Amazon recently announced a new agreement that will have the U.S. Postal Service delivering packages to its customers on Sundays. This is the latest move in the online giant’s efforts to compete with the instant gratification that is one of the few remaining advantages of brick-and-mortar retailers. Amazon customers no longer have to wait until Monday to receive the item they ordered late in the week.
As businesses take advantage of new technologies to offer more options and better service to customers, the supporting infrastructure of plants, warehouses, transportation and communications must evolve to support emerging needs. Sometimes, though, it’s hard to determine which is the cause and which is the result. Does better transportation create new distribution channels and expectations, or does the demand for faster delivery spur the creation of the infrastructure?
In the days before containerized shipping and other modern efficiencies in the transportation world, bringing a product from a factory in Asia to a consumer in North America might add as much as 25 percent or 30 percent to its cost. Today, a sweater can travel 3,000 miles for 2.5 cents and a can of beer can cross the ocean for a penny. China’s success in becoming the world’s manufacturer, to a great extent, is based on the availability of cheap transportation. Even with its dramatically lower labor rates, China would not otherwise be able to get those products to customers reliably and affordably. Cheap transportation did not create the Chinese manufacturing juggernaut, but it certainly enabled it to serve markets outside of its own geographic area.
Federal Express created the overnight delivery business that, along with the likes of the United Parcel Service and the package delivery arm of the post office, power Internet sales. FedEx and UPS package delivery have been around a lot longer than the Internet, but Internet sales could not have grown as fast and become as big a part of the retail landscape without them. It may be true that the Internet changes everything, but the transportation industry is a vital part of business that has proved to be an essential part of businesses of all kinds.
There has been much discussion in recent years about the future of the postal service. The dramatic decline in letter mail has led to huge operating losses for the government subsidized service. The USPS has been frantically looking for ways to cut costs, including closing offices and reducing service (they considered eliminating Saturday delivery). The better answer to turn this business around and make it profitable once again is to reapply existing facilities and capabilities to a growing segment of the market, namely package delivery. Sunday delivery is a competitive edge not available from the other delivery services. Connecting with the biggest package shipper of them all is certainly a good start in building up this new business focus.
Amazon is a winner, launching a new level of service for its customers. The postal service has a new source of revenue that may help return the business to profitability (or at least reduce the deficits). Customers can get their purchases more quickly.
How long will it be before Amazon’s competitors also offer Sunday delivery and the postal service’s competitors begin seven-day delivery?
Reprinted from Portsmouth Herald / Seacoastonline.com – November 19, 2013