The Brilliant Strategy Behind Amazon's Sunday Package Delivery Partnership With the US Postal Service

The thing about strategy these days is that it is not enough just to advance your own ambitions: it only really works if you harm a competitor at the same time.

Amazon's announcement that it will partner with the perennially struggling US Postal Service works on so many levels it's a challenge to remember all of them.

Firstly, it should be noted that Amazon is going about this in a thoughtful way, using it as a controlled experiment. The initial markets in which it is available are New York and Los Angeles, where the concentration of customers and USPS assets makes it most cost effective. It is only being made available, at least initially to Amazon Prime customers, those who pay a premium for enhanced services. This rewards their loyalty, encourages further reinvestment in Amazon initiatives and adds to the company's coffers.

Second, this reinforces Amazon's already sizable advantage in delivering ecommerce convenience. Sunday delivery is not generally available, even before the holidays. And this is where the stick-it-to-your-competitor aspect becomes apparent: this option gives Amazon an advantage over most bricks-and-mortar retailers as well as Google, eBay, Apple, Facebook and anyone else hoping to grab a piece of the retail market, whether online or in traditional mode.

Finally, and this may be where its true genius becomes clear, Amazon gets to score some brand-burnishing points.  It has, in the past few years, lost its mojo as an internet darling. In fact, it is developing something of a reputation as more of a taker than a giver. Politicians, regulators and the general public have belatedly recognized that the company's success has come at the expense of retail businesses, especially small ones, as well as the jobs and tax revenues they provide. Support for Amazon's tax free status is rapidly disappearing as a result.

With this one gesture, Amazon invests in a publicly supported but chronically underfunded postal service, injecting much needed revenue while benefitting from two hundred years of government investment in infrastructure and people - and one which the tax payers still subsidize. In doing so, Amazon demonstrates a certain amount of public spiritedness, but at little actual cost to itself. Many politicians ideologically opposed to a government postal service have demonstrated they still feared the public's wrath if they voted to mandate USPS cut back Saturday deliveries but they are only too happy to support private sector partnering. 

Given the company's greater ambitions to grow beyond its current 'niche', this may help reduce the opposition to future initiatives requiring public acquiescence and regulatory approval. All in all, this may be one of the most masterful strategic, regulatory and public relations convergence successes in recent memory. JL

Jay Greene reports in the Seattle Times:

The online retail giant plans to deliver packages seven days a week, now in New York and Los Angeles, and in much of the country next year.

As the holiday shopping season revs up, Amazon.com is adding another weapon to its competitive arsenal: Sunday delivery.
The online retail giant has cut a deal with the U.S. Postal Service to extend delivery of packages to customers to every day of the week. That means Amazon Prime customers who pay $79 a year to get free two-day shipping on millions of products can order an item Friday and have it arrive before the weekend is over. And Sunday delivery will be available to customers who don’t subscribe to Prime as well.
Sunday deliveries of Amazon products will start this weekend, but only to customers in the Los Angeles and New York metropolitan areas. The company, which needs to build up the technical capability at warehouses elsewhere, plans to work with the post office to roll out the service to “a large portion of the U.S. population” next year. It wouldn’t say when Sunday delivery would come to Seattle.
Details of the agreement have been sealed with the Postal Regulatory Commission, an independent agency with regulatory oversight over the Postal Service, according to USPS spokeswoman Sue Brennan.
It’s the first time the Postal Service has worked with a retailer to enable Sunday delivery.
“It requires the scale that Amazon has,” said Dave Clark, Amazon’s vice president of worldwide operations and customer service.
On Nov. 26 last year, Amazon’s peak shopping day, customers ordered more than 26.5 million items worldwide, or 306 items per second. About 57 percent of Amazon’s sales last year were in North America.
For the Postal Service, the deal boosts volume, something the financially struggling agency needs. It briefly flirted with canceling Saturday mail delivery earlier this year, only to have Congress pass a short-term budget that required six days of mail delivery.
Despite the diminishing economics of mail delivery, package delivery is booming for the Postal Service. Agency spokeswoman Brennan said the Postal Service expects to deliver 420 million packages in the period between Thanksgiving and Christmas, up 12 percent from last year.
During the holiday season, that volume often leads to massive package backups on Sunday.
“Mondays are historically huge delivery days,” Brennan said. “Part of this (deal with Amazon) is to ease the weight for our carriers.”
For Amazon, delivery speed is a crucial competitive challenge. It can often beat brick-and-mortar stores with prices. But it can’t match consumers’ instant gratification in obtaining a purchased item the second it’s bought.
What’s more, Sunday delivery ratchets up pressure on Amazon’s online rivals, who haven’t cut Sunday delivery deals with the Postal Service. Amazon’s deal is not exclusive, though Brennan said the agency is not negotiating currently with any other company.
Because of the post office’s limited Sunday operations, Sunday delivery requires the type of labeling, routing and sorting technology that Amazon possesses at its massive warehouses. The company will presort the packages, provide labeling required by the Postal Service and transport the packages to the specific post offices, then they will be delivered to customers.
“It’s really about the capability you have to have to enable you to do this with the post office,” Clark said. “I think it would be hard for others to replicate.”
That’s why Sunday delivery, for now, will be available only on items shipped by Amazon.
Amazon does offer limited Sunday delivery currently, through its Amazon Fresh online grocery service. In addition to produce, meats and dairy, customers can pick up some items from Amazon.com when they place an order with Amazon Fresh. The delivery trucks, operated by Amazon, roll seven days a week.
But the selection is limited to goods stocked in the warehouses near Amazon Fresh facilities in the two markets where that service is available — Seattle and Los Angeles.
The Postal Service, too, offers limited Sunday package delivery during the holidays. It sends out carriers on the three Sundays before Christmas in major metropolitan markets.