Why did e-commerce take off in the US years before it did in other countries?

Three reasons:

1) A high percentage of US consumers have credit cards.

2) Rich ecosystem of banking services allows small businesses to accept credit cards.

3) The United States Postal Service (USPS) offers a useful, reliable, flat price small parcel service to every address in the country.

This landscape allows businesses small and large, to enter e-commerce. Whether the business has one location or many. Whether the business is in Hawaii or Manhattan. Whether in a city or in a rural area.

For almost 20years, I helped build shipping software for tens of thousands of small businesses. Many of these were home businesses. The vast majority of these businesses were selling to consumers (B2C). And the vast majority of the parcel volume was shipped via the USPS.[1]

There are many reasons for the dominance of the Postal Service in the small-parcel segment. The most important element: The Postal Service can do what it does because it is a utility, not a business.[2]

Yes, there are delivery trucks of many colors. Brown is ubiquitous, as is white, purple, and yellow. But only one of those trucks has an organizational imperative to touch every US address multiple times per week: The United States Postal Service.

UPS and FedEx were designed and built to be business-to-business services (and to this day charge Residential Surcharges when delivering to homes[3]). When delivering to remote areas, these private services charge significant extra fees (and some of them deliver only to specific lists of zip codes, to avoid remote areas completely).

The Postal Service operates like your water district: It has to serve every address in the country, with an even hand.[4] Across the land, it is required to offer a consistent, evenly priced, set of services. That is the basis: A letter, package, or other piece of mail can be sent for a flat or predictable rate to any address. No matter where you ship from. No matter where you ship to. All you need to do business with the Postal Service is a pen and some postage stamps (I keep a few in my wallet). That and a mail box (even the one outside your house) and voila, a package is on the way, to arrive within three days (four to extreme locations).

It is the Postal Service's job to build a pricing model to support the whole network.

What e-commerce sellers, especially home-based ones, know is that the Postal Service's pricing chart is ideal for selling to consumers. Clothing, small electronics, and more are reliably delivered at price points that are often lower than the lowest price available on any private carrier. Whether you sell a few things on eBay or hundreds of items on your own web site, the Postal Service is the best connection to your customers because they are touching every consumer address, every day.

And only the Postal Service offers a consistent product to every address in all 50 states. (That means Hawaii, Alaska, and even territories like Puerto Rico. Not to mention military mail to every far flung military base and naval ship.)

No other organization has this even part of this mission.

And no private business would bother to deal with serving the dense (low cost) deliveries along with the remote (expensive) deliveries on a consistent basis. Heck, UPS and FedEx change their pricing every week.[5] Such price volatility is hard for a small business to manage.

From some headlines, you might think the Postal Service has failed. But this is false. For the past dozen years, Postal Service losses have been artificial, the result of a law passed by a lame duck 2006 Congress. This law, the 2006 Postal Accountability and Enhancement Act, forces the Postal Service to prepay health benefits in a way that creates red ink where there actually is little or none.[6]

Compared to other countries, the US has a reliable, trustworthy Postal Service. (Ask eBay sellers about small electronics that often disappear in some European posts.) Americans, without a thought, routinely drop large checks in the mail, confident that they will be received, and on schedule.

The USPS has been a key part of American commerce for a century or more. It is the foundation that allowed e-commerce to flourish here, years before it took off in other countries.

Bad news about the Postal Service is unfair. Postal finances were fine until that misnamed “Postal Accountability Act” was passed.[7]

If the Postal Service is radically changed, or fades away, larger e-commerce players will survive.

Smaller firms won't have the options or leverage to get what they need from the private sector.

And remotely located consumers will remember the good old days when they paid the same for items as people in cities.

Rafael Zimberoff has been at the nexus of e-commerce and shipping for over twenty years. The founder of ShipRush (acquired by Descartes in 2017), Rafael works on the business, technology, and strategic aspects of parcel and freight shipping. https://www.linkedin.com/in/zimberoff/

[1] Across the eBay platform, for example, %60-80 of all sales are shipped via USPS. For some categories, like clothing, it is over %90.

[2] https://about.usps.com/postal-act-2006/universal-postal-service.htm

"While other carriers claim to voluntarily provide delivery on a universal basis, the Postal Service is the only carrier obligated to provide all the various aspects of universal service at affordable prices."



[3] See the Residential Surcharge in the UPS Service Guide as an example. It is currently a $4.10 fee on top of the base shipping rate. Go to page 127 and 115 of this PDF (or search for “residential surcharge”): https://www.ups.com/us/en/shipping/zones-and-rates/additional/daily.page?

[4] Because of the Universal Service Obligation, as mentioned in the earlier note.

[7] The Postal Accountability and Enhancement Act, December 20, 2006: https://www.congress.gov/bill/109th-congress/house-bill/6407

After 12 years in control of the House of Representatives, the Republicans lost control of the House in the November 2006 election: https://en.wikipedia.org/wiki/2006_United_States_House_of_Representatives_elections