![]() But when USPS rates go up for Amazon they are likely to increase for omnichannel retailers overall. The upshot is that Amazon will continue to invest in fulfillment capacity and the last mile will increasingly be critical. Amazon will still need human labor and can build more infrastructure in metro areas, but can't overtake the USPS infrastructure in place. Now Amazon can't necessarily automate its way out of the capacity crunch. For last mile, AMZN currently has limited alternatives (to the USPS) given UPS and FedEx are also struggling with capacity constraints and regional carriers are lacking in scale. We note it is also estimated ~850M of these packages pass through AMZN's sortation network on their way to shoppers. The current split of AMZN package shipments (estimated at ~1.3B in 2017) is ~62% USPS / 21% UPS / 8% FedEx / 9% regional carriers. However, in that scenario, it is also expected UPS and FedEx would raise rates in lockstep, impacting the entire industry. ![]() That creates a bigger headline risk for AMZN if the USPS were to raise rates. In addition, there are capacity constraints at USPS.įrom the research note: An estimated ~62% of all AMZN packages in the US now flow through USPS. In a research note, Jefferies analyst Brent Thill said that its expert expects that USPS will have to raise rates due to an aging fleet and infrastructure. With those moving parts out of the way, the value in Jefferies note lies in how it plays out for Amazon's fulfillment costs in the future.
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