Why did Amazon strike a deal with the USPS for Sunday deliveries? The quick answer is that is all about the customer, even more so than the bottom line. Or as Forrester Analyst Sucharita Mulpuru tweeted: “Sunday delivery by Amazon: customer-centric, yes; profitable, no. Just like almost everything else from Amazon.”
Speed, Prime and Disruption Explain Deal with USPS
Leaving aside finance for the moment – neither party would discuss details, in any case – we can underscore the primary customer angle. Faster delivery will please buyers. Greater customer satisfaction, incidentally, should result in more positive feedback for FBA sellers, which is a good thing from our perspective. Two other factors that help explain the deal are Amazon Prime and Amazon’s habit of disruptive business ventures. Let’s review all three:
Speed. Sunday delivery has the immediate effect of quicker deliveries in the Los Angeles and New York metro regions. Amazon said it would expand the program in 2014 to Dallas, Houston, New Orleans and Phoenix. This hurry-up initiative aligns with Amazon’s expansion of its distribution network, some of which is reaching even within manufacturing facilities. The upshot is the same. As Amazon VP Dave Clark told USA Today: “Adding an additional day is all about delivery speed.”
Amazon Prime. Sunday delivery bears most directly upon Prime members. For a $79 annual fee, Prime buyers receive (among other benefits) free, two-day shipping on eligible purchases. Amazon’s default free shipping offer applies to orders of $35 or more (raised recently from $25) and guarantees a much longer delivery window of five to eight days. As a Prime member living in LA or New York, if you place an order on Friday, you could now receive it on Sunday. This is special treatment, but Amazon has reason to indulge its Prime members. In 2012, they spent more than twice as much on Amazon as non-Prime members.
Market Disruption. Whether traditional retail, web services, computer tablets or logistics, Amazon has penchant for breaking models and disrupting markets. FedEx and UPS already partner with the USPS, through their SmartPost and SurePost services, respectively. So the idea of a hybrid (private/public) service isn’t entirely new. But in this case, Amazon is partnering directly with the USPS, thereby undercutting its erstwhile partners FedEx, UPS or any other private carrier who would have handled that Monday delivery.
“Weird” and “Unsettling”
The deal yet has some commentators scratching their heads. CNN Money contributor Dan Mitchell called it “weird” and “unsettling” for these reasons:
Sunday mail (for now anyway) comes exclusively from Amazon.
Government-agency-as-private-contractor is an unfamiliar role reversal.
The deal combines a successful (private) and a troubled (public) enterprise.
That last point is less of a puzzle in light of the USPS’s desperate need for cash. What is curious is the use of the term “successful.” Amazon has a high stock price and generates tremendous cash flow, but it is also losing money – just not nearly as much as the Post Office. So the customer wins, as Mulpuru tweeted, but any profit is harder to see.
Originally published on November 21, 2013, updated July 7, 2019
This post is accurate as of the date of publication. Some features and information may have changed due to product updates or Amazon policy changes.