Amazon’s new threat to delivery services via the U.S. Postal Service

Washington Postal Scene by Bill McAllister

When the Wall Street Journal reported that Amazon is planning to begin its own delivery service, the news hit the stocks of two big shippers, United Parcel Service and Federal Express.

But Brian Ossenbeck, an analyst for J.P. Morgan, said the market has forgotten the impact on the biggest shipper for the Seattle-based retailer: the U.S. Postal Service.

“We believe the headline overlooks the primary company at risk, which is the U.S. Postal Service,” he said in a recent report.

“We estimate the USPS is Amazon’s largest carrier so not only does it stand to lose volumes from ‘Shipping with Amazon,’ [the name of the new Amazon venture] but it generally lacks the same labor flexibility and service offerings,” Ossenbeck wrote.

Postal workers are unionized, he noted, arguing that Amazon drivers could easily “provide premium products services such as perishable goods and same day deliveries.”

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The analyst’s report came a week after the Wall Street Journal disclosed that “Shipping with Amazon” was being considered.

While the market may have considered the move at threat to UPS and FedEx, it could also have serious consequences for the Postal Service.

The government agency has charted its future on carrying a major chunk of ecommerce packages on a fleet of new trucks.

It won’t discuss how much of its package business comes from Amazon, but clearly it has been the driving force behind the Sunday deliveries that postal workers now make in most major cities.

For several years, the Postal Service has been pushing Detroit to create a new delivery truck for it that would be designed for packages not letters because most of the vehicles are aging in its fleet.

If the Amazon packages disappear from the Postal Service package mix, it would potentially threaten Postmaster General Megan J. Brennan’s blueprint for dealing with the continuing losses of letter mail.

That most profitable segment of the mail for the Postal Service is projected to continue declining, while packages are the growth element of the agency’s future.

Packages are more expensive than letters to handle, and the growth in this area has added to the Postal Service’s costs.

Ossenbeck has previously noted Amazon’s large role in USPS’s package business.

“USPS’s volumes have grown at a faster pace than those of UPS and FedEx for the past few years,” he wrote in December.

He largely attributed that growth to the 2013 shipping agreement Amazon signed with the Postal Service.

In that agreement, the Postal Service promised to make deliveries seven days a week, which Ossenbeck said was “a new level of service at the time.”