Amazon may help bail out U.S. Postal Service with shipping deal

Amazon may help bail out U.S. Postal Service with shipping deal

Summary: The U.S. Postal Service needs more shipping volume and Amazon is happy to help if it can nail down Sunday package deliveries.

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Amazon and the U.S. Postal Service have forged a deal where packages will be delivered on Sunday starting in Los Angeles and New York and building out to more cities in 2014.

The deal is a classic win-win. Amazon will be able to deliver packages on Sunday to its customers and the U.S. Postal Service gets more shipping volume and a boost to the one business that's growing. You could argue that the Postal Service is becoming an Amazon delivery service, but so what? Amazon isn't disclosing its payments to the Postal Service for Sunday deliveries, but it probably got a better deal than it would have with FedEx or UPS.

Let's face it: The U.S. Postal Service financials are horrible. Saturday mail delivery was about to be nixed. So why would the Postal Service start Sunday package delivery? E-commerce and shipping is the one growth area for the Postal Service.

The Postal Service tells the tale:

The impact of technological change has been especially pronounced on our First-Class Mail revenues which continue to decline even as new services, the growth of e-commerce, and successful marketing campaigns have helped us grow our Shipping and Packages revenues. However, because Shipping and Packages presently represent nearly 20% of our total revenues and because the profit contribution on these services is much lower than that of our First-Class Mail services, the increases we are currently experiencing in Shipping and Packages cannot fully offset the declines in First-Class Mail revenue and volume. Revenues from Shipping and Package Services would have to grow at a substantially higher rate in order to replace the contribution of First-Class Mail. We anticipate that the volume of First-Class Mail will never return to former levels experienced in the mid-2000s; in fact, we predict that it will continue to decrease well into the foreseeable future...

Despite trends away from hard copy to electronic media, First-Class Mail and Standard Mail continue to provide the vast majority of our revenues. First-Class Mail represents 43% of our revenues and accounts for 42% of the mail volume while Standard Mail generates 25% of revenues, but 51% of volume. Shipping and Packages generates nearly 20% of our revenues despite representing only 2% of volume.

usps service line

 

Now Amazon won't offset snail mail declines, but the volume will be welcome. And it's quite possible that other e-commerce companies will follow Amazon's move. If shipping and packages can become 40 percent of revenue perhaps the Postal Service looks like less of a train wreck due to pensions, debt and government funding.

In August, the Postal Service outlined its financials. In the third quarter, the Postal Service had operating revenue of $16.2 billion, up 3.6 percent from the same quarter a year ago. Operating expenses, however, were $16.9 billion. That tally is due to an efficiency drive at the Postal Services---mail processing centers, work hours and delivery routes were consolidated or eliminated.

uspsfinancial2
uspsfinancial1

 

Here's the problem: The Postal Service's first class delivery volume has plunged in recent years due to e-bills and simply less need for snail mail. However, shipping and package revenue was up 8.8 percent.

The Postal Service's resurrection plan revolves around more shipping and a lot less mail.

Amazon's deal for Sunday delivery isn't a cure for the Postal Service, but is a welcome addition to any turnaround plan.

Topics: E-Commerce, Amazon, Government

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34 comments
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  • Amazon and USPS

    just a quick comment on your article.....once again someone speaks without first getting the facts correct!!!! The USPS receives NO FEDERAL MONETARY SUPPORT!!! All operating expenses are paid from revenue generated from sales of services offered ie; stamps, package deliver, priority mail etc.
    chrisrazzzz
    • they are subsidized to the teeth

      they don't pay tax especially property taxes, vehicle and income.

      Meanwhile FedEx and UPS pay taxes on every little damn thing and manage to turn a profit.


      The postal service needs to fire every employee, remove the union, hire back half(the ones that actually work) at real market wages and go to 3 days a week delivery for residential.
      everss02
      • their pension obligations are too high

        firing will not help much.
        ForeverSPb
        • yes, so like all unions

          just skip forward and have them file bankruptcy to rid the pension debt
          everss02
          • There's more to the story

            The pension obligations have nothing to do with the union. The Republican Congress several years ago passed a bill forcing the USPS to fund its pension plans at several times the expected rate of payouts for decades in the future. The purpose of this is assumed to be to bankrupt the USPS.
            mikeschr
          • Sooooooo they should just pay cadillac benefits and not fund them?

            yeah, how dare they be expected to fund them or god forbid cut them

            nothing to do with the unions plzzzzzzzzzzzzzzzzzzzzzz
            everss02
          • Faux news bs alert

            fund them yes... but 75 yeas out.... Don't be ridiculous.

            This has been a Faux news Bs alert
            cjmmjc
        • You can plug this comment to any job

          You can say this about any job, until you do the job yourself then you'll understand. Just like the many thousands of you that quit on the first day, college education or not.
          Phx Steelerfan
      • Could FedEx or UPS deliver

        A letter anywhere in the country for 46 cents?
        thekman58
        • No

          But neither can the USPS which is one of the big problems.

          (I think the USPS service is excellent; this is not bashing; they just need a new undiscovered approach.)
          Bill4
          • Exactly

            The USPS needs to be more than a 6 day a week subsidized junk-mail delivery system.

            Go to any Apt mailbox cluster, they have a large trash can next to them full of junkmail. So all this effort just to have it tossed in the trash instantly.
            everss02
          • As expected only complaints and no solutions

            So what's the alternative? Because none of these other so called PROFITABLE companies are going to a fraction of the deliveries they make. Just because you have no need for the service does not mean others don't depend on it. Same as always you offer no solutions other than eliminate it and to hell with those who use it. Big government, unions, complain, complain. Lets just lay everyone off, that is always a good solution to making companies profitable.
            thekman58
          • Do we need to deliver paper?

            Everyone has a computer? Why isn't the USPS operating the biggest, super-secure (i.e. NSA free) e-mail service in the country? If folks want paper, let them print it after they open their USPS e-mail.

            Good grief, lets kill the waste. I get ZERO statements in the mail. I do almost all of my banking and bill paying on-line. It's automatic, free and doesn't even cost the price of a stamp.

            The only thing I get in the mail is credit card offers I don't need (I get the same thing my junk e-mail), weekly store flyers (the same thing is available on their web sites) and discount coupons (not sure but I'm sure there's a way to offer them electronically.

            Other than delivering on-line packages, why do we need a service that delivers paper letters and junk mail?
            robradina@...
          • we dont need a junkmail delivery service, no solution is needed

            get a clue, USPS is just a big make-work operation at taxpayer expense.
            everss02
          • In my po

            There's a large blue recycling bucket in my local post office. By 11am it's usually full.
            oldskooldj
          • USPS can't deliver a letter ?

            Bill4:
            just where in the US doesn't the USPS deliver a letter for $.46 ?
            dsomerv
          • RE: USPS can't deliver a letter ?

            dsomerv:

            just where in the US doesn't the USPS deliver a letter for $.46?.... My house on a consistent basis. A recent example (one of many) of an order I placed for something in July of this year. 3 fusible resistors that were shipped in a small envelope first class, with a signature required. Since no one was home, the carrier returned it to the post office, but either failed to leave the notice that the package required a signature or placed the notice somewhere that I have yet to find. No second delivery attempt was made. Rather than returning it to the sender as undeliverable, it was marked as delivered and sat at the local post office for a few months. Finally it was returned to the sender as of late October. The sender at that point re-sent it without the signature requirement and it finally arrived.

            In the meantime I had contacted the sender, but he said he had it marked as delivered by the post office. Since my job takes me out of town Mon - Fri, going to the post office to deal with this was not an option over a $4 item, so I obtained them elsewhere.
            JimBezdan
          • personal issues

            this seems more like a personal scheduling issue with yo not being available for the delivery. There is nothing here that happened that could not have happened with UPS, Fedex or any anther service. So to blame the Postal Service a some big screw up is just nonsense
            cjmmjc
      • Alert Alert Faux news Bs alert

        The post Office would be totally SOLVENT if the republican congress (the same ones that FORCED it in in the first place) would lift the requirement that the Postal Service must fund its retirement benefits 75 years into the future. That is effectively funding the retirement for employees that have not been BORN yet.

        NO company has to do that, and it makes them non-competetive. It is a Repuglican ploy to destroy the Post Office and the Postal Union, nothing more nothing less..

        this has been a Faux news BS alert
        cjmmjc
        • Troll...

          Cite the law the Republicans passed requiring your BS statement.
          oldskooldj