Featured Article

Amazon isn’t to blame for the Postal Service’s woes, but it will need to innovate to survive

No, selling “The Postal Service” CDs on its website doesn’t count

Comment

Cyrus Radfar

Contributor

Cyrus Radfar is the founding partner at V1 Worldwide.

More posts from Cyrus Radfar

In the past week, the 45th president has Twit-tacked Amazon three times and, potentially, cost their shareholders over $40 billion in market cap or just more than one Greek economy.

At the heart of our current President’s criticism is a claim that Amazon is making a mint and leaving a *failing* U.S. Postal Service holding the bag. It’s not a new critique from the Twitterer-in-Chief, but it is one that’s worth unpacking given the crippling effect technologies have had on the USPS — where email is even more reliable than a carrier undeterred by “snow nor rain nor heat nor gloom of night.

Is it failing?

“Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer?” This infantile question was posed by President Trump on Twitter in December 2017. While it’s not clear what exactly prompted Trump’s criticism,  the tweet did spark a wave of debate as to whether the Postal Service is indeed failing and, if so, whether Amazon is to blame.

First of all, it’s true that the Postal Service is “losing billions of dollars a year” – $2.7 billion in 2017, to be more precise. In fact, the Postal Service has been losing money for over a decade. And the USPS does have a curious relationship with Amazon. While competitors UPS and FedEx charge the e-commerce giant $7-$8 per package, USPS only charges for $2 for the service. However, as with most stories, that of USPS is more complicated.

USPS and Amazon

The USPS-Amazon relationship may be seen as “dumb” by the 45th president, but to many it’s a piece of shrewd business on the part of the Postal Service. As of 2017, Amazon was USPS’s biggest customer, and an intelligent way for the independent agency – that traditionally made its money by having a monopoly on first class mail – to get a piece of the increasingly profitable package delivery pie. It’s not the first time that the Postal Service has tried to muscle its way in on the growing package delivery industry. Back in 2010, the entertainment company Netflix accounted for $600 million from its DVD subscription service. Of course, the Netflix DVD delivery service is fast fading and being replaced by on-demand streaming; and Amazon look to be preparing their own delivery service. It seems that the USPS may have to prepare itself to be jolted by another wave of disruption.

One-Two Punch of Email and a Financial Crisis

The Postal Service’s first major battle against the age of innovation came with the rise of email, and it didn’t take the beating that you might expect. Despite the fact that in 2002 the majority of Americans used email, the Postal Service still managed to make profit between 2003 and 2006. During this time, people were still writing letters, sending greetings cards and, perhaps most importantly, bills were still sent by post.

It wasn’t until the 2007 global financial crisis that the Postal Service took a hit that, arguably, it still hasn’t recovered from. After thousands of businesses suffered from the crisis, they started to cut back on expenses wherever possible, and one such place was mail. Back in 2000, nearly two-thirds of bills were delivered by USPS, and the total revenue from bill payments in this year was estimated at between $15 and $18 billion. Between 2006 and 2010, USPS volume fell by 42 billions pieces, with 15 billion of those being caused by electronic billing.

And if that weren’t enough, the rise of social media further confounded USPS’s problems. Between 2010 and 2014, postcard volume fell by 430 million. As more and more people began logging into Facebook, Instagram and Snapchat to send virtual Christmas cards and birthday wishes, fewer people were sending mail, and therefore fewer profits for the agency that had had its fair share of knocks in the 21st century.

Photo courtesy of Flickr/André-Pierre du Plessis

Innovating within a Risk-Averse Government

To suggest that those in charge at the Postal Service have been idly watching as new technologies disrupt and threaten the agency would be unfair.

It is an organization that looks to engage with the latest technology. For instance, in 2014, it released a white paper on the impact that 3D printing could have on the industry and how the Postal Service could benefit; and again in 2015 it released another on the Internet of Things. Both papers were clearly commissioned with a degree of prescience, being published before either technology had begun to pervade the public consciousness.

Unfortunately, though, forward-thinking initiatives such as these have been blocked before they can enter the action stage. USPS’s status as a quasi government entity may have its benefits, such as a monopoly on all first class post, but in return Congress has a say in how the agency is run. It can outline the products and services provided by the Postal Service, and set its prices. However, unlike other Federal agencies, USPS receives no funding, and hasn’t done since 1982.

In 2016, the Postal Service wanted to make the most of its relationship with Netflix and other video rental business, but the proposal was blocked by the Postal Regulatory Commission. In 2013, USPS attempted to end Saturday letter delivery – a change that would have saved $2 billion a year. The proposal was blocked by Congress. And in 2016, it was ordered to lower the cost of postage stamps from 49 cents to 47 cents, resulting in a $2 billion annual cost.

At the heart of the troubled USPS-Congress relationship lies the problem. A big existential question mark hangs over the Postal Service’s head: what exactly is it? With 2.7 million people working for it, it’s the biggest employer in the US (Walmart, by comparison had 2.2 million as of 2017). It also delivers to remote locations that private companies like FedEx and UPS won’t touch. For these reasons, it exists out of necessity. There are also those who want to see the Postal Service fully privatized or even abolished, believing it to be an outdated relic of nostalgia.

Understandably, those within the Postal Service are equally unsure as to what they should be. On one side, they’re being encouraged to innovate and drive up profits, and on the other they’re being blocked making the changes necessary.

As it stands, the USPS motto “neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds” still holds true. Their resilience through massive shifts in consumer behavior is nothing short of remarkable.

They are at the service of the American people, and so it’s up to them to decide what they want it to be. Although it may be true to say the Post Office is losing money thanks to Congress and cutting Amazon a more-than-fair deal, its importance is far more nuanced and complex than he gives it credit. And without the Postal Service, it would be more than just Amazon that would be losing out.

As the world moves to more and more virtual communication channels it will be fascinating to see USPS evolve.

More TechCrunch

Ahead of the AI safety summit kicking off in Seoul, South Korea later this week, its co-host the United Kingdom is expanding its own efforts in the field. The AI…

UK opens office in San Francisco to tackle AI risk

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

10 hours ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

2 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

2 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities