- Two US representatives warned yesterday that the US Postal Service may cease regular operations as early as June.
- The lawmakers came to this conclusion after briefings about plummeting mail volumes, and said the Postal Service “will not survive the summer without immediate [monetary] help.”
- This shutdown would be chaotic for Amazon, which heavily depends upon the USPS to deliver its packages.
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The US Postal Service could be kaput by June without financial help, according to a warning from two lawmakers on the committee with jurisdiction over the USPS.
That’s not just bad news for all of the places that still like to send physical junk mail instead of just emailing it, but also Amazon, which still depends on USPS services.
Reps. Carolyn Maloney and Gerry Connolly said in a statement on Tuesday that the coronavirus is plummeting mail volumes and that the USPS “is in need of urgent help” from Congress and the White House. By the end of the summer, Maloney and Connolly said, the USPS could shut down unless it receives swift emergency funding.
The lawmakers warned that the shutdown would cut off Americans from “vital goods and services” and impair voting by mail. Another direct impact, not highlighted in yesterday’s warning, would be your Amazon Prime deliveries.
While Amazon has rapidly in-housed its delivery network in recent years, the mega-retailer still depends on the USPS to deliver many orders. As recently as July 2019, the USPS delivered around a third of Amazon packages, according to data from Rakuten Intelligence.
Amazon also pledged last April that it would deliver all Prime packages in one day. In rural America, the USPS would be a major part of that.
The USPS’ deliveries are markedly larger in rural areas, where Amazon has not invested in its own last-mile network. A December report from Morgan Stanley said that’s not a coincidence. The Seattle-based retail giant has “cherry-picked” America’s densest zip codes and is leaving those areas where homes are more spread out, and more costly to service, to the USPS.
But the USPS has a legal imperative to serve all US addresses — even the low-margin, low-density rural neighborhoods. Rural America is so costly to service that McKinsey recently reported that even drone delivery may not offset the costs.
If the USPS were to vanish, Amazon would have to build its last-mile network in rural America or set up partnerships with delivery giants like UPS. CEO Jeff Bezos is already plunging billions into accelerating Amazon’s shipping network, as worldwide shipping costs popped by 43% in the fourth quarter of 2019 despite online sales only growing by 15%.
The USPS and Amazon did not respond to a request for comment from Business Insider.
Coronavirus is delivering yet another blow to the USPS
The USPS lost $3.9 billion in fiscal year 2018, according to a December 2019 report from the Task Force on the United States Postal System. Its cumulative losses are nearing $70 billion.
One major contributor to USPS’ woes is a 2006 law passed under President George W. Bush surrounding pre-funding retirement benefits. That law required the USPS to determine how much it would spend on pension over the next 75 years and quickly build up a fund to cover all of it. According to USPS’ Inspector General, the requirement to pre-fund retiree benefits accounted for $54.8 billion of the agency’s $62.4 billion loss incurred between 2007 and 2016.
And the coronavirus pandemic is yet another hit to the USPS. To give it a boost, Maloney and Connolly introduced a bill that would furnish the USPS with $25 billion in emergency funding.
“Every community in America relies on the Postal Service to deliver vital goods and services, including life-saving medications,” they wrote on Tuesday. “The Postal Service needs America’s help, and we must answer this call.”
SEE ALSO: Morgan Stanley reveals that Amazon Logistics is ‘cherry picking’ the most lucrative delivery zip codes and leaving rural deliveries to the USPS — and it’s a brilliant strategy to slash costs