ISIS takes control of the ancient Syrian city of Palmyra. Several nations agree to take in Southeast Asian migrants. And the U.S. and Cuba move closer to full restoration of diplomatic ties. A panel of journalists joins guest host Indira Lakshmanan for analysis of the week's top international news stories.
Yesterday we learned that the online retail giant, Amazon, is expanding its delivery options with a decidedly old school partner, the U.S. Postal Service. Starting in New York City and LA the U.S. Postal service will be adding Sunday Deliveries for some Amazon customers at no extra charge. The partnership is likely to bring in much needed revenue to the long struggling Postal Service, and for Amazon customers, it can mean even speedier delivery times, a feature online shoppers increasingly expect. Please join Diane and her guests to discuss how expanding Sunday delivery service and the ongoing push toward same-day are transforming online shopping and the retail industry.
- Mac McClelland independent reporter
- Vicki Cantrell senior vice president of communities and executive director, Shop.org, National Retail Federation.
- Brian Fung reporter, The Washington Post.
- Derek Thompson senior editor, The Atlantic.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. Yesterday, Amazon announced it was partnering with the U.S. Postal Service to begin regular Sunday deliveries in New York and L.A. The move ups the ante in the world of online shopping and coincides with expanding consumer expectations for same-day delivery.
MS. DIANE REHMJoining me to talk about trends in online shopping and stepped-up delivery service: Brian Fung, a reporter with The Washington Post, which is of course now owned by Amazon's President Jeff Bezos, Vicki Cantrell of the National Retail Federation, joining us from a studio at NPR in New York, Derek Thompson of The Atlantic magazine. I hope you will join us as well. Weigh in with your own thoughts, ideas. Give us a call, 800-433-8850. Send us your email to firstname.lastname@example.org. Follow us on Facebook or send us a tweet. Welcome to all of you. Good to have you with us.
MR. BRIAN FUNGThanks for having me.
MR. DEREK THOMPSONThank you.
MS. VICKI CANTRELLGood morning. Thank you.
REHMDerek, if I could start with you, Sunday deliveries have always been possible but, I gather, at a greatly expanded cost. So what's new about the partnership announced on Monday?
THOMPSONThe e-retail space is extremely competitive. And you can find a lot of different ways to compete. You can compete on product. You can find the best product to sell people. You can compete on service, on the interface, on the website. But the interesting way that Amazon has decided to compete here is it's competing on time. It's competing on day. It's saying, no one else is delivering on Sundays. We will.
THOMPSONSo if you're the kind of person that wants something same-day delivery on a Sunday morning or a Saturday night, there's only one option for you, and that option is Amazon. Amazon isn't just trying to compete for market share. It's also trying to compete for mind share because there are lots of places you can buy toiletries and DVDs and all sorts of things that you would want delivered to you.
THOMPSONThis is a way for Amazon to say, if you want something at this particular time of the week, there is one place for you to go, and that's amazon.com, and hope that you can suck people in for the rest of the week because you've decided to make them your one-stop shop for at least that one day.
REHMDerek Thompson of The Atlantic. Turning to you, Brian Fung, you say that usually government hires private contractors. This seems to be the other way around.
FUNGThat's right. I think, you know, when you look at the history of the last 10 years of Washington, you know, Washington really grew big on federal contracting and on federal dollars. What we're seeing now is Amazon paying what's essentially a government-owned service to perform a function that a private company would ordinarily undertake with another enterprise.
REHMWhat is this likely to mean for the U.S. Postal Service?
FUNGWhat we're looking at with the Postal Service is, you know, it's a service that's fundamentally -- I wouldn't say broken, but it's in trouble. You know, it's already on track this year to lose $3.9 billion. Some estimates say that it could be as high as 6 billion by the end of the year. So clearly the Post Office is in need of a cash infusion. Amazon is in a good position to help out with that problem, but more importantly, I think, it's also worth mentioning that, you know, by shifting to Sunday service, the USPS is, in effect, moving to a place in the market where no one else is, as you've sort of indicated before.
REHMNow, tell me about other retailers. I mean, there's Amazon getting its foot in the door first and fast. Will other retailers follow?
FUNGI think that's definitely a possibility. This sets a kind of precedent that could potentially shake up the shipping industry, you know, if...
REHMFedEx and UPS.
FUNG...FedEx and UPS follow suit, then we may see them begin to get into the Sunday delivery business as well.
REHMAnd to you, Vicki Cantrell, what's this going to mean for retailers generally? Are they going to have to become part of the Sunday service?
CANTRELLI don't think they have to become part of the Sunday service, but retailers are very flexible, resilient. Amazon is a retailer, and what they do is always figure out exactly how they can be -- what's the next thing that they can offer? That's how they came up with Sunday. Retailers are doing this all of the time.
CANTRELLThey are making new arrangements in their store, pick-up in store. They're partnering with FedEx. Walmart says pick up your goods at the FedEx location. So all of the retailers are in fact reacting, as they always do, to come up with innovative ways to make the customer experience great and capitalize on their network and their stores.
REHMDerek, when you see this kind of change in service coming, what is it going to mean for the Post Office? What's it going to mean for the likes of Amazon, perhaps the other senders? What's it going to mean for retailers?
THOMPSONIt's going to mean the same competition that we've seen in the last 100 years in retail. It's just going to continue. And so I think the historical context here is extremely important. I wrote a column for The Atlantic that sort of tried to place Amazon in the flux of national retail innovation. And what's so fascinating is that, you know, you go back to the late 19th century with Sears and Montgomery Ward, and, you know, these innovations seem incredibly old-fashioned at this point in having a catalog -- you're shopping from your couch.
THOMPSONAnd people moved beyond that in the middle of the 20th century. They left their homes. They drove to brick-and-mortar stores. And so you had the birth of brick-and-mortar retail. And now what we're seeing, I think, in a funny way is that Amazon isn't so much bringing retail into the future by having us shop on our browsers on our couches.
THOMPSONIt's actually bringing retail back into the past because that's what people were doing in the late 19th century. They were shopping with a Sears catalog on their couches. And they were placing orders, and those orders were being fulfilled by telegraph and train. And now those orders are being fulfilled not by telegraph and train...
THOMPSON...but sometimes by server, if you're looking at Amazon's video service, and sometimes by plane and by, you know, faster cars and by other innovations with infrastructure. Amazon in many ways has evolved, and is evolving, into an infrastructure company because the way to differentiate itself from other retailers isn't so much to offer a wider fleet of products, even though it does, but to differentiate itself based on how many fulfillment centers it has, how close those fulfillment centers are to major cities.
THOMPSONAmazon is moving into cities and spending so much on all of this infrastructure, all of these houses, these deals with companies like UPS that they're trying to find ways to get products to people as fast as possible. And, so like I said at the beginning, the major differentiator here isn't necessarily so much the product, but the time.
THOMPSONPeople are living in an on-demand world. They expect that, when they click on something, they can get it as fast as possible. And Amazon is saying, if you want it as fast as possible, particularly around Sunday, we are the only option for you. We are the only place to go for shopping.
REHMSo, on the other hand, Vicki, if I really want something immediately, I go to the store because the stores are now open seven days a week. Is there a breakdown that you can give us between online sales and in-store sales today?
CANTRELLYes. The online sales have been increasing much faster than the brick-and-mortar sales. Over the last few years, it's in double digits. It's anywhere between 10 and 20 percent, depending upon the timeframe you're talking about, as an increase year on year for online sales. Obviously, same-store sales for brick-and-mortar is much lower and anywhere between one and 5 percent, depending upon the chain. So we're seeing such an incredible increase in, in fact, online sales. But what's more important is -- and he said it -- the consumer is leading everything that everyone does...
CANTRELL...including Amazon. Everyone is reacting to the consumer, and the consumer -- it's tough for retailers because they want the experience that is just like the best experience they ever had. So as soon as they experience Sunday delivery, if that's important to them, then they would hope that everyone has that. So retailers are always in a kind of a struggle.
CANTRELLWhat I think is important here is that it is consumer-led. The tradeoff here about where they get their merchandise is retailers' capability of blending the channels, making a great experience. But more importantly, is the consumer willing to pay for that? What they're willing to pay for right now, absolutely, isn't as much same-day delivery. What they are most concentrating on right now is free shipping. Eighty-five percent of consumers say free shipping is what they expect. That's a big deal. OK?
REHMAnd what's going to happen when Sunday delivery comes along, Brian?
CANTRELLRight, at a cost.
FUNGWell, I think, you know, Amazon's strategy here is to get people to sign on for Amazon Prime as quickly as possible. You know, by adding service after service after service to Prime -- I mean, Prime is really Amazon's big money maker. And a lot of what Amazon does often happens at a loss.
FUNGFor example, it sells -- often it sells its Kindle devices at below cost as a way to get people to buy more e-books. And I think, you know, what we're seeing here with Amazon Prime is much the same thing. You know, Sunday delivery is very, very costly. But, you know, when you look at the big picture, Amazon stands to gain a lot of revenue from getting more people to sign up for Prime.
REHMHow much does Prime add to the cost?
FUNGWell, I think, you know, looking at how much money Amazon, you know, funnels into fulfillment costs, you know, I think it came to something like 5 percent of its total revenues, you know, a few years back in 2011. You know, the potential for Prime to restore some of those costs is pretty large.
REHMBrian Fung, a reporter for The Washington Post. When we come back, we'll talk further, take your calls. Stay with us.
REHMAnd welcome back. We're talking about the announcement this week that Amazon will join forces with the U.S. Postal Service to create Sunday delivery and, in some cases, ship same-day -- deliver same day. And that's what, increasingly, people are saying they want. On the line with us is Derek Thompson of The Atlantic.
REHMHere in the studio, Vicki Cantrell of the National Retail Federation and Brian Fung, a reporter for The Washington Post. Joining us now is an independent reporter, Mac McClelland. She spent a short time working in an online shipping warehouse. Hi there, Mac. Thanks for joining us.
MS. MAC MCCLELLANDThanks for having me.
REHMTell me what you did. Describe, if you would, your day-to-day activities.
MCCLELLANDWell, I was a picker, and those are the people who have to go around and actually find in these massive warehouses the items that you order on the Internet.
MCCLELLANDSo one of your guests was saying earlier, you know, these items arrive by trains and planes. But, before that happens, they are handled by humans, by and large, and it might be done by robots entirely at some point in the future. But now it's done by many, many thousands of low-paid workers. So if you order a Barbie on the Internet, when you click -- you know, put that in your basket, there's a person who has a little computer that they carry around all day.
MCCLELLANDAnd they have to run to wherever in the warehouse -- and these are vast -- I mean, you know, up to a million square feet, these warehouses, just huge structures. And there are thousands of people either making minimum wage or, in some cases, something like $11 or $12 an hour running around and getting your Barbie and putting it in a tote and sending it away on a conveyor belt before it can be actually packed and sent to your house.
REHMTell me what made you think of that working in an online shipping warehouse was going to be any different or any more difficult than warehouse work in any industry?
MCCLELLANDWell, I had already had a glimpse of it when I was working on an unrelated story. I stopped in a fulfillment center that one of my old friends was managing, and so I had a glimpse of -- and I used to work in warehouses through high school and through college, so I actually have a lot of experience working in warehouses. When I walked into this particular warehouse where they were fulfilling online orders, I couldn't believe how tight the restrictions on them were.
MCCLELLANDLike, nobody was allowed to talk. There was no talking on the floor. And I was only there for 45 minutes or something, and, in that time, I saw someone get fired for speaking to another person. And I saw another person get fired for going to the bathroom too often. And they all had their cell phones confiscated and kept on the desk of the manager like they were high school students or something. These were grown adults, of course.
MCCLELLANDAnd the manager was telling me, you know, I could fire every single person in here right now because I have a stack of applications. I could have them replaced within hours, and so they can't complain about the conditions. The economy's bad enough that we can basically restrict them to whatever rules we feel like. So there's a special kind of dehumanizing aspect to these warehouses that was new to me, and I'm not new to warehouses.
REHMSo, from your perspective, you're giving us the shot from inside that warehouse while we're sitting at home comfortably at our computers. And what that does is to set you all in motion really, really fast.
MCCLELLANDYeah, and you just never think about it. I mean, I never thought about it. I buy stuff on the Internet like everyone else, and you just don't -- it doesn't occur to you that, if you're buying products at rock-bottom prices and free shipping that, you know, where does the squeeze come from? And it has to come in from the people on the ground who are working to fulfill these razor thin profit margins, right. So they have to work as fast as possible to get as much product out the door as they possibly can.
MCCLELLANDAnd that comes at a great physical cost, not just that it's emotionally or sort of spiritually very sad and damaging. But the physical cost is very high when you are moving super-fast and doing very repetitive actions. And you have to kneel down on the floor and jump up to get these shelves. A lot of people come away with permanent physical injuries.
MCCLELLANDAnd the people that I was working with, many of them -- I was 31 or something when I was working there, and it was killing me. And I considered myself to be in excellent shape. Many of the people who were working there were much older than me in their 50s, in their 60s, in their early 70s in some cases.
MCCLELLANDAnd they were just telling me, you know, when you wake up every morning, you have to take a handful of Advil and sort of keep that up throughout the day. And if you do that, you can ignore the pain that your body is in and sort of keep through it. And, as I said, I've worked manual labor before, so it's not your normal kind of hurt. It's the kind that doesn't necessarily go away even after you quit your job.
REHMWell, tell me how long you lasted in that job.
MCCLELLANDI only worked there for four days not because I, you know, was going to die if I didn't quit, but I just had another assignment that I had to go to. But I was working 10-hour shifts. And every day, you know, leaving, I would leave, and it was dark outside. And I would come back in the morning, and it was dark outside.
MCCLELLANDAnd it was almost Thanksgiving. And so everyone was about to start working 11- or 12-hour shifts instead. And they don't tell you until the end of the day, so, you know, towards the end of your shift, you've worked nine hours maybe of your 10. And then they say, guess what, you have two more hours that you have to work.
MCCLELLANDIf you have childcare, you know, you need to be taking care of, you can't have your cell phones with you in the warehouse. So I guess people in your family just have to know that you may or may not be arriving home at some point. There was another person who worked in a warehouse once, too, had a blog about it. And he was saying that they just started going out and buying new packs of socks and underwear because they had no time in between their shifts to do their laundry. And this lasts -- that kind of accelerated schedule lasts all the way through the Christmas season.
REHMMac, I know that you wrote up your experience for Mother Jones magazine. And I wondered what your overall takeaway is. Are you trying to help people to understand how their need for quick consumption is affecting the human beings who are working behind the scenes? Are you trying to tear down that kind of online industry because it's happening all over the world? What is or what was your intention as you wrote this?
MCCLELLANDJust to let shoppers know -- well, first of all, to find out for myself what it was like and to let other people know -- I don't have any illusions that the Internet is going to stop being a major marketplace. I think, you know, that will keep growing, the sector. It always has, and I think that it always will. But if people are aware of what the conditions are like in these warehouses, it positions them to make possibly different choices or even to make demands on the people that they're buying from, on the companies that they're buying from.
MCCLELLANDI mean, you know, these companies are getting away with these very dicey labor practices mostly because people just aren't aware that they're happening. And if more people were aware and more people were worried about it or upset about it, they could demand better service. And also they could understand that they might have to pay for shipping. You know, in a way the -- I talked to one industry consultant who was saying, I personally have hired people to do fulfillment before.
MCCLELLANDI didn't know that the conditions were so bad, but there's no alternative right now. And if there was a company that started guaranteeing, you know, no human exploitation, we'd treat our workers decently if you just pay a little bit of a premium on shipping, there is a population that would pay more for that. I would pay more for that in the way that people pay more for organic food.
MCCLELLANDAnd so I think that if people become aware of the conditions, then there -- it might open up a place in the marketplace for alternative sets of conditions because this is the way that it's all done right now. And, as you mentioned, speed is only getting faster, and I've heard from other warehouse workers since I stopped working there that they've upped the goals beyond what I was already picking, which was 1,700 items in a day. And so the speed is just getting even faster for the people working there.
REHMMac McClelland, she's an independent reporter. The article titled "I Was a Warehouse Wage Slave" appeared in the February 2012 issue of Mother Jones magazine. Thanks for joining us, Mac.
REHMAnd turning to you, Brian Fung, does all this sound familiar?
FUNGOne thing I think Mac's story really sort of sets up is a question about what's going to happen to a lot of the postal workers who are then going to be servicing Amazon. Now, it's obviously -- you know, what postal workers are doing isn't, you know, working on the floor of an Amazon fulfillment center. But, you know, as one of my colleagues yesterday Lydia DePillis wrote in the column, you know, this sets up a situation where, well, why doesn't Amazon simply buy out the Post Office in its entirety?
REHMBut, on the other hand, Derek Thompson, the U.S. Postal Service does most of its in-house stuff by computer, does it not? And so you wouldn't assume that you're going to see postal workers having to move around picking in the same way Mac McClelland describes.
THOMPSONI'm actually not that familiar with the working conditions of the Postal Service, to be honest. I do think though it's interesting what Mac was saying.
THOMPSONYou know, two of the most respected technology companies in the country, Apple and Amazon, both led by fearless and widely respected leaders, both incredibly popular among the most admired companies in the U.S. going back the last five, 10 years according to surveys, both very dependent on working conditions, whether you're looking at Foxconn in China or these warehouses in the U.S., that when Americans are brought face to face with sort of the fruits of the productivity that they've come to rely on, are often embarrassed by what it takes to bring us the technology that we love.
THOMPSONAnd I think that that's sort of an interesting thing that, you know, not only are these companies, you know, beloved from a consumer standpoint. They're also very much admired for what they do as a business. But it is amazing to see the labor conditions. The other half of it that, I think, is worth just spending two seconds on is that in the future, you know, one of the real tragedies for, you know, low-income workers is that there might not be warehouse jobs for them if the robot technology that Amazon is experimenting on...
REHMYeah, I wonder.
THOMPSON...continues to develop a pace. Because these sort of jobs, the ability to find a parcel and put it on a conveyer belt, that's a routine-based job. And you look back over the last 120 years of automation technology, it is precisely these kind of routine-based jobs that are on the frontline of automation and robot fulfillment.
REHMDerek Thompson of The Atlantic magazine. You're listening to "The Diane Rehm Show." One point that Mac made -- and I'd be interested in anyone's reaction -- she said that the free delivery is part of what keeps the employees of these companies' wages low and pushes them to work harder and harder. Is that true, Brian?
FUNGI'm not sure that -- I'm not confident of weighing in on, you know, Amazon's business approach to its workplace conditions.
REHMYeah, go ahead.
FUNGBut one thing I would say is that, you know, Amazon does operate on razor-thin margins and, in fact, you know...
FUNGThat's right. And, you know, Amazon also doesn't make a whole lot of money in profit, and that's partly intentional. Jeff Bezos has sort of been very clear about his willingness to hold on to investments and spend money in a way that doesn't necessarily produce profits. And he's OK with that. That's one of the things that I think makes him, you know, a great investor and a great entrepreneur, but it's also, you know, slightly -- it produces some negative consequences.
CANTRELLI think what's really important to keep in mind here is it's not just -- there are many factors here. It's not just the workers and the free delivery, OK. That's -- there's are many, many factors. The financial model inside of a retailer is extremely complex. There's product. There's manufacturing. There's innovation. There's supporting the corporate workers...
REHMAnd there's the consumer.
CANTRELLThere's the consumer. There's the marketing. There's the -- so it -- I think it's irresponsible to say that those two things are the only two direct corollaries when the financial model to run a retail business, online, pure play, multichannel, whatever it is, is incredibly complex with many levers at once.
CANTRELLSo it's a full-blown model when you're talking about your profit and where you spend your money and how you innovate and what you have to spend on that. So I agree that we need to be looking at all factors, but it is irresponsible to think it's just a direct correlation between the workers and the profit.
REHMHow quickly do you see companies like Amazon moving toward a robotic industry?
CANTRELLIt's really interesting. It is very dependent upon the type, the area and the product. Some products are not conducive to that. And think about why Amazon is being successful right here. Because they're talking about food and adding, oh, and, by the way, I think I'll get this Barbie for my child on top of food, OK. So the combination of products also lends itself to you can't go 100 percent automation.
CANTRELLNow, in the future they might build certain distribution centers that only deal in a particular product. The robotics, you know, could run the entire place. But until they understand -- remember that what they're doing is putting distribution facilities close by, OK. So depending upon what product they want to deliver close by will be whether it can be completely robotic or not.
REHMVicki Cantrell, she's senior vice president of communities and executive director of Shop.org in the National Retail Federation. Short break here. When we come back, we'll open the phones, hear what our consumers have to say. I look forward to speaking with you.
REHMAnd joining us now is Oren Teicher. He is CEO of the American Booksellers Association. Hello, Oren. It's good to have you with us. Tell us about your reaction to the USPS deal with Amazon.
MR. OREN TEICHERWell, thank you, Diane. You know, we found out about this yesterday. And because it was Veterans Day, we tried desperately to reach somebody at the Postal Service to get an answer and to learn more about what the program entailed. Unfortunately, they were closed. We've reached out to them this morning and are trying to understand more about what it is.
MR. OREN TEICHERAnd, obviously, our concern is that we think that if the U.S. Postal Service is making an arrangement with one company, with Amazon, they ought to be making it with everybody and that, you know, it's not the role of the U.S. Postal Service to pick favorites between competing retailers and a very, very competitive e-commerce market. And we hope that other companies and entities will have an opportunity also to be able to participate in meeting what their customers are asking us to be able to do.
REHMI wonder, Oren, is Amazon, by virtue of stating this deal with the USPS, simply going to go around the booksellers, supplying the books from their own warehouses, rather than including the booksellers in their market?
TEICHERWell, you know, consumers will choose where it is they want to buy books. And we're perfectly comfortable to compete in the market and to be able to allow consumers to choose where they can get the best service, where they can have the best shopping experiences.
TEICHEROur concern simply is that we don't think that a quasi-government agency ought to be picking favorites between one vendor over another. It may very well be a wonderful idea to help support the U.S. Postal Service, to keep them in business by having private companies subsidize what they do, but to allow only one company to do that, which is what it appears to be -- the announcement yesterday strikes us as being uneven and unfair.
REHMDerek Thompson, do you want to respond to Oren Teicher's comments?
THOMPSONYou know, Brian has actually written quite well about this idea of adverse contracting. And it's not entirely clear to me that it's illegal or irresponsible for USPS to essentially contract with only one company. Essentially you have a deal between a private company and a quasi, you know, public company or a publicly-run institution like the USPS. Amazon was simply willing to make this deal. And if Walmart or Target or eBay want to reach similar deals with the USPS, I'm aware of no law or regulation that says that they can't. Amazon was simply ahead of this.
THOMPSONAnd, as critical as I've been of certain Amazon practices, I'm not critical of their gumption here to essentially say, look, we're in a very competitive race with other retailers. We're going to try to find a way to differentiate based on day. And we're going to come up with this innovative way to do it. And they've done it. I think it's exciting, and consumers want it.
REHMBrian, do you want to comment?
FUNGI think it's important to point out that we don't actually know very much about the terms of the deal. We don't know, for example, who approached whom. We don't know whether or not this was Amazon's idea or the Postal Service's idea. So I think, you know, we risk jumping to conclusions a little bit when we say that the Postal Service is out to pick winners and losers. The other thing I would say is that the USPS is already being relied upon by services such as UPS to complete the last miles worth of shipping.
FUNGAnd so that's simply because it's a lot cheaper to use USPS than it is to use UPS or FedEx to complete that last mile. So just in terms of economics, it makes a lot of sense why Amazon would want to choose the Postal Service as its provider.
REHMOren Teicher, any last comments?
TEICHERWell, you know, it's absolutely fair that we don't know very much about it. It was a little peculiar that the announcement happened on a day in which the USPS was closed, so we couldn't get answers to some of these questions. Hopefully, those answers will come today. I just think that it's clear that, as a quasi-government agency, its role is to provide a neutral playing field in allowing all retailers to be able to take advantage of what may exist and that we as taxpayers obviously subsidize -- and have subsidized for a long time -- the Postal Service.
TEICHERAnd I think in an open competitive environment, all businesses ought to have access to ways in which they can serve the consumers and that nobody ought to be giving favoritism to one business over another.
REHMOren Teicher, he's CEO of the American Booksellers Association. Thanks for calling.
TEICHERNice to talk to you, Diane.
REHMAll right. And now, let's go to Ben, in Dover, Mass. You're on the air.
BENYes. Hi, Diane. Thanks for taking my call.
BENYeah, I'm wondering, the role of culture in all of this, I think as a society we need to have a break. I thought Sunday was a day that society's supposed to take a break, but this is a situation (unintelligible) a way to Amazon and the USPS for working on Sundays. They're ruining the employee's quality of life. Where is the role of all that in all of this conversation? Thank you. I'll take my answer…
REHMAll right. Thanks for calling. Brian Fung?
FUNGI think with what Amazon is doing, you know, the USPS has said that it won't need to hire additional workers to fulfill Amazon's contract. And what we're talking about I don't think is USPS workers shifting to a seven-day workweek. You know, I think there are existing workers in USPS's workforce who already work on Sundays, and those workers will simply be shifted over to perform that task.
REHMAll right. To Julia, in Baltimore, Md. Hi, you're on the air.
JULIAOh, thank you. I had one dealing with Amazon, and it will be the last. I ordered a product from Amazon and paid shipping costs, all that stuff, and the product came from within two miles of my residence. That was the return address on the package. And, to me, it spells rip-off real quick. I would have spent less on gas money to go to that store than what I did on the shipping cost to have Amazon supposedly send it to me.
REHMAnd why didn't you go to the store as opposed to buying it online?
JULIABecause I didn't know the store existed. At the time, it was in a shopping center that I normally don't go in.
REHMI see. I see.
JULIAAnd it was a little specialty store in that shopping center.
REHMYeah, well, it's a good lesson, Julia. We all have choices and…
JULIAAnd it sounds to me like Amazon and Walmart are buddy, buddy, buddies.
REHMI don't know about that. Do you know anything about that, Derek Thompson?
THOMPSONWell, they're buddy-buddies in terms of the industry that they're in, but they're actually competitors…
THOMPSON…because -- Amazon and Walmart, I can't imagine they're terribly fond of each other.
THOMPSONIn fact, you know, Walmart has been forced to spend billions of dollars to catch up in the fulfillment center race because they're trying to have the same sort of same-day shipping that Amazon has premiered.
REHMAll right. To Oscar in Durham, N.C. Hi, you're on the air.
OSCARHello, Diane. Thank you for taking my call.
OSCARListen, I consider myself a very savvy shopper, especially online. And we almost buy everything Amazon, but what you'll find is that, other than the books -- you get good prices on the books. But every other product you're essentially paying the same price as you would be paying on other retailers' sites because what you'll see is that Amazon -- because we're members of Amazon Prime and you don't pay shipping, you get it in two days.
OSCARBut if you go to another site, you'll find the product for cheaper, but you have to pay shipping costs. And that shipping cost usually adds up to the Amazon Prime price. And it's either exactly the same or a little bit more, but we keep coming back to Amazon because we get it in two days. So…
OSCAR…this added delivery for Sunday, that's great, I think. But I don't think you're necessarily getting free shipping. The price is included in there. It's just that, since you're there, it's more convenient, you get it in two days, and it comes from Amazon.com, which we pretty much trust. I mean, they do make mess-ups, like the lady previously…
OSCARBut they do make mess-ups, but, overall, we're pretty satisfied.
REHMOK. Oscar, thanks for calling. Vicki?
CANTRELLI think the important message here is that our number one commodity as consumers these days is time. And if you think of that at the core of everything, then you realize that convenience is king. So across the board, Prime represents convenience. And that's what the other retailers are trying to do, is figure out a way to make convenience for shoppers.
CANTRELLAnd, again, Sports Chalet decided to do same-day delivery on skis and then decided to come up with a more convenient way for the shopper to return the goods because that's a kind of uncomfortable process. And that's just one of many examples where the retailers are trying to capitalize on that convenience because of time.
REHMAnd an awful lot of products are now available not only with free shipping but free returns…
REHM…as well, which is certainly an enticement. Here's an email from Jack in Gainesville, Fla., who says, "Low-paid workers will also be used on the USPS side. I work for the Postal Service. I can tell you cost effectiveness is driving wages down in the USPS. Sunday delivery will be given to contractors for the USPS or lower-paid non-unionized employees." Is that something you are worried about, Brian?
FUNGAbsolutely. It's definitely, you know, labor costs are definitely a big part of the USPS's budget woes. And, you know, at the same time, you're also looking at a $5.5 billion charge that's being levied on the USPS simply for funding its healthcare pension fund. And that's not an insignificant cost for the Postal Service.
REHMWell, of course. And a lot of people believe that were it not for that congressionally mandated fund, that the USPS would not be in the red, so-called.
FUNGAbsolutely. I think that a lot of proposals that the USPS has come up with have worked in spite of that congressional mandate. And it's something that the USPS has proven itself very willing to adapt to.
REHMOK. Here's a question from Ben. "Is it possible that the advent of the same-day shipping by Amazon is sort of a protection against a future of 3D printers being in most, if not every, home?" Derek Thompson, what do you think about that?
THOMPSONThe possibility of 3D printers in every single home in America is a little sci-fi. However, if it were the case that every single household in America -- you've got 155 million households with 3D printers that could basically make anything from a shoe to a Barbie doll, I mean, that would be disastrous for Walmart and for Amazon.
REHMAnd for Amazon.
THOMPSONYeah, it would remake the entire retail industry. And so, you know, it would be an absolutely incredible development for individual families. But it's so far out there that it's difficult to say anything definitive about it. In the meantime, Amazon's -- sorry.
THOMPSONAmazon's competitor isn't 3D printers. It's Walmart and eBay.
REHMAnd you're listening to "The Diane Rehm Show." Brian, you wanted to weigh in on that.
FUNGYeah, I think what Derek was just talking about was a really interesting explanation of why the business of e-retail is going in a slightly different direction. There are a lot of challenges to putting 3D printing in your home right now. For one thing, you can only print in mostly one, maybe two materials at a time. And that's because the conditions that are required for 3D printing are unique depending on the material that you're using.
FUNGSo, for example, if you're using steel, you might need a different focus of the laser or a different temperature inside your chamber than if you were printing in aluminum. So what that winds up causing is it often makes a lot more sense for companies like Amazon to think about integrating 3D printing into its own business model as opposed to thinking of it as a competitor.
FUNGAnd we're already seeing that in companies like UPS. UPS has kiosks in San Francisco that allow visitors to 3D print remotely any 3D printing file that they happen to bring to the store. And so, you know, you could see a future in which Amazon builds on that model, perhaps putting 3D printers in its distribution centers in various cities around the country and using 3D printing to fill any logistical gaps in its supply chain.
REHMAnd one more email from Rich, who says, "One of your guests is incorrect in stating that USPS is subsidized by taxpayer dollars. This is incorrect, a typical misconception. Taxpayers do not subsidize the USPS." How about that, Derek?
THOMPSONMy understanding is certainly different. I don't know if Brian has another take. USPS is funded by the government, and, as a result, it comes out of taxpayers' dollars. That was certainly my impression.
REHMWell, but it is a semi-private-run corporation so that, certainly by using postage stamps, buying postage stamps, we're subsidizing the use of the Postal Service.
FUNGThat's certainly true, but I would also say that what Derek was saying is, you know, that the Postal Service is owned by the government, even though we as consumers -- you know, I wouldn't say that taxpayers are necessarily subsidizing the Postal Service but that consumers, when they buy postage stamps, are, in some sense, yes, subsidizing the Postal Services operations. At the same time, you know, those revenues account for, you know, a very small and a declining portion of the Postal Service's records.
REHMExactly. Brian Fung, he's a reporter for the Washington Post. Vicki Cantrell of the National Retail Federation and Derek Thompson of The Atlantic Magazine, it's going to be fascinating to see this roll out, how it moves and how it affects all us, whether we start buying more or less online. Thanks to all of you for being here. And thanks for listening. I'm Diane Rehm.
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