By: Chris O'Shea
Times are tough for the old Unites States Postal Service. It's losing money by the handful, and now has struck a deal with Amazon to start delivering packages on Sundays. The deal will help the postal service from continuing to hemorrhage money, and provide better service to Amazon's customers.
The postal service signed off on this deal because of mounting losses. Last year, the USPS announced that it lost a record $16 billion in revenue. At the time, the independent agency was basically begging the government to let it scale down delivery days; specifically cutting Saturdays. According to postal service big wigs, Saturday delivery wasn't needed because less people use physical mail these day. And the numbers backed them up, too. The total mail sent during 2012 was 160 billion pieces, which was a five percent decline from 168 billion in 2011. Less mail, however, meant less revenue for the company.
"The Postal Service is facing a fiscal cliff of its own, and any unanticipated drop in mail volumes could send the agency over the edge,” Art Sackler, the director of a trade company associated with the postal service, told Reuters at the time. “If Congress fails to act, there could be postal slowdowns or shutdowns that would have catastrophic consequences for the eight million private-sector workers whose jobs depend on the mail." Congress decided otherwise, and wouldn't let the postal service cut Saturdays. That set the stage for the deal with Amazon.
The Sunday delivery service begins immediately, with customers in New York and Los Angeles getting it first. For the postal service, this is a big old band-aid on its gaping money wound. Delivery of regular mail isn't very profitable, but packages are another story.
"Shipping and package services have been one of the few bright spots for the beleaguered Postal Service," reported The New York Times. "First-class mail, its main source of revenue, declined to almost 69 billion pieces last year from nearly 92 billion in 2008. That contributed to a decline in revenue to $65 billion in the fiscal year that ended Sept. 30, 2012, from nearly $75 billion in 2008. Shipping and package volume has increased to about 3.5 billion pieces since 2008, and accounts for about $11.6 billion in revenue for the agency."
That is why it's all smiles from the postal service. "Consumers have shown that there is a market for package deliveries seven days a week, and we are glad to be in a position to partner with Amazon on providing this service," Patrick Donahoe, the postmaster general, explained in The Times piece.
The move will surely help the postal service, but for how long? And though Amazon is saying all the right things about the deal — a spokesperson for the company gave the cheesy line: "Now every day can be an Amazon delivery day" — there is little doubt it will benefit Amazon more than the post office. But this is what happens when you run a company dropping billions each year: You strike deals because you have to. Not because you want to.
[Pic via Flickr - William Christiansen]