Amazon paid USPS to deliver on Sundays, using routes the post office already ran

On November 10, 2013, the U.S. Postal Service began delivering Amazon parcels to homes in the New York and Los Angeles metropolitan areas on Sundays — a day the post office had not run ordinary deliveries since 1912. The move landed a year after USPS lost $16 billion and had failed to persuade Congress to let it drop Saturday first-class delivery. Its one growing business was packages, which were profitable overall.

The terms were kept secret: both sides called it a negotiated service agreement with proprietary terms. What USPS did disclose was the operating trick that made it cheap. A spokeswoman said the service would hire no additional employees and pay no overtime for the Sunday runs — the routes would be worked from the staff and vehicles it already had. Amazon Prime, then $79 a year, gained Sunday delivery at no extra charge, and USPS said it would add Dallas, Phoenix, New Orleans and Houston if the program worked.

It worked fast. In May 2014 Amazon announced Sunday delivery in 15 more cities across seven states, said millions of packages had already arrived on Sundays, and stated the goal of reaching a large portion of the U.S. population with Sunday delivery within the year.

The elegance is that each side sold the other exactly what it had to spare. USPS had a paid-for network, dense routes and staff standing down on its emptiest day; Amazon had the one shipper with volume dense enough to fill that day. No new trucks, depots or headcount were needed on either side — the agreement just repriced an idle asset.

Rent your idle Sunday network to the rival who needs it

USPS's network costs were already paid for, so adding parcels on an empty day cost only incremental fuel and sorting, which the negotiated price covered.

Amazon's parcel flow was dense and predictable — the ideal load for an existing route network working at the margin.

Neither side had to build anything: no new trucks, depots, hires or overtime, so the deal cleared both boards instantly.

It tied USPS to the customer whose growing volume would refill the network that collapsing first-class mail was emptying.

Sunday was otherwise reserved for a premium product (Priority Mail Express), so ordinary Sunday delivery was a capability competitors could not quickly copy.

Fixed-cost networks have nearly free off-peak capacity. With letter volume dying, USPS's unused Sunday earned more rented to the hungriest shipper than kept idle for demand that never came back.

Sunday delivery spread from two metro areas to 17 cities by mid-2014, with millions of Amazon packages already delivered and a target of reaching a large portion of the U.S. population that year. The Postal Service kept package delivery as its profitable segment while letter revenue kept falling, and the Sunday network it built around Amazon became a standing feature of American retail delivery.