Amazon, Now With Official Government Support
Amazon.com isn't done breaking new ground in retail services quite yet. The latest big idea adds a unique level of U.S. government support to Amazon's shipping service.
The U.S. Postal Service and Amazon have signed a deal to deliver packages on Sundays, if your package was ordered from Amazon's online shopping mall and has a delivery address in Los Angeles or New York (though other major markets like Dallas and Phoenix will join later).
This is a unique service for now, "Making every day an Amazon Prime delivery day." Specifically, if you're an Amazon Prime member, you can now expect free two-day delivery without weekend schedule stuttering even if you placed your order on a Friday.
Can the USPS really afford this move?
This might come as a surprise if you've followed USPS news lately. The Postal Service is notoriously unprofitable, and may have to cancel Saturday delivery at some point. In particular, package delivery is far less profitable than regular first-class envelopes. Can the service really afford to cut a special package-delivery deal with one of its largest bulk-mailing customers?
But packages are profitable -- just less so than first-class mail. The USPS faces a $6 billion decline in annual first-class revenue over the next five years, and it would take something like $18 billion of additional package orders to make up for this shortfall. If Amazon is paying a small premium for this as-yet exclusive arrangement (and I don't know if it is), it would help the USPS meet its long-term goals sooner.
In fact, you shouldn't expect this Amazon deal to stay exclusive for very long. An Amazon press release contained clues that other online shopping outlets might receive similar treatment soon enough -- whatever it takes to build that $18 billion package delivery increase.
"As online shopping continues to increase, the Postal Service is very happy to offer shippers like Amazon the option of having packages delivered on Sunday," said Postmaster General Patrick Donahoe (emphasis mine) in the release. He's not specifically talking about Amazon shopping on the rise, and he clearly opens the door for other shippers like Amazon to join the party.
So don't be surprised if eBay cuts a similar deal with the Postal Service, to offer its auctioneers a more convenient shipping alternative. Wal-Mart might have to join the party eventually if the traditional retail giant wants to make the leap into the e-commerce era. Sunday shipping may sound like a minor advantage, but every little bit counts.
What's in it for the Postal Service?
The USPS has every incentive to go looking for more partners. The service is under heavy assault from private shipping giants FedEx and UPS , and needs every little edge it can get in this cutthroat three-way war. While the Postal Service is also a major partner of FedEx (and a less committed collaborator with UPS), meeting that ambitious $18 billion, five-year goal could force it to make a land grab and eat a larger slice of the delivery pie.
If that eventually forces both UPS and FedEx to jump aboard the Sunday delivery bandwagon, it'd be fair to say that Amazon started a revolution this week. Stay tuned.
The biggest winner is, as usual, the American consumer. Not only do e-shoppers in select markets get better service, but we get to sit, popcorn in hand, and watch shippers battling on one level and e-commerce retailers on another.
Amazon is changing the face of retail -- again
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The article Amazon, Now With Official Government Support originally appeared on Fool.com.Fool contributor Anders Bylund has no position in any stocks mentioned. Check out Anders' bio and holdings or follow him on Twitter, LinkedIn, and Google+. The Motley Fool recommends Amazon.com, eBay, FedEx, and United Parcel Service. The Motley Fool owns shares of Amazon.com and eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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