Amazon and the United States Postal Service (USPS) recently announced an ambitious plan that has turned conventional thinking about package delivery and ecommerce on its head. Last weekend, residents of Los Angeles and the New York City metropolitan area received packages they ordered from Amazon.com on Sunday. The partnership is more than a one-time gimmick. Sunday delivery through USPS and Amazon will spread to more cities in 2014 and the implications for the future of ecommerce are significant.
Providing Sunday delivery was no small task and there is a reason why such an intuitive move wasn’t done in the past. Despite being very good at delivering mail and packages, the USPS is in serious financial trouble. The organization had a loss of $5 billion last year and it took an act of Congress (it can happen) to prevent them from cancelling Saturday service all together back in April. In order to make this partnership happen, Amazon had to agree to essentially subsidize the cost of the service, which is being offered at no additional charge. However, it is clearly an investment for the company.
“The three big pieces of growth for us are selection, lower prices and speed,” said Dave Clark, Amazon’s vice president of worldwide operations and customer service in an article with USA Today. “Adding an additional day is all about delivery speed. An Amazon customer can order a backpack and a Kindle for their child and be packing it up on Sunday for school on Monday.”
This change is a significant departure from the traditional way people think about ecommerce. One of the biggest problems for ecommerce retailers is that their customers have to wait to get their products. Being able to offer seven-day-a-week delivery puts Amazon, and retailers who sell their products through Amazon, with a significant advantages over their competitors. Though it’s not clear that other ecommerce sites could, or are willing, to pay the cost to subsidize the service like Amazon is. Other ways sites can try to keep their customers is to offer better site-to-store services or lower the threshold for free shipping.
There is a chance that UPS and FedEx may try to offer similar services to keep up with USPS. However, if plans weren’t already in the works for similar partnerships with other ecommerce solutions, it is unlikely they will be able to compete any time soon. While it’s far too soon to suggest that Sunday delivery will be the saviour of the post office, being able to offer such a unique and useful service will undoubtedly help.
“It will certainly help. The fastest growing segment is the package business,” Postmaster General Patrick Donahoe said. “The future of package delivery is a seven-day-a-week schedule. We’ve got the capacity to do it. We’ve got to figure out how to grow this business in order to keep the postal service afloat for all of America.”
The move is a further indication of how small businesses can increase their appeal by partnering with other services. For example, Amazon recently started offering same-day delivery in certain markets. There’s no reason why a small business couldn’t do the same for local orders using a courier service. These deals sometimes reduce the profitability of anything sold that’s delivered through this kind of partnership. But such moves attract people who wouldn’t otherwise use online services which in the long term value to the organization.
According to one expert quoted on a CBS news article about the partnership, “They [Amazon] are absolutely taking a hit on this. No question. But, Amazon is looking at the bigger, longer-term picture in trying to gain market share and encourage customers to shop more.”
It’s too soon to know how much Sunday delivery will affect ecommerce, but there’s great reason to assume that it will positively affect the amount of goods sold through Amazon during the holidays this year. Retailers who use Amazon should check their listings to make sure they look their best and have all of the relevant information customers need to make a decision. Businesses that can sell their products through Amazon but haven’t started, should hurry to integrate Amazon into their marketing strategy and website. Even if the changes are ready in time to help with the markets in LA and NYC this Christmas, the business will be ready to take advantage of the service in 2014 when it moves to include cities like Dallas, Houston, New Orleans, and Phoenix.