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Amazon Sunday Delivery Poses Threat to Retailers

Douglas A. McIntyre

Amazon.com Inc.'s (AMZN) challenge to large retailers is not just that it does not need physical stores to do business, nor that it has one of the most visited websites in America. Beyond that, Amazon is smarter and more innovative, and this holds true no matter how hard its bricks-and-mortar competitors try. Amazon will begin to deliver orders on Sundays, courtesy of the badly damaged U.S. Postal Service (USPS).

It does not matter to Amazon that it is highly successful and the USPS is often considered on its last legs; the USPS still has an unprecedented infrastructure to reach tens of millions of people with deliveries. Thus, the marriage:

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Amazon.com, Inc. is working with the U.S. Postal Service to deliver packages on Sunday, starting in the Los Angeles and New York metropolitan areas. Amazon Prime members, who receive unlimited, free two-day shipping on millions of items, can now receive their packages on Sunday in these areas. Amazon and the U.S. Postal Service plan to roll out this service to a large portion of the U.S. population in 2014 including Dallas, Houston, New Orleans and Phoenix, to name a few.

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"Free" is another major point of leverage over competition.

The challenge, particularly to the country's biggest retailer -- Wal-Mart Stores Inc. (WMT) -- is immediately clear. Amazon's plan may not damage Walmart much this holiday season. But Walmart will have to find an alterative soon. The set of alternatives is narrow -- United Parcel Service Inc. (UPS) and FedEx Corp. (FDX), each of which has the capacity to deliver packages on Sunday. However, their participation could be expensive because of the cost of added personnel time. Unlike the USPS, neither has anything to prove about its customer service. And neither is desperate to remain relevant

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To some, the Amazon action may seem minor, at least until it is fully nationwide. However, it is one more aspect of the Amazon advantage which runs from its foray into hardware with the Kindle and Kindle fire, to its emerging premium video service. The number of products and services it offers has become overwhelming, even to giant Walmart.

And, with Sunday deliver, it has overwhelmed, again.

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