Amazon Throws a Juicy Bone to the USPS

Nov. 12, 2013
The USPS will begin offering Sunday package deliveries to select cities, thanks to a new deal with Amazon.

Just when you think it’s safe to consign the U.S. Postal Service to the ranks of the irrelevant, something comes along to remind you that there’s a reason this quasi-government agency has been around since the days of the American Revolution, when Benjamin Franklin was the first Postmaster General. In time for the holidays, the USPS will begin offering Sunday package deliveries to several major U.S. cities, thanks to a new deal with online retailer Amazon.

Last time we checked in on the venerable USPS, they were looking at a strategy of cutting back to a five-days-a-week mail delivery schedule, with the possibility of central lockboxes set up to reduce the number of home deliveries. The reason for the severe curtailing of service, of course, is the USPS is bleeding money at a breakneck pace, losing roughly $16 billion last year. But every time they petition Congress for the go-ahead on some of its cost-cutting ideas, Congress says, “No way! Our rural voters would vote us right out of office if we denied them Saturday deliveries.”

Fact of the matter is, what the USPS really wants is a five-day-a-week schedule for mail, and a seven-day-a-week schedule for packages because clearly, package deliveries are the growing and profitable side of the business, according to this article from The New York Times. First-class mail volumes are down by about 23 billion pieces over the past five years, with a resultant decline of $10 billion in annual revenue. The real sore spot, though, for the USPS are healthcare costs, as the agency has defaulted on three annual $5.5 billion payments into its retiree health fund.

The new Sunday delivery schedule will be in place for the upcoming holidays, but only in the country’s two largest metropolitan areas: New York (including parts of New Jersey and Connecticut) and Los Angeles. In future years (assuming everything works as expected), the USPS will expand the Sunday service to Dallas, Houston, New Orleans and Phoenix—presumably, the agency is sticking to Sun Belt cities where the likelihood of weather-related delivery delays is minimal.

“Customers can expect the same reliable and valued service that the Postal Service currently provides,” notes Patrick Donahoe, Postmaster General. No doubt, customers are hoping for better service than what they’re currently getting from the USPS, since the mass exodus of delivery business to UPS and FedEx is what’s causing the USPS so much angst in the first place.

For Amazon, meanwhile, the news is all good, since the availability of Sunday deliveries will remove one of the few sticking points that might cause a last-minute shopper to resist buying from Amazon over a weekend. As the Times article also points out, the deal with the USPS is not exclusive, meaning Amazon could very well offer Sunday deliveries with other package-deliverers as well. The Wall Street Journal (subscription required) adds that Amazon is planning to offer Sunday deliveries in London, using Amazon drivers.

Ironically, the announcement was made on a federal holiday (Veterans Day), when the USPS was closed.

About the Author

Dave Blanchard Blog | Senior Editor

Focus: Supply Chain

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Contributing Editor Dave Blanchard provides the IndustryWeek audience his expertise in lean supply chain, reporting on topics from logistics, procurement and inventory management to warehousing and distribution. He also specializes in business finance news and analysis, writing on such topics as corporate finance and tax, cost management, governance, risk and compliance, and budgeting and reporting.

Dave is also the chief editor of Penton Media’s Business Finance and editorial director of Material Handling & Logistics.

With over 25 years of experience, Dave literally wrote the book on supply chain management, Supply Chain Management Best Practices (John Wiley & Sons, 2010), and is a frequent speaker at industry events. Dave is an award-winning journalist and has been twice named one of the nation’s top columnists by the American Society of Business Publications Editors.

Dave received his B.A. in English from Northern Illinois University, and was a high school teacher prior to his joining the publishing industry. He is married and has two daughters.

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