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View Count: 34 |  Publish Date: November 19, 2013
Amazon Sunday Packages Won’t Stem Postal Losses
By Angela Greiling Keane - 2013-11-19T05:00:01Z Stock Chart for Amazon.com Inc (AMZN)
Amazon.com Inc. (AMZN)’s new deal with theU.S. Postal Service will put diapers and books into the hands ofits customers on Sundays. Postal Service officials want it topave the way for similar deals in the future.
While the Amazon arrangement will offer a limited financialboost, Postmaster General Patrick Donahoe said in an interviewthat he wants to expand the service to other retailers. Amazondoesn’t have an exclusive deal for Sunday delivery.
“We are certainly, as we always do, talking with otherpeople in this market,” Donahoe said. “We think we offer veryreasonable prices and assurances with scanning that customerslike.” He wouldn’t name names.
The arrangement may become a template for similar deliverycontracts with Best Buy Co., EBay Inc., LL Bean Inc., SearsHoldings Corp., Target Corp. and Wal-Mart Stores Inc., said Gene Del Polito, president of the Association for Postal Commerce.The Alexandria, Virginia-based group’s members include Bank ofAmerica Corp. and JPMorgan Chase & Co.
Weekend and custom deliveries are nothing new for thePostal Service, which trails FedEx Corp. (FDX) and United ParcelService Inc. (UPS) in express delivery. UPS has 51 percent of the U.S.small-package shipping market, followed by 34 percent for FedExand 15 percent for the Postal Service, according to a BloombergIndustries report.
It already offers a Sunday delivery option for PriorityMail Express, its fastest service, and had 378 negotiatedservice contracts in the fiscal year that ended Sept. 30,according to a regulatory filing. It considers the contractsproprietary information so doesn’t release the terms. Flower Deliveries
The Amazon Sunday deliveries have started for customers inNew York and Los Angeles. Amazon said in a statement Nov. 11 theoffering will expand to cities including Dallas, Houston,Phoenix, New Orleans next year. Amazon said shipping prices willbe the same for its Sunday-delivery customers.
Delivering Amazon’s packages on Sundays may add only $1million in revenue for the Postal Service for rest of this year,said Satish Jindel, president of SJ Consulting Group, alogistics advisory firm based in Sewickley, Pennsylvania. Jindalsaid the number is a guess as it is too small to be worthwhileto calculate. The service had $66 billion in revenue last fiscalyear and lost about $13.7 million a day.
In December 2012, the Postal Service announced an agreementwith 1-800-FLOWERS.com for a trial of same-day delivery in SanFrancisco.
“While the USPS will benefit from increased networkdensity, it’s unclear how the deal will affect its weakfinancial footing,” Lee Klaskow, a Bloomberg Industriesanalyst, said in a Nov. 13 report. Bill Needed
The service’s ability to find new sources of revenue, evenif they aren’t large, may have unintentionally made it harder toconvince Congress to pass legislation changing the postalbusiness model, Del Polito said.
The Postal Service, while reporting an annual loss of $5billion on Nov. 15, said it increased revenue for the first timesince 2008.
“Clearly it’s not going to have the urgency the PostalService deserves because Congress loves having the heat takenoff them,” Del Polito said in a phone interview.
“A lot of people are going to be asking why do we need todo this complicated bill, which makes a number of changesvarious people don’t like, when the Postal Service has found away to make money?”
Donahoe said the service still needs Congress to changepayments for future retiree health-care costs, a $5.6 billion-a-year obligation that causes most of the service’s losses, and tocut Saturday letter delivery. Legislation to allow those changeshas stalled in the past two sessions of Congress.
The service has also asked for more leeway from Congress toexpand into new lines of business. Yesterday, the Postal Serviceannounced a deal with office-supply company Staples Inc. (SPLS) to sellpostal products and services at some of its stores.
“If you take a look at our balance sheet right now, theCongress should have no comfort with anything that’s on there,”Donahoe said in a phone interview.
“It’s nice to have a positive trend that we’ve seen in thepast year, but I think it would be a big mistake for anyone tosit back and think the problems would be solved.”
To contact the reporter on this story:Angela Greiling Keane in Washington at agreilingkea@bloomberg.net
To contact the editor responsible for this story:Bernard Kohn at bkohn2@bloomberg.net

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 Amazon   Angela Greiling Keane   bill   Congress   Corp   custom   customers   deal   del   delivery   Donahoe   Donahoe said   Inc   offer   Postal   Postal Service   report   revenue   Service   Del Polito 
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