened with disruption because of strikes - strikes which are aimed at preventing exactly the modernisation that could keep our big customers on board.
"Customers like Amazon are critical to us, and to our competitors. They represent an important area of growth in a market which is otherwise declining as fewer items of mail are sent."
The Royal Mail is still in talks with the Communications Workers Union to avert a strike.
Amazon.co.uk refused to comment on this story because it does not discuss relationships with suppliers.
Full statement here. ®