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Retail Roundtable: Amazon and USPS Sunday shipping

Our experts weigh in on possible ramifications of this very big retail partnership.

November 27, 2013 by James Bickers — Editor, Networld Alliance

Amazon garnered a lot of attention earlier this month when it announced a partnership with the U.S. Postal Service that will facilitate Sunday deliveries. So we sat down with several of the brains on the RCE blogger team to see what kind of impact this deal might make on the retail industry.

Doug Fleener: I think it is an obvious win/win for both organizations. For the USPS it's almost a Hail Mary catch. I believe it will help them carve out a niche with a lot of etailers for weekend delivery. Obviously UPS or Fed-Ex could move to Sunday deliveries as well, but it could be pretty difficult to do with their unions.

I don't see a lot of impact on other retailers. If you live in a rural area you were willing to wait until Monday for a delivery, and if you live in an urban area you may have or be getting same day delivery in the future. It's just another reminder that retailers have to continue to differentiate themselves, add value with their staff and customer experience, and in many segments be as competitive as the online retailers. 

I will say that one other thing that is changing consumer perspective, and that's when Amazon starts collecting sales tax. They recently started collecting in Massachusetts where I live, and I've already seen it change my shopping habits. Just last week I would have ordered something I needed from Amazon, but because they now charge sales tax I stopped by Best Buy. 

Mike Wittenstein:This deal is a large experiment as the Post Office transforms itself into an embeddable last-mile logistics capability for other companies. To its credit, the US Post Office is taking a fresh look at what customers need most and is responding with new services and even a new business design. In conjunction with the Amazon announcement, USPS has also announced the opening of store-in-store post offices in many Staples stores.

At first blush, the deal looks sweet. Lower lease costs, longer hours, greater convenience and more services for customers (e.g. most Staples have a copy/print/pack/design/special order desk). Other post office operations worldwide have been in downsizing and space-sharing mode for years. I recently spoke with a Danish Post representative who shared that to compete, the Danish Post Office has closed all but 10 of its stand-alone locations in the entire country. They also offer services normally relegated to independents, such as shared, multi-vendor print promotions, eBoxes for secure delivery of electronic mail (like bank statements, insurance, etc.) and some analytics to help marketers more intelligently and efficiently send promotions materials and offers only to those people might really buy them. 

As demand for physical mail plummets, the USPS’s innovation capabilities are among the strongest I’m familiar with in the U.S. government. Managing shrinking and growing product and service lines at the same time is no small task. 

Jeff Fromm:I'm not very close to the online chatter about this, but it feels like it may be a case of a desperate brand — the USPS — trying to re-invent itself before it disappears with the Pony Express.

There are some clear consumer benefits if the USPS can be a consumer-friendly brand but is this a sustainable strategy? Can the USPS be the "retail" footprint that allows Amazon to deliver and particularly when seasonal demand can be very high? Amazon is a very strong brand partnering with a struggling brand. Usually that type of imbalance creates problems.

I'd also push back and ask to show me a major retailer case study that has a partnership with Amazon that has sustained success. So, I think this is a potential win for Amazon, consumers who will have improved access and perhaps the USPS lives a bit longer while it searches for a new value proposition in today's Millennial-inspired participation economy.

Mike Wittenstein: Good points, Jeff.

Let’s add that the USPS wasn’t founded as a business, rather as a service. One of the things we count on our government to do for us is to create necessary infrastructure when nobody else wants to or when we need something done quickly. The thought experiment of imagining the Post Office disappearing and the effects of that might lead us to understand what the true value of the postal system is today. We might discover which parts of it have the most value to its various customers and in which combinations with other businesses those parts might thrive as part of our national infrastructure. I think part of that experiment is happening with Amazon and Staples today. It will be interesting to see how other players respond.

Micah Solomon: My experience with the postal service in recent years has been almost uniformly positive. No mail lost — literally not a single lost letter, or check, at the low price of 46 cents. And priority mail is by and large a better value than the competition. Very helpful and sometimes life saving clerks, etc. They get bad press and people love to pile on and Congress in particular has treated them unfairly. So clearly they could benefit from a rebranding but their basic servide is very solid. I hope the Amazon patina they are getting will help with this.

James Tenser: Amazon understands at its core that the online sale is easy but the fulfillment is hard. To fulfill its ideal of near-instantaneous delivery for any item at any time, it has two basic choices — develop its own last mile mechanism or outsource to one or more trusted partners. This announcement reveals it has taken the latter option, but in a unique way — by linking its growing network of local fulfillment centers to the USPS field services organization.

The U.S. Postal Service is wise to pursue its own reinvention, as a provider of relevant and essential services to individuals and institutions. If Amazon can steer profitable deliveries its way at a scale that could turn Sundays into a new profit center, then a great win is possible. Order Saturday — receive Sunday could become the new service standard. Parcels from non-Amazon sources might ride along too, if the entities are able to get the packages to the same USPS receiving points.

That last part — the mechanism of the handoff of deliveries from Amazon to USPS — seems like the crucial element here. I’m very eager to learn more about how that is going to be accomplished.

Bob Phibbs: I think it is a very big deal and very smart on both sides. So many retailers smugly assume I think that customers want to buy it today and have it today. Nowhere else do they get that satisfaction. Amazon, with Sunday delivery has just gotten 14 percent ahead of everyone else because they can deliver every day, not just M-Sat. Coupled with Amazon Prime it is a deal changer and potentially takes larger or more time-sensitive products — "Oh, I ran out of dog food, we don’t have to go to the pet store, we can still order from Amazon." It ties the customer tighter to the teat of Amazon with little downside for either.

Yes, the USPS will partner with other retailers to provide this service but it won’t play out nearly as compelling as Amazon who has a string of firsts in their back pocket.

Of course, the fact they make no profit is only lost on the shareholders.

Photo by Paul Fisher.

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