Amazon and U.S. Postal Service strike Sunday deal

In a move that many are saying will benefit both parties, Amazon and the U.S. Postal Service have reached an agreement to have the floundering government agency make Sunday deliveries for the retailer.

Here are some of the details from the New York Times:

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.

 The L.A. Times story pointed out some of the benefits for the Postal Service in expanding its offerings:

The deal could be a boon for the postal service, which has been struggling with mounting financial losses and has been pushing to limit general letter mail delivery to five days a week.

Spokeswoman Sue Brennan said that letter mail volume is declining “so extremely,” yet package volume is “increasing in double-digit percentages.”

The postal service’s Sunday package delivery business has been very small, but the arrangement with Amazon for two of the retailer’s larger markets, Los Angeles and New York, should boost work considerably.

To pull off Sunday delivery for Amazon, the postal service plans to use its flexible scheduling of employees, Brennan said. It doesn’t plan to add employees, she said.

Members of Amazon’s Prime program have free two-day shipping and, under the new deal, can order items Friday and receive them Sunday. Customers without Prime will pay the standard shipping costs associated with business day delivery.

As consumers increasingly move online to shop, retailers are finding that their shipping policies can be a bellwether of customer loyalty. Though not necessarily offering Sunday delivery, many are testing same-day service.

The Washington Post said that the USPS would add employees in some locations, so it will remain to be seen if this will be a boon to hiring. It definitely could help the ailing agency:

The arrangement with Amazon could open the doors to more partnerships with retailers that are eager to use the 500,000 USPS employees and 31,000 post offices across the country to satisfy consumers who want to get what they buy online faster.

The Postal Service said it would increase staffing in the locations where Amazon will offer the service, but did not offer specific numbers.

The USPS also declined to comment on how much additional revenue the new initiative is expected to bring. In 2012, the number of packages the agency delivered rose to 3.5 billion, from 3.3 billion in 2011 and 3.1 billion in 2010.

Even so, the Postal Service lost $21 billion over the past two years — and predicts it will continue to operate deep in the red — largely because of the growing expense of delivering letters.

For Amazon, the partnership steps up a fierce battle to make online shopping closer to the instant-buying experience at bricks-and-mortar stores. In the near future, e-commerce is expected to deliver a variety of items — designer jeans or a jug of milk — within hours after an online order is placed.

Wal-Mart, Google, eBay and others are experimenting with same-day delivery. Amazon has a pilot project called Amazon Fresh, which offers grocery delivery in Los Angeles and Seattle, and plans to expand it nationwide.

The plan will definitely help Amazon customers, especially Prime users, move closer to the instant gratification of buying in the store. It will also benefit all those last-minute shoppers who scramble to get presents before Christmas day. It will be interesting to see what it does to online loyalty as well as if it hurts in-store sales this holiday season. There are only so many consumer dollars to go around.