Amazon Moves on the Post Office
USPS is in trouble, and Amazon wants to hasten its decline. The privatization of the postal system would be a true disaster for American society.
Three stories came out recently about the United States Postal Service:
March 16th: ShipMatrix announces that Amazon is now the largest parcel carrier by volume period, finally overtaking USPS.
March 17th: The Postmaster General testified before Congress that USPS “will be out of cash and unable to deliver mail, and pay vendors and employees, in less than 12 months unless Congress lifts the carrier’s statutory debt limit of $15 billion and eliminate mandates that handcuff its ability to make money and burden it with uncontrollable expenses.”
March 17th: Amazon announces that it plans to cut ⅔ of the volume it sends through USPS.
Technically, these are three unrelated stories about the dire straits of USPS, but it’s hard to feel like their rapid succession is coincidental.
With the buildout of its rural network, Amazon has been positioning itself to be able to take over USPS service should the Trump administration proceed with postal privatization. When I updated my Amazon distribution network primer last summer, I found 123 Rural-Super Rural (RSR) facilities, and I’m pretty sure they’re over 200 now. RSRs and Sub-Same Days are the two fastest growing categories of Amazon’s distribution nodes.
Even with this phenomenal growth, I still think Amazon’s case to benefit from postal privatization is not as strong as, say, UPS’s. But Amazon is no doubt politically in a much better place than UPS to make their case, and if I had to guess, they’re assessing the current state of the world and thinking that they shouldn’t let a good crisis go to waste.
Operationally, Amazon’s biggest problem right now is that they are still in the infancy of figuring out reverse logistics. Which is to say, they are very good at outbound distribution, but less so at injecting outside parcels into that one-way flow. But with Amazon Shipping, they’re certainly figuring it out. Here’s a label I collected through my Amazon package label project of a package that was picked up by a driver and first processed at the DLX5 Delivery Station in LA, routed through three Sortation Centers (ONT5 in San Bernardino, CA, MTN6 in Sparrows Point, MD, and EWR5 in Avenel, NJ), before being dumped to USPS. No Delivery Station involved in the last-mile, but one involved in the first!
But it seems unlikely that they would scale this system up quickly enough to take over USPS service. My sense is what they would do is scrap USPS’s own distribution network but retain post office branches and inject all volume from there into the Sortation Center network, mostly bypassing their Delivery Stations for inbound parcels.
But this is just for parcels. They’d have no idea what to do with the 109 billion pieces of first-class and marketing mail that went through USPS’s system last year. And while they would most likely function at an operating loss not to piss the public off too quickly, it would only be a matter of time before Amazon went back on USPS’s Universal Service Obligation to “provide prompt, reliable, affordable, and efficient postal services to all Americans, regardless of where they live.”
Looking at USPS’s last-mile coverage is instructive here. In the state of Wyoming, USPS currently has 77 last-mile delivery facilities. UPS has 9, FedEx has 8, and Amazon has 3. How are any of these companies going to deliver mail six days a week? Even operating at a loss, postal privatization would likely involve immediate reduction of daily to weekly delivery service or worse.
In brief, then, postal privatization would be a true disaster, a fundamental interruption and degradation of a public service that Americans take for granted, and a political disaster for any administration under which it was executed. Most devastatingly, it would also result in a decimation of the postal workforce, a unionized stronghold in the country (about half a million union members in total). This is the future that Amazon is trying to hasten.