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Should the USPS Help Amazon Deliver Groceries?

Amazon is working with the USPS, offering it a variety of innovative services, including same-day delivery and Sunday delivery. The Postal Regulatory Commission (PRC) has now granted the Postal Service permission to test a new grocery-delivery service called Customized Delivery, which provides customers with delivery of groceries and other prepackaged goods primarily during a 3 am to 7 am delivery window.

As we reported in September, the Postal Service began testing grocery-delivery in conjunction with Amazon Fresh in order to test its operational capabilities. The PRC has now granted it permission to proceed with a market test.

At a time when postal services are looking to package delivery to counter declining mail volume, the US Postal Service noted separately that Belgium’s postal operator bpost started an online shopping delivery service. Customers can combine multiple orders from retailers and grocers and have them delivered at the same time.

In its application for a market test of the new service, the USPS wrote there was no reasonable expectation that Customized Delivery would create an “unfair or otherwise inappropriate” competitive advantage to other parties, including small businesses. The Taxpayers Protection Alliance (TPA) did not agree, asserting that expanding grocery delivery services to additional markets would harm private providers.

The PRC had to take that into consideration in its decision, and studied several grocery delivery service providers identified by the USPS, including Safeway, Vons, Instacart (Whole Foods), Giant (Peapod) , Fresh Direct, and Urban Grocery, as well as Courier and Express Delivery Service companies.

“The Commission is authorized to limit the amount of revenues the Postal Service may obtain from any particular geographic market as necessary to prevent market disruption,” it said, and, “if necessary, the Commission may also cancel the market test or take other action that it deems appropriate.”

While the PRC is granting permission for the market test, it denied the request for an exemption from the $10 Million adjusted limitation as premature due to the lack of financial data to estimate revenues for Customized Delivery.

The Postal Service may resubmit its request for an exemption “once it collects and reports to the Commission sufficient data to calculate the total revenue received and estimate the additional revenue anticipated for each fiscal year of the market test.”

While some are concerned that the USPS has an unfair competitive advantage over private businesses, there are also concerns that private businesses could take advantage of the USPS. The USPS has been working with private shipping carriers to deliver mail, commonly called “last mile delivery.” In a report published in July, the USPS Office of Inspector General warned about the risks involved.

“The Postal Service cannot afford to be the provider of last-mile delivery only when the revenue is low and the cost is high. Such “cream skimming” will harm the Postal Service’s package revenue and its ability to fund universal service.”

The OIG noted that American businesses and consumers spent more than $68 billion to ship packages domestically in 2013. Package delivery is poised to get even more interesting with the growth of ecommerce and technological developments such as drones.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.