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Problems in the US Postal Service have raised concerns over the November election, but they have already caused headaches for some of the 2 million Netflix customers who still receive DVDs by mail, as well as the distribution network. Amazon.com Inc.
Netflix NFLX,
, which still ships rental DVDs in its iconic red envelopes in addition to offering its more popular streaming service, has experienced isolated delivery delays through the U.S. Postal Service, according to a person with knowledge of the company’s operations. The Postal Service remains an important strategic partner for Netflix, and the two operations are working closely together to manage the situation, which is not expected to have a material impact on customer service or sales due to isolated issues, the company said. no one.
The Postal Service is removing 671 high-speed mail sorting machines across the country, which will eliminate 21.4 million items per hour of processing capacity from the agency’s inventory. Relief could be on the way with Post Minister Louis DeJoy’s statement on Tuesday that the Postal Service is ready to handle any mail-in ballots it receives in November, and postpones sweeping changes afterwards. the elections.
But with Democrats openly skeptical of the vow, as well as budget cuts in mail delivery, tech companies are taking nothing for granted.
Read more:Postman has no plans to restore mail cuts, says Pelosi
“There has been a noticeable delay,” says Nitin Gupta, founder of One Hundred Feet Inc., a developer of map geocoding applications that help delivery systems get to their sites faster. He has seen an increase in use of his company’s app, which is used by FedEx Corp. FDX,
, Uber Technologies Inc. UBER,
and Verizon Communications Inc. VZ,
, over the past few weeks.
Netflix’s DVD-by-mail service represents a relatively small portion of the company’s overall business, but remains popular in rural areas, where access to high-speed internet and streaming services is limited. The DVD business reported sales of $ 297 million in 2019, from over 2 million subscribers, up from $ 366 million in 2018; as recently as 2012, Netflix reported over $ 1 billion in DVD revenue. Netflix grossed $ 20.16 billion in sales in 2019, so only 1.5% of that total comes from DVD business.
The importance of rural mail delivery has heightened the challenges for online retailers shipping products such as prescription drugs, groceries, jewelry, and DVDs, including Amazon AMZN,
“This is so essential for the elderly who are confined to their homes during the pandemic, especially those who depend on drugs,” Shivaram Rajgopal, professor at Columbia Business School, told MarketWatch.
Any postal service issue could affect Amazon on a larger scale, as the e-commerce giant ships billions of packages a year. However, the company has built redundancies into its delivery network – using its own deliveries with the postal service and private carriers – because its products are so geographically dispersed.
Amazon Logistics, the company’s in-house logistics operation, “more than doubled its share” of US parcel volumes from around 20% at the end of 2018 and now ships at a rate of 2.5 billion per year . Morgan Stanley believes United Parcel Service Inc. UPS,
and FedEx have US shipping volumes of 4.7 billion and 3 billion packages per year, respectively, and that Amazon already delivers about half of its own packages to the United States.
By 2022, Amazon’s package delivery volume to the United States could more than double, to 6.5 billion, according to the Morgan Stanley report. This would easily exceed FedEx’s estimated 5 billion UPS and 3.4 billion package volume.
Amazon CEO Jeff Bezos, who as owner of The Washington Post has been publicly targeted for vitriol by President Donald Trump, has established an extensive network of delivery partners to avoid bottlenecks. In addition to its ubiquitous vans that have become as common in neighborhoods as letter carriers, Amazon has made deals with the USPS and UPS to provide customer service.
“We regularly balance the capacity of our extensive network of partner carriers to ensure we are able to deliver on our delivery promises,” an Amazon spokesperson told MarketWatch in a telephone interview. “While we do not comment on our agreements with our carrier partners, we continue to review all of our options to ensure we are providing the best possible service to customers.”
This hasn’t always translated into fast delivery for small businesses partnering with Amazon. Sharon Buchalter, CEO of Products on the Go, an online seller of baby products and other products, said his company has lost sales in recent weeks because Amazon has been slow to process and deliver some orders, which prompted customers to request a refund from Amazon. or cancellations.
“I really can’t do anything if Amazon is late,” Buchalter told MarketWatch. “This [slower mail] and the economic slowdown caused by the pandemic affected sales somewhat. “
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