How USPS delays affect Amazon, Etsy and eBay

A US postal worker delivers Amazon boxes outside the New York Stock Exchange (NYSE) on October 11, 2018 in New York City.

Spencer Platt | Getty Images

In early July, business owner Zach Williams searched for 200 parcels lost in the U.S. Postal Service hub for distribution from Detroit.

Normally it would take a day for the shipment to check in at the facility, but this time it took three weeks, said Williams, whose company in Maryland, Flashback Limited, sells video game accessories. Earlier, he grew up in contact with a Post Office supervisor, who said the packages were accidentally left behind on a semi-truck inside the Detroit facility. Shortly thereafter, the items were shipped out.

Williams attributed the crash to ongoing delays caused by the pandemic, which has hampered the USPS and other carriers. “Every time something is missed, but that’s the first time it happened to me in that degree,” he added.

The incident is an example of what a recurring headache can be for small and large online businesses if problems with the U.S. Postal Service persist.

The Postal Service is facing a tough road ahead. The financial woes were exacerbated by the pandemic, and critical funding is tied up in the latest coronavirus relief package, which President Donald Trump has rejected as part of his fight against voting via mail. The USPS also faces operational challenges after recently installed Postmaster General Louis DeJoy limited overtime and banned workers from making late delivery trips. On Tuesday, Reuters reported that DeJoy would pause the rollout of those initiatives until after the November presidential election.

The changes introduced by DeJoy, in addition to the coronavirus pandemic, coincide with reports of widespread mail delays such as those by Williams. Yet, for the most part, the Postal Service operates nationwide without delays.

In June, USPS delivered 93.7% of premium e-mail packages on time, according to ShipMatrix, a software provider that analyzes shipping data. This is in line with or better than UPS or FedEx, which reported delivery times of 94% and 91.5%, respectively, in the same period. However, it is still from May, when the USPS delivered 94.9% of packages on time.

“Even at 93.7%, that can be 6.3% hundreds of thousands of packages,” said Satish Jindel, founder of ShipMatrix. “It’s not a huge number, but they move tens of millions of packages a day, and you will not hear about the good cases.”

An ‘important enabler’ of e-commerce

The USPS is not trusted not only by small businesses selling goods through their own websites, but also sprawling online marketplaces operated by Amazon, EBay, Etsy, as well as large retailers such as Walmart and Target. Growth in parcel delivery from online retailers such as Amazon has consistently been a bright spot in the Post Office’s financial results, amid declines in mail and magazine shipments.

Amazon has built up a huge logistics and fulfillment operation across the country, but it still relies on the Postal Service to handle some last-mile deliveries if it does not use its own contractors. An Amazon spokesman declined to comment on what percentage of their packages are delivered by USPS, but some analysts estimate that the Postal Service delivers 40% of Amazon’s orders.

UPS, DHL and FedEx also rely on the Postal Service to handle part of their last-mile deliveries through the same Parcel Select service used by Amazon. The service allows carriers and companies like Amazon to process part of the long distance of the delivery process, and then drop off packages at local post offices, where employees deliver last-mile deliveries within a certain radius.

“In cases where it’s actually not profitable for Amazon, UPS, FedEx or DHL to make the delivery, they actually rely on USPS,” said Mario Paganini, head of marketing at Shippo, which provides software to companies. connect to shipping services. “It’s much more cost effective to bring a large volume of half as much as half way across the country and then the USPS will have to do the last mile delivery.”

For small business owners, the USPS is probably the most affordable and reliable shipping option available. Roughly 89% of small and medium-sized businesses using Shippo select the USPS as their primary carrier, Paganini said. Shippo does not disclose how many SMBs use their services, but they make up the majority of the services’ 50,000-plus active customers.

“[The USPS] is a pretty important small business writer, “said Paganini. This is something that many people overlook and take for granted. “

John Von Colln, founder of on-demand poster printing company, said the Postal Service typically costs about $ 5 per order for first-class mail, while UPS shipping rates can more than double that price.

Von Colln said it is important for his company to offer affordable shipping costs for inexpensive, lightweight items such as posters to keep customers happy. “People do not want to pay more for shipping than the product itself,” Von Colln added.

Push to increase prices

Delays in delivery are not the only worries that weigh on the minds of business owners. They also worry about the possibility that the Postal Service will be pressured to increase shipping rates as a way to increase its finances.

President Trump has repeatedly called on the Postal Service to double its parcel services, claiming that the Postal Service has paid online retailers too little to deliver parcels. Trump has long held, without proof, that Amazon is subsidized by the Postal Service, once saying that Amazon uses the USPS as its “delivery boy.”

The Postal Service announced Friday that it would increase the price of commercial shipments throughout the holiday season, but the rate hike is temporary, ending Dec. 27. UPS and FedEx have since announced similar price increases.

John Webber, founder of Carved, which designs and manufactures wooden smartphone cases, said that if the USPS increases prices, it would not only damage the bottom line of his business, but it would probably mean passing on the cost to consumers. . He estimates that the Postal Service manages more than 90% of its company’s domestic parcel volume.

The postal prices of the Postal Service have become even more critical during the pandemic and the wider economic downturn, forcing many companies to look for ways to cut costs.

What’s more, if the USPS aggressively hiccups its shipping prices as Trump has suggested, some companies may turn to competing carriers like UPS and FedEx, causing it to lose market share.

Calls to keep Postal Service prices affordable have received support from a growing number of e-commerce companies and retailers. The Package Coalition, a lobbying group supported by Amazon and eBay, among others, has urged lawmakers to keep the service “affordable and reliable.”

In May, the retail coalition launched a series of television commercials in a number of states opposing efforts to raise tariffs on the Postal Service. The group also remains lobbying the Senate to provide assistance to the Postal Service, fearing that in the “unpredictable future” cash will run out, “said John McHugh, chairman of the Package Coalition.

“This is not ‘maybe it will happen,’ it ‘when it will [it] barre, “” said McHugh. “We have been really busy trying to help legislators and their key staff.”

Etsy and EBay have directly argued for the need for additional USPS funding on behalf of the business owners who make up their marketplaces.

Later last month, Etsy CEO Josh Silverman wrote to Congress, urging lawmakers to provide funding for emergency services for the Postal Service and expand coronavirus services for small businesses.

“The vast majority of U.S. Etsy vendors – 91% – rely on USPS to deliver their packages to consumers,” Silverman wrote. “USPS is especially important to our vendors who live in rural communities, where USPS is the only carrier for them.”

EBay’s public policy team has also urged Congress to support a “strong and viable” Postal Service. EBay sellers also meet with lawmakers in Washington, DC every year to discuss issues affecting their business. Williams, who is part of eBay’s small business network, attended last year’s meeting and said the Postal Service has discussed one of several issues.

“We talked to her about ensuring that the USPS remains a public service and ensuring that it can provide services to rural areas at affordable rates,” Williams said, adding that eBay continues to actively address these issues with lawmakers.