Amazon was one of a handful of major U.S. retailers to join “The Package Coalition,” a lobbying organization dedicated to supporting the United States Postal Service’s delivery services, in early August.
Amazon is no ordinary online retailer, of course. The e-commerce giant is taking steps toward developing its own shipping network, delivering packages with its own vehicles, fulfillment centers and pick-up options.
But Amazon’s participation in the Package Coalition is a testament to the continued critical role the USPS plays in parcel delivery — especially in rural areas that private shippers avoid because such routes are inefficient and expensive to deliver packages to. Someone has to serve those customers with door-to-door delivery, and primarily, that’s USPS.
What is the Package Coalition to Support the U.S. Postal Service?
The Package Coalition aims “to work proactively with policymakers and the public to highlight the importance of the postal package delivery services to American businesses and consumers,” the group said in a press release. In other words, it’s a lobbying group.
But it includes some of the U.S. and world’s largest and most powerful retailers and industry groups: Amazon, Columbia Sportswear, Express Scripts, the National Retail Federation, OSM Worldwide, Pitney Bowes, Publishers Clearing House and QVC.
John McHugh, former Secretary of the U.S. Army and a former Republican member of Congress, is the coalition’s chairman.
While most of these retailers rely on private carriers, including FedEx and the United Parcel Service, for the bulk of their shipments, USPS still fills in some key gaps. USPS is “the only daily delivery service that connects every one of America’s 157 million addresses,” the group said — no matter their proximity to freeways or fulfillment centers.
With e-commerce growing and the demand for same-day delivery and two-day shipping increasing, USPS service is even more important, the group said. “The USPS delivers packages to every home in America, provides seven day a week service, and connects millions of small businesses with customers across the globe — without it, consumers would have fewer shipping options, reduced service in rural areas and prices would drastically increase,” Blair Anderson, director of transportation policy at Amazon, said in a statement.
Why USPS Matters For Last-Mile Package Delivery
McHugh, chair of the coalition, explained:
“The U.S. Postal Service has 157 million delivery points,” McHugh said. “No other organization in America has that kind of reach and penetration. Particularly in rural environments, it’s absolutely essential. In the era of e-commerce, it’s even more crucial. For rural community residents and small businesses, the only way they can afford to get that is through the Postal Service.”
McHugh said that of the U.S.’s 42,000 ZIP codes, more than half — 24,000 — are assigned to rural areas, where USPS or the Post Office provides these critical services.
USPS offers large retailers like Amazon bulk rates, but its rates are still consistent across the board — the agency does not negotiate contracts with each shipper. At the same time, USPS loses money on many of those rural deliveries for which retailers rely on it.
In theory, retailers’ shipments would cover USPS costs and overhead, McHugh said. But that isn’t always the case, especially when a large online retailer, like Amazon turns, to USPS primarily for expensive deliveries.
Simply put, USPS loses money. And that’s what put the agency in President Donald Trump’s crosshairs.
Trump has often attacked Amazon on Twitter. He’s called USPS Amazon’s “delivery boy” and suggested (without evidence) that the bulk rates Amazon and other package shippers pay have led to USPS’s tremendous loss.
Trump’s suggestion that Amazon is undermining USPS as a “delivery boy” have raised concerns about potential parcel rate hikes and reduced postal service. The creation of the Package Coalition comes just weeks before an expected report from a task force Trump created in April. The task force was meant to study possible reforms for the money-losing agency.
USPS’s rural deliveries do eat into its bottom line, and many retail giants use USPS for exactly those services. So Trump’s assessment isn’t wrong. But changes to USPS pricing could make rural deliveries more expensive for everyone — and those costs would likely be passed on to consumers.
Amazon Moving Into The Shipping Industry By Delivering Packages
At the same time, there are ongoing rumors that Amazon will eventually seek to deliver all of its own sales — and maybe some from third parties, too. But Amazon’s membership in the Package Coalition demonstrates how important USPS remains to its fulfillment services.
“This will be slow at first but will accelerate as Amazon rolls out more of its own delivery services,” GlobalData Retail Managing Director Neil Saunders said in comments emailed to Retail Dive earlier this year. “This leaves delivery firms with the unattractive prospect of losing share in their most lucrative and profitable markets, while at the same time having to offer a national service with all the expense of delivering to rural locations.”
Last-mile delivery service is a challenge for all retailers, even those as big as Amazon. And while Amazon has already innovated in the parcel delivery space — take Hub by Amazon and Prime Air, for example — those innovations are focused in dense urban environments, not sparse rural ones.
For now, Amazon’s solution to deliver packages to rural customers is the same as everyone else’s: The United States Postal Service.
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