Postal Service to Make Sunday Deliveries for Amazon
Postal Service to Make Sunday Deliveries for Amazon
By RON NIXON
Published: November 11, 2013
WASHINGTON — The cash-short United States Postal Service,
which has failed to win congressional approval to stop delivering mail on
Saturdays to save money, has struck a deal with the online retailer Amazon.com
to deliver the company’s packages on Sundays — a first for both, with obvious
advantages for each.
For the Postal Service, which lost nearly $16 billion
last year, first-class mail delivery, particularly on Saturdays, is often a
money loser, whereas package delivery is profitable.
The deal, announced on Sunday and taking effect
immediately, in time for the holiday shopping season, gives the Postal Service
a chance to take some business from United Parcel Service and FedEx, which do
not deliver on Sundays. Now, some orders that would have been handled by either
of those carriers for Monday delivery will go through the Postal Service and
arrive on Sunday.
The Postal Service said it expected to make more such
deals with other merchants, seeking a larger role in the $186 billion
e-commerce market. Amazon.com would not say if it would try to arrange Sunday
deliveries with other parcel carriers.
For this holiday shopping season, Sunday delivery of
Amazon products will be limited to the Los Angeles and New York metropolitan
areas, which in New York’s case includes parts of New Jersey and Connecticut.
In 2014 it is expected to expand to other cities including Dallas, Houston, New
Orleans and Phoenix.
Among the primary beneficiaries of the new delivery
schedule will be Amazon Prime members, who pay an annual fee for premium
services including free two-day shipping for certain items, said Kelly
Cheeseman, a spokeswoman for Amazon. “Now every day can be an Amazon delivery
day,” Ms. Cheeseman said.
Postal Service officials called the agreement an
important step in diversifying its services and expanding those that make a
profit. “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,” said Patrick R. Donahoe, the postmaster general.
Neither Amazon nor the Postal Service would disclose
financial arrangements or discuss the volume or revenue they expected to
generate from Sunday deliveries. The Postal Service already delivers some
packages on Sundays and holidays for an extra fee.
Shipping and package services have been one of the few
bright spots for the beleaguered Postal Service. 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.
Mr. Donahoe, the postmaster general, said the deal with
Amazon was part of the Postal Service’s attempt to alter its business model.
That effort includes increasing package delivery to take advantage of the
growth of e-commerce, streamlining the work force and eliminating mail delivery
on Saturdays.
Though the Postal Service would continue to deliver
packages on Saturdays, the proposal to halt Saturday delivery has met
resistance from the business sector and some members of Congress. A move to cut
Saturday delivery would save about $2 billion annually, postal officials said.
The agency faces myriad problems that have led to its
financial decline. It faces legal constraints that prevent it from diversifying
into certain lines of business. It is also barred from raising postage prices
faster than the rate of inflation.
But an even bigger cause of the financial decline is a
2006 law that requires the Postal Service, unlike any other government agency,
to pay $5.5 billion a year into a health fund for its future retirees. The
majority of the agency’s losses since 2007, about $32 billion, result from the
health funding requirement, financial documents show.
As a result of its financial troubles, the Postal Service
has defaulted on three annual $5.5 billion payments into the health care fund.
It has also exhausted its $15 billion borrowing limit from the Treasury
Department. More recently the agency has asked for permission to raise its
postage prices to help cover costs.
Congress is considering legislation that would overhaul
the agency and ease the financial constraints, but few anticipate a bill
passing this year as lawmakers continue to wrestle with broader budget issues.
“We’ve got to get this done,” Mr. Donahoe said. “The
faster we can get it done, the faster we can focus attention away from all the
negative attention about our financial situation and onto the positive things
we do, like this new agreement with Amazon.”
A version of this article appears in print on November
11, 2013, on page B1 of the New York edition with the headline: Postal Service
to Make Sunday Amazon Deliveries.
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