Laura Behrens Wu is the co-founder and CEO of Shippo, which is building a shipping platform for e-commerce in the 21st century.
Since moving to USA, I valued and admired the United States Postal Service as a symbol of American ingenuity and resilience.
Like electricity, phones, and the freeway system, it's part of our larger history and what holds the United States together. But it is also something that can easily be taken for granted. USPS delivers 181.9 million first class mail items a day without straining an arm and leg. If you have an address, the USPS will serve you – and no one will ask for cash in advance.
As CEO of Shippo I am an e-commerce technology platform that helps companies optimize their shipping. I have a unique perspective on the USPS and its impact on e-commerce. From the beginning of Shippo, the USPS has been an important partner to make shipping more accessible to growing companies. Because of our collaboration with the USPS and several other emerging technologies (such as site builders, e-commerce platforms and payment processing), e-commerce is more accessible to small businesses than ever before.
And although my opinion on the importance of the USPS is not based on my company's business relationship with the postal service, I want to be frank about the fact that Shippo generates part of its revenue from purchasing shipping labels through our platform at the USPS along with several other carriers. If the USPS stopped operating, it would impact Shippo's earnings. However, the negative impact would be far greater for many thousands of small businesses.
I know that because at Shippo we see firsthand how over 35,000 online companies work and how they reach their customers. We see and support everything from the options that retailers show their customers at checkout to handling returns – and everything in between. And while every company with different products, customer processes and strategies is unique, they all have to be delivered.
In the United States, most of this shipping is facilitated by the USPS, especially for small and medium businesses. In context, the USPS processes almost half of the world's total mail and delivers more than the best private carriers in total in just 16 days a year. And all without tax money, while it offers its employees health and pension benefits.
As with many organizations, COVID-19 has had a significant impact on the USPS. While e-commerce parcel shipments continue to grow (+ 30% since early March, based on Shippo data), overcoming the drastic drop in mail has not been enough. I have heard opinions about supposed "inefficiency", call for privatization, push for significant price and structural changes and even indifference to the possibility of closing the USPS.
In the midst of this crisis, we all need the USPS and its vital services more than ever. In a world with a diminished or disassembled USPS, it won't be Amazon other big companies or even Shippo that suffer. If we let the USPS die, we will kill small businesses at the same time.
Very often, opinions about the efficiency (or lack thereof) of the USPS are very narrow. Yes, the USPS could turn to improve its balance sheet and turn operating losses into profits by cutting awkward routes, increasing prices and making more selective decisions about who to serve.
However, this leaves out the overall picture and the true value of the USPS. What some have termed inefficient are indeed important catalysts for small business growth in the United States. The USPS offers businesses across the country the ability to reach their customers regardless of size, location, or financial resources.
We should not judge the USPS strictly in terms of balance sheet efficiency or abstractly as a “public good”. We should look at how many thousands of small businesses have been enabled through the USPS, how the USPS enables hundreds of billions of dollars in trade annually, and how many millions of customers may not otherwise have access to goods served by the USPS.
In the United States, e-commerce has annual sales of over half a trillion dollars and is growing in double digits each year. When I hear people talk about the growth of e-commerce, Amazon is often the first thing that pops up. What doesn't show through that often is the massive growth of small businesses – which is essential for the health of retail in general (nobody needs a monopoly!). In fact, the SMB segment has grown steadily alongside Amazon. And given the challenges traditional companies face with COVID-19, more small businesses are moving online than ever before.
USPS Priority Mail receives parcels almost anywhere in the U.S. in two to three days (average transit time is 2.5 days based on Shippo data) and starts at around $ 7 per shipment with a full range of services: tracking, insurance, free pickup, and even free packaging will bring them to you.
At a time when we as consumers are getting used to shipping all of our online purchases quickly and free of charge, the USPS is critical for small businesses to keep up. As consumers, we rarely look behind the curtain, so to speak, when we interact with e-commerce companies. We don't see a small business owner placing orders from home or from a small shop. We only see an e-commerce website. Without the support of the USPS, it would be even more difficult for small business owners, in some cases almost impossible, to meet these sky-high expectations. 89% of US-based SMEs (under $ 10,000 monthly volume) on the Shippo platform rely on the USPS.
I have spoken a lot about the USPS 'partnership with Amazon, how it is responsible for the current situation, and how things would improve under a private model. Although we have our own strong opinions on Amazon and its impact on the e-commerce market, Amazon is not the driver of USPS's challenges. In fact, Amazon contributes significantly to the further growth of the USPS 'most profitable source of income: parcel delivery.
Although I do not know the exact economy of the business between USPS and Amazon, considerable price reductions for volume and efficiency are common in e-commerce shipping. Part of Amazon's pricing is due to the fact that it is actually cheaper and easier for USPS to fulfill Amazon orders compared to the average shipper. For this process, Amazon delivers shipments in large quantities to USPS distribution centers, which significantly reduces the costs and logistical challenges for USPS.
Without the USPS, Amazon would be able to negotiate similar processes and efficiency benefits with private carriers – small businesses would not. Given the drastic differences in day-to-day operations and infrastructure between the USPS and private transportation companies, small businesses would significantly increase shipping costs, in some cases more than double. In addition, small businesses would see a new operational burden when it comes to getting their packages into airline systems without daily routes through the USPS.
Overall, I would expect US e-commerce entrepreneurship to slow down without the USPS or with a private version of the USPS that works with a for-profit mindset. The entry barriers would be higher, as new companies would need higher costs and larger infrastructure investments in advance. For Shippo, I would expect a much wider variety of carriers used by our customers. Our technology, which enables companies to optimize across multiple carriers, is becoming even more important for companies. Despite the optimization, small businesses would still be the group that suffers the most.
Nowadays, most e-commerce brands for SMEs, based on Shippo data, spend between 10 and 15% of their sales on shipping, which is already a lot of work. This could go well over 20%, especially if you consider surcharges and pick-up fees, which is an additional burden for companies in an already challenging environment.
I urge our legislators and leaders to see the big picture: The USPS is a critical service that enables small businesses to survive and thrive in difficult times, and provides citizens with access to essential services regardless where they live.
It also means that if we all face the COVID 19 crisis, we have to provide state support, both financially and spiritually. In this way, the USPS can continue to serve both small businesses and citizens while protecting and protecting its employees. This also means that they are equipped with appropriate safety and protective equipment at the forefront for the fulfillment of their tasks.
Ultimately, if we continue to view the USPS as just a balance sheet and optimize profitability in a vacuum, we will ultimately lose far more than we gain.