Tuesday, November 12, 2013

Something different: Exhibit A...

Stuff I think merits considering as preludes to whatever future we are hurtling toward.

Exhibit A: Amazon and the USPS
By launching Sunday deliveries, the Postal Service has moved to where its longtime competitors aren't. Hardly anybody in any industry delivers on Sunday, with the exception of newspapers. As a business idea, this makes total sense — and while USPS doesn't exactly threaten FedEx or UPS, it might cause those companies to strike agreements with other e-commerce businesses. The deal will effectively shake up the shipping industry.The other reason it's disruptive? This is one of the few cases we've seen of what we'll call reverse contracting — when the private sector hires a government agency to fill its need rather than the other way around. We haven't seen much of this, in part because there are so few publicly run, consumer-facing services like USPS at the federal level. There's Amtrak, the Corporation for Public Broadcasting, and a handful of others. But the pact between Amazon and USPS might open the door to further reverse contracting. If this venture takes off, Amazon may unintentionally wind up pioneering a new model for public-private partnerships.
The deal with Amazon won't single-handedly save USPS. And at this point, officials from both parties are keeping quiet about the terms of the agreement. But it puts the Postal Service in an aggressive posture that's as refreshing as it is surprising. [More]
Suppose this idea migrates to the other quasi-government entities listed above. Suppose a health insurance company contracted out to Medicare for some of its policies?

But maybe there could be even more.
Now, let's turn to Amazon. The company has been investing heavily in ways to deliver more products faster, cheaper, and farther than the competition, including dozens of warehouses in the U.S., a fleet of trucks, and even "lockers" for people to pick up their goods at local convenience stores. It's expensive: Fulfillment costs amounted to $1.96 billion, or 11.5 percent of revenue, last quarter alone. Amazon considers it an investment in the future, as part of its strategy to provide anything customers might need as fast as they could possibly get it (as well as a tax strategy, since it knows it'll lose the benefits of lacking a physical presence in states soon anyway). The embodiment of this gambit is AmazonFresh, which doesn't yet make a profit, but is supposed to ease the transition towards delivering more and more goods.Owning the Postal Service would get Amazon the rest of the way there. It's got 31,000 post offices and 461 mail processing centers, which represent significant excess capacity. The USPS is still the best last-mile mail delivery service provider, and Amazon is perhaps the most aggressive warehousing logistics innovator, which could enable a partnership — similar to one proposed by a group of former postal leaders and partly approved by the National Academy of Public Administration — that would leverage the strengths of both. [More]
As enormous amounts of money pile up in companies, expect business deals that stretch the imagination.

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