According to analysts, the new plan by tech titan Amazon, aimed at speeding up parcel deliveries and cutting down on courier costs, to create a network of small delivery businesses would be problematic for the US Postal Service, which is currently experiencing a slowdown in its growth.
The USPS’s package delivery service is its fastest growing aspect, and is expected to take first-class mail’s place as its largest contributor to revenue by 2019, based on research data from Cowen. But, tech titan Amazon has shifted their need towards making sure that customer get their hands on their parcels as soon as possible has seen it move away from the post office.
The dynamics come thanks to a review of the postal service’s finances and courier costs, which were ordered by President Donald Trump, a vocal critic of Amazon. He has called on the USPS to double the charges for the tech titan, following having lost $2.7bn in the last fiscal year, marking a whole decade where the service hasn’t made a profit.
Neither Amazon or the USPS has disclosed the terms of their contract, but the analysts say that these proposed changes would be profitable for the latter. The USPS has been helped by some acceleration in the past few years from package shipping, which came about thanks to the rise of e-commerce, which compensated for a drop in total mail volume.
Data from Cowen projects that USPS’s share of Amazon deliveries will go down to 45% by 2023, driven by a shift of deliveries via independent courier companies, on top of deliveries made by Amazon and its small business subsidiaries. An analyst from the firm says that they’re already noticing a deceleration in the growth of the USPS’s parcels, which dropped to 15% in 2017, from 26% in 2015.
A USPS spokesman says that the agency was continuing to attract e-commerce customers and business associates, thanks to people still seeing the value in their reliable services, improved visibility, as well as cheap courier costs and pricing.
Amazon’s statement on the matter says that the company’s business decisions were driven to complement their existing associations, not replace them outright.