For many, Amazon Prime shipping means you’re getting a package in two days or less. But folks in rural areas know that’s a pipe dream for them – that is, for now.
Amazon is expanding its one- or two-day shipping capabilities across the country in an effort to boost sales. The Wall Street Journal reports this is a direct challenge to the U.S. Postal Service.
Sebastian Herrera, who helped break this news for the Journal, spoke with the Standard about how the rollout might look in Texas. Listen to the interview in the player above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: Two-day Prime delivery hasn’t been available all over the U.S. before is because the country is big and there are logistical challenges. How does Amazon now think they can overcome them?
Sebastian Herrera: Yeah, it’s hard to believe if you live in a big city that there are actually places in the U.S. where Amazon takes a little longer than one or two days. But there are many locations like that in the U.S.
But Amazon feels like it can now conquer these areas as well. And the way it’s doing this is basically it’s just opening more delivery sites that are closer to remote areas of the country. And these delivery sites are really hyper optimized for quick delivery.
They’ll have all the stuff that’s needed for customers there. Amazon’s really figured out where to put items and where people want those items, where their customers are and where that demand is.
And aside from these delivery centers that they’ve gotten to be hyper optimized, they’re actually using local businesses like mom-and-pop shops in rural areas to make these sort of deliveries possible. And so there’s literally small business owners that are going to get Amazon packages and delivering themselves. And that’s one of the ways that Amazon, economically, can make this work.
So they’re doing a variety of things. And part of it is their expertise with delivery and with logistics mixed up with people, local people, actually helping out with these deliveries.
They’ve been in big cities for a while. Then their next step was suburbs, and now they’re going out even farther.
Texas, of course, has a lot of wide-open spaces. When can Prime customers expect to see these faster deliveries?
I think it’s going to be pretty soon.
Texas, as you know, has a lot of remote areas, especially in the West. So there’s a lot of untapped potential there for Amazon and a couple of sites where Amazon is planning delivery stations in rural areas. Paris, Texas, is one area; San Angelo is another place where they’re opening a delivery site.
And really, it’s not those two cities that will see the greatest benefit. It’s actually smaller towns around those type of cities that that will see the greatest benefit. So we’re talking about places like Christoval or Sterling City, these pretty remote, smaller towns.
And it is coming. It’s something that Amazon is actually working on right now. Some of these sites are opening as we speak. Some of these sites are in the pipeline to open. So this is something that they’re actively doing right now, this big expansion. And so I think in the next year or so you’ll see more, hear more about this.
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Amazon and the U.S. Postal Service are both partners and rivals – frenemies, you might say. Can you explain how this move from Amazon ups the challenge they pose?
Yeah, frenemies is a great word to use because Amazon and the USPS have been doing business for a long time. But Amazon, more and more, has done more of its own deliveries.
And it’s really done that because it doesn’t really want to rely on carriers like the USPS or UPS to do its deliveries. In its eyes, if it can have control over its shipping, that’s the best route for itself.
And the USPS, you know, has had some issues. They really have problems with profitability, and they’ve actually been raising rates and reducing pickups in some areas. So Amazon sees that and it thinks, if we can do it better and we can make it economically work, then we’d rather just do it ourselves. And that’s what you see happen.
And so it is kind of an awkward relationship because the USPS really needs Amazon to a large degree because they get a lot of revenue from them. But, at the same time, that partner is less and less using their services. And so the USPS is really going through a big, big, changeup right now in terms of how its figuring out its future and how it’s figuring out parcel delivery, which is, you know, very different than its traditional just mail delivery.
How can Amazon afford this change? Are customer prices going up or are they making changes in other ways to really pursue this expansion?
That’s a really good question, because part of making this expansion work is they have to economically make it work for them. And, you know, the USPS delivers all over because they have to – because they’re mandated by the government to do so. And these remote deliveries cost more naturally because you can get to fewer customers.
And so the way that Amazon makes it work is, for them, it’s all about getting more volume, basically getting more shipments out. And the reason why that works for them is if they can get more packages out, they can get more sellers to sign up to sell on Amazon.com.
And that’s really where Amazon makes its money in deliveries, because they charge sellers all kinds of fees to deliver their packages. And the revenue that they get from those sellers is a huge, huge, amount of revenue for Amazon. It literally makes up one-fourth basically of their total revenue. And so really their revenue from their sellers is how they’re able to do these sort of deliveries.
And so, in order to make it work, they essentially have to have more customers buy more of their stuff. That enables more sellers to sign up on their website and attracts them to Amazon. And then they get revenue from the fees that they charge those sellers to basically finance these deliveries. So it’s a system that sort of kind of plays off itself. And that’s how Amazon is able to do this.
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