As Amazon's Delivery Business Grows, USPS Struggles to Fulfill Mission

While first-class mail volume declined to 50.7 billion pieces in 2021, the lowest number since 1971, the United States Postal Service reported that its shipping and packages revenue increased by $3.5 billion in 2021, a 12.2% increase from the year before, largely driven by a surge in e-commerce volume.

But the government agency continues to struggle to compete in a delivery marketplace increasingly dominated by Amazon. It reported a net loss of $4.9 billion for its fiscal year ending September 30, 2021, compared to a $9.2 billion loss in the prior year.

As e-commerce sales peak and Postal Service rates increase, companies like Amazon have made major investments in building in-house shipping networks. In 2021, the company shipped 72% of its own packages, compared to just 47% in 2019, as reported by CNBC.

This move directly impacts the Postal Services last-mile delivery business.

"Innovation is crucial when you consider the rise of e-commerce," Dr. Michael Gorman, Niehaus Chair in Business Analytics and Operations at the University of Dayton, told Newsweek.

"As sales continue to move online, more stuff is being shipped by private parties because of the Amazon effect," he added.

Over the last five years, Amazon has grown to become the second largest retailer and a global delivery service, accounting for 21% of market share for U.S. parcel volumes, compared to 40% for the USPS. Much of this growth has been driven by technology, automation and an increasingly centralized logistics network.

"Every single activity from the time you click 'buy now' until that package on your front step is tracked very precisely," Gorman said. "It's automated and optimized by using some analytics, leading to very efficient warehousing and delivery services."

But Gorman emphasized that when compared to Amazon, the logistics of the Post Office are fundamentally different.

"With Amazon, you click that button and they know exactly where the package is, how much it weighs and exactly what can fit on the truck," Gorman said. "They have a lot more control over those things."

"The Post Office, on the other hand, has over 35,000 different locations, each of which has to be manned to transact with individual customers who walk in to buy stamps, letters or ship packages, each of a different shape and size," he said. "There are more unknown variables here, which make it a tougher process."

Author and postal expert Chris Shaw said that if the Postal Service were strictly a delivery service, these logistical differences would make it almost impossible to compete.

But he argues that the Post Office is much more than that.

"There's a move away from the idea that the Postal Service is a public service, but that is why it exists," Shaw said. "It is not a business, so taking too much of a business approach actually undermines the mission of the agency."

He believes the biggest challenge the Post Office will face moving forward is retaining its public service mission while continuing to deliver the mail safely and on-time.

And what the Post Office delivers has changed dramatically in recent years.

"The reason it worked for so long is that there were lots of letters being shipped," Gorman said. "Now, with the internet and cell phones, there are fewer packages, and companies like Amazon are doing their own deliveries."

"There are not as many things in your mailbox anymore, so USPS can't cover the cost of that person who will come to your door and drop off mail every day," he added.

And the pandemic increased the pressure on delivery services.

"COVID sped everything up when it came to package delivery," Elaine Kamarck, director of the Center for Effective Public Management at the Brookings Institution, told Newsweek. "And it's not clear that we're going back to stores. If this is a permanent trend, then clearly the Post Office has to adapt its operations to that."

Despite seeing revenue growth in its shipping services this year, the Postal Service is still trying to rebuild the trust it lost last year, after thousands of packages were delayed because of surging volumes and a lack of preparedness.

"There was a problem last year with delivery around the holidays where the mail was much slower than it has been anytime in recent history,'' Shaw said. "That type of management was not something that is going to win people's confidence."

In an effort to respond effectively to the changing marketplace, the USPS has implemented its 10-year Delivering to America Plan, which includes investments in digital infrastructure, automated machinery and efficiency upgrades for their logistics networks.

But the primary focus remains on cost-cutting in order to offset $160 billion in predicted losses over the next decade and restore public trust in the country's oldest federal institution.

The Post Office expects to handle more than 12 billion letters, cards and packages this holiday season. The Postmaster General insists he's up to the task.

At last month's Postal Service Board of Governors meeting, Louis Dejoy said, "I want to begin with three words — We are Ready!"

U.S. Postal Service Processing Center Ramps Up
The pandemic has resulted in more people electing to purchase goods through e-commerce websites, increasing the flow of goods through the post office. Above, service mail handler Joycelyn Brown prepares a box full of packages for sorting at the U.S. Postal service's Royal Palm Processing and Distribution Center on December 17, 2018 in Opa Locka, Florida. Photo by Joe Raedle/Getty Images