Saturday, July 11, 2015

Is the Postal Service Primed for Amazon Prime Day?

Next Wednesday is Amazon Prime Day, a huge promotion that one postal expert predicts will overwhelm the U.S. Postal Service.

Amazon is celebrating its 20th anniversary on July 15 with a one-day online shopping event that will offer “more deals than Black Friday” to members of Amazon Prime, including those who sign up for a free 30-day trial membership.

“It will be interesting to see how USPS handles what is sure to be a major onslaught of Amazon package deliveries, with Amazon Prime two day shipping after the one day sale,” writes Lisa Bowes of Intelisent, a company that advises direct mailers. “Will Prime Day impact delivery for other classes of mail? My guess is – probably so…”

A look at the numbers indicates she is correct – that the Postal Service will struggle to handle the surge of Amazon packages without hurting delivery of other types of mail, even with massive overtime.

In a filing this week with the Postal Regulatory Commission, Amazon said it had 15 sortation centers at the end of 2014, with more on the way, that each prepare “tens of thousands” of packages per day to be handed off to the USPS for final delivery. That indicates that USPS delivers several hundred thousand “Parcel Select” packages to Amazon customers on a typical day. 

The e-commerce giant uses a variety of package-delivery services, but clearly the Postal Service is the favorite because of its ability to deliver to residential customers seven days a week at relatively low cost. Amazon has built an extensive logistics network that bypasses most of the Postal Service’s own network and delivers packages early every morning directly to the USPS’s destination delivery units (DDUs), where letter carriers pick up mail to be delivered later that day.

Membership: 30 million-plus and growing
An RBC Capital analyst estimated 10 months ago that Amazon had 30 to 40 million Prime members in the U.S. The numbers have probably been growing since then, and Prime Day seems likely to boost the membership roster.

Suppose that about 20% of existing U.S. Prime members take advantage of Prime Day and are joined by another 5 million who get a trial membership to take advantage of the deals. And suppose each Prime Day participant orders an average of two items, with half of them destined for “last-mile delivery” by the Postal Service.

That would mean letter carriers would handle 12 million packages, roughly 20 times their normal Amazon volume and more than double their normal daily volume for all Parcel Select packages. (That 12 million number is what we statistical experts call a SWAG, a Sophisticated Wild-Ass Guess. The actual numbers may be much higher or much lower, but with some reasonable – to me – assumptions, you can get a ballpark ideal of how Prime Day might affect postal operations.)

Amazon will have its own logistical challenges but also has opportunities to ease the pain. If the items likely to be hot sellers are spread throughout its network of distribution centers, it can probably hand off many of them to the Postal Service on Thursday, the day after Prime Day, rather than hitting the agency with one big wave on Friday the 17th.

It can also pull other levers, such as making exceptions to the two-day guarantee for certain items, especially those ordered late on Prime Day. And it can highlight deals on digital downloads (e.g. movies, music, e-books) instead of those requiring physical delivery.

The Postal Service has limited ability to handle a huge one-day surge, especially at what is usually a slow time of year when many career employees are on vacation and there are fewer temporary and part-time workers than during the Christmas rush.

Amazon Prime Day and its aftermath may be a challenging test of the Postal Service’s efforts to play in the e-commerce big leagues while still providing traditional mail delivery.

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Anonymous said...

Let's all just be glad they didn't schedule this "day" in late November... Delivery times are long enough during the Holidays! :)

Mel Carriere said...

At least I have Friday off. Should be interesting.

Tim Martin said...

I'm not sure if this will effect USPS as much as UPS. Every Prime package I have ever received has been UPS Next Day or 2nd Day Air. The attraction with Prime is the free expedited shipping.

Anonymous said...

Personally, I think that they are overestimating the volume here. I know more than 5 people that are Prime members and I haven't heard any of them mention that they will be shopping that day. Nevertheless, If they are accurate, I think that it's Amazon's network that will be overwhelmed. Keep in mind that it is Amazon's responsibility to transport the packages to each individual delivery post office by a reasonable time. That might cause a bottleneck. Once at the delivery post office, I'm confident that USPS can get the job done. It might take some extra time, but they won't crumble under the load. Mel, I would like to be off that day, too. On the other hand, I would want to be off every day it rained or snowed. It's just part of the job.

Jim T said...

Most, if not all, of my Prime packages are via UPS. I'd say UPS will be loaded down, not USPS.

On certain items, Amazon will also offer a small credit toward digital content if I accept slower delivery. It's not much slower and I end up with enough for free Kindle books on a regular basis.

Anonymous said...

I work for the USPS and we are completely overwhelmed with Amazon packages. There was no research or logistical studies done before our office was brought on board. Our routes which were already rated at around 8 hrs, now get anywhere from 30-60 more packages per route. This includes many more larger packages. As a result, mail trucks are filled to capacity with just the Amazon packages, leaving no room for priority packages or even mail!

During this, our busiest time of the year, we are shorthanded and, as a result, we have to borrow carriers from other offices. These carriers have no idea where they are going. On more than one occasion our carriers are out until after 10 PM delivering in the dark (and I do mean streetlights).

If this volume keeps up once it starts getting darker much earlier, it's a recipe for disaster. Yet, USPS management at both the district and area levels, seem content to put their employees' lives on the lines in exchange for the almighty dollar.

On average we return 75 packages to Amazon for incorrectly addressed packages (sent to addresses where customers do not receive delivery - they must have a PO Box and MUST have the package addressed to that PO Box).

It's a complete mess on the east end of Long Island and, IMO, it's going to take either someone getting seriously hurt (or worse) while delivering all these packages before the USPS even considers turning off, or at least limiting the flow of Amazon packages

Theresa M. Moore said...

That's interesting, because I have offered FREE shipping year-round for my products, and I don't use Amazon to sell any of them. Will the USPS be overwhelmed with my packages? Never, because Amazon is a hostile environment to sell from. Buy direct from the real vendor and save the headache.

Anonymous said...

I would imagine that Amazon would have discussed its campaign plans with their logistics department and its partner vendors for their deliveries. Seems ill planned if they didn't do that, and I don't think that would be the case.
I read the article, but no one has seemed to get any information from USPS or Amazon as a source.

Anonymous said...

Ups claimed all my Amazon deliveries had an incorrect address and did not deliver. I called to find the ups person said that they could not see any problem with the address and that it may have been the driver just was overwhelmed and brought them back. They should arrive Monday, now. Obviously Amazon and its partners need to talk. Two day is never two days any more. Ups is terrible. FedEx misdelivered someone's perishable medicines to our home and it was the wrong street. I called and they rushed back. Ups would not have batted an eye or cared.

Anonymous said...

I think Return Mail problems could also really affect the deliverability of items via Amazon - specifically for this event. Christine Erna, postal expert, will be hosting a free webinar on the topic of return mail on 8/4 at 1PM. I hope you can join us!

Compatible Ink Cartridge said...

Well, this is a very interesting read. It would be great to see how traditional and modern options merge and deliver results fairly well. I hope that Amazon prime day can make way for better services. Thanks for sharing!

Emma Passmore said...