The online retail giant Amazon.com has made a deal with the ailing United States Postal Service to provide Sunday deliveries to Amazon customers.
Amazon, which typically works with competing delivery companies FedEx and UPS, has decided to make the deal due to their typical carriers lack of Sunday deliveries.
The deal is seen as an opportunity for both the retailer and USPS to monopolize the Sunday delivery market.
The deliveries will start in major cities such as Los Angeles and New York this fall, with plans to expand to other cities in 2014.
- Sucharita Mulpuru, vice president and principal analyst serving e-business and channel strategy professionals at Forrester Research. She tweets @smulpuru.
JEREMY HOBSON, HOST:
From NPR and WBUR Boston, I'm Jeremy Hobson. It's HERE AND NOW.
It wasn't long ago that the U.S. Postal Service was considering ending Saturday delivery. So it may come as a surprise to learn that the post office is starting Sunday delivery, at least in and around Los Angeles and New York. It's part of a deal with the online retail giant Amazon. Joining us to discuss: Sucharita Mulpuru, an analyst with Forrester Research. Welcome.
SUCHARITA MULPURU: Thanks, Jeremy.
HOBSON: So I haven't seen a price tag on this deal yet. Do we know much more about the details of this, about how much the Postal Service is going to get for doing this?
MULPURU: That's a great question. I think, like a lot of what Amazon does, much of it is under wraps. So we don't know the specific economics of the deal on either side. But what we can rest assure is that the Postal Service isn't doing this for free. So what they have decided to do is that package delivery - this isn't, you know, kind of the letters or the postcards that you get. It's only for packages that Amazon will be enabling the Sunday delivery service in those dense urban markets, well, Los Angeles and New York, so for now.
And basically, Amazon has committed to not increasing consumer prices on it, and what that likely means is that the Postal Service will be getting some type of a payment, a premium payment, likely, for making those deliveries because Amazon will ultimately be subsidizing the cost of that delivery on the weekends.
HOBSON: And there are so many parties involved here that could be affected. I want to go through a couple of them. First of all, what does this mean for companies like FedEx and UPS?
MULPURU: Well, I think that what happens is that they get brought into the mix because they ultimately would love to have a piece of that, and they would - they arguably, you know, also don't want to be left out. So I think that it raises the bar not just for every other retailer, but for the other carriers to also be - to have an offer in this way as well.
HOBSON: What about Amazon? Why do they need to do this? They're already the largest online retailer around.
MULPURU: I think that there are a couple of reasons. One is that Amazon historically has had a perspective about being super customer-centric. And this is, yet again, another way to surprise and delight customers. I mean, they have really mastered fulfillment over the last decade. They deliver, better than anybody, a package accurately and on time, often ahead of time. And the - one of their big holdouts there was the fact that, you know, they didn't - they weren't able to deliver on Saturday and Sundays as frequently as they probably would have liked.
And what that does is that that drives more customers to shop with them more frequently, especially if you don't have to pay for that delivery. The other is that Amazon has been having this attempt to really, really capture more and more wallet share from the American public and from, actually, a lot of global shoppers and to squeeze out every other retailer that's out there. And this is, yet again, an untouchable strategy that very, very few other retailers will be willing to subsidize at the level that Amazon will.
HOBSON: So you don't see Wal-Mart or Target or some of the other big retailers doing this?
MULPURU: Well, the reason is that that retailers can barely subsidize the cost of shipping on weekdays. I really think that it's going to be a tall bar for them to subsidize it on weekends as well where the prices are even higher. So that is probably unlikely. But what we may see is more omni-channel strategies, more opportunities to pick up packages in stores, perhaps more long store hours to actually pick up some of your Web orders.
HOBSON: Sucharita Mulpuru, an online and multi-channel retail analyst at Forrester Research. Thanks so much for joining us.
MULPURU: Thanks for having me.
HOBSON: And let us know what you think about this. Will you be ordering from Amazon because they're delivering on Sunday? Is that going to help you decide where to buy your products? You can go to hereandnow.org. This is HERE AND NOW. Transcript provided by NPR, Copyright NPR.