September 8, 2014
To be more competitive, the U.S. Postal Service will cut its prices by as much as 58 percent on certain Priority Mail packages for retailers shipping at least 50,000 packages per year. Both UPS and FedEx believe the price cuts are an unfair way for the USPS to gain an edge in the e-commerce business. Amazon and USPS already have a partnership to deliver on Sundays, but the two organizations are teaming up again to test grocery deliveries in San Francisco.
Despite financial woes in the past few years, the U.S. Postal Service won approval from regulators in August to lower prices. Customers may not see the price cuts reflected in their online order bills, but the change may mean that companies are able to offer more free shipping.
Meanwhile, the government agency is trying to attract more online retailer customers from the $263 billion e-commerce industry and make the $10 billion necessary to purchase new mail trucks and package sorting equipment.
The price cut comes as competitors UPS and FedEx hike prices to charge customers by size and weight of packages. UPS and FedEx also charge extra for delivering to homes and rural areas and add a fuel charge. The Wall Street Journal reports, “Some retailers could save 50 percent on shipping shorter distances by switching [to USPS delivery], said Satish Jindel, president of Shipmatric Inc.”
Amazon has started the United States Postal Service for delivering groceries through its growing AmazonFresh service. The grocery delivery service is already running in Seattle, Los Angeles, and San Francisco, and the East Coast may be next. In the San Francisco market, the USPS delivers insulated tote bags of food items between 3 a.m. and 7 a.m. AmazonFresh deliveries usually cost consumers up to $10.
The USPS is Amazon’s most-used delivery service. The government agency carries about 30 percent of Amazon’s 608 million parcels shipped across the U.S. last year, according to The Wall Street Journal. The two organizations already work together to deliver packages on Sundays.