Instead, they let Amazon practically own the concept, eating away at their huge distribution advantage.
Most of the stores are optimized for in store shopping. What this means in practice is that the actual back rooms where the products are stored are relatively tiny (on the order of less than 10-15% the floor space of a typical Supercenter). The whole operation is designed so that the trucks can be unloaded as quickly and efficiently as possible, and most of the stuff can be stocked straight on the shelves where it is available for purchase. Inventory held in back rooms are minimal, and all the items in the entire store turn around extremely quickly.
Contrast this with an e-commerce warehouse, which has to deal with a large 'long-tail' of demand. People are used to having a huge range of choice available, and they expect same or next day shipping on whatever they order. Now instead of having say 20 boxes each of 8 different kinds of toilet paper now you need maybe 10 boxes of 100 different kinds, and they all have to be organized such that they're easily accessible to the packing crew. To make an efficient warehouse, you simply need a different layout and assortment of products than is available in your average store. At the same time, the stores continue to generate the vast majority of revenue for your business so you can't mess up their operations too much.
Not implying that it is an impossible problem to solve, simply a difficult one. I'm sure amazon will run into similar issues as they continue to integrate whole foods.
e-commerce makes it easy to have a million choices, but my local brick and motor store - because they have limited space - just gives me the choices I care about without too many.
I agree that to do it efficiently at scale, you need to change a lot. But they could easily have started with an Instacart-like approach, where every night when the stores are empty they have people pull and pack from the regular stock. That gets them into the game, and as buying habits change, they can start optimizing for the patterns that emerge. There are a lot of levers they can pull to keep that from disrupting store operation, including geographic rollout, limiting product selection, and marketing spend.
That's not optimal, of course. But neither is waiting until Amazon has a huge lead. So I still feel like they weren't thinking far enough ahead at a business level. Which as Clayton Christensen has shown, is pretty common for successful businesses.
What I wonder: why didn't USPS start an e-commerce business?
USPS's reputation has also saved a few eBay sales, when the buyer said they didn't receive the item. I ask the buyer to please double-check that it didn't get mixed in with the junk mail or something, and say that, if it's not there, I'll refund them in full immediately and ask the USPS Postal Investigator to figure out what happened. Every double-check thus far has found the package.
USPS continues to bleed money but that's due to the mandate from Congress about pre-funding pensions. That's a requirement that nobody else has - see the articles about the 3rd-largest coal company declaring bankruptcy and shedding its pension obligations.
Is always understaffed? Yeah, there are lines a lot of the time. So go to USPS.com if you can and buy postage online. Go to the offices that have ATM-like machines if you can't. My usual problem is that I have a letter that I don't want to send Priority Mail and I've gotten out of the habit of having 10 different amounts of postage labels.
Misplace the mail? I signed up for their service that sends me a picture of almost every piece of mail that gets delivered. The last problem with the mail that I can remember having was dropping off a check at the airport while leaving on a trip. The contractor suggested that mail there got extra inspection, which delayed it. I'm not sure that's right but I can see somebody dropping something "bad" in the mail right before they leave the city/state/country.
They're certainly not perfect and I bet it's not any more fun to work there than when "going postal" was a thing. But I'm pretty happy with USPS.
Ideally, they would get rid of those retiree healthcare and defined benefit pension benefits and just pay their employees more in cash, and let them buy annuities if they want. That would make the whole operation far more transparent and get rid of possibilities of corruption and numbers games being played with these deferred pay agreements.
So if/when they try their little bankruptcy schemes, it won't work.
My wife and I will have different payouts for Social Security, because the younger have been stolen from. Every year that the federal govt adds to Social Security is one year less I get. And that matters to my housing, quality of food I eat, medical help, drugs I need, and basic quality of life.
https://www.ssa.gov/planners/retire/retirechart.html
I pay in the same percentage as older, yet they can retire earlier and get their money. And given my family proclivities of massive heart attacks in late 50s/early 60s, I'll see none of it. And I'm diabetic - this country cares little to none about health care... How many "supplements" will I need for medicare when I'm close to retirement age?
Where I'm sitting, I don't have that much to look forward to, given how much I've (forcefully) paid in. And I have little trust in the chuckleheads in office the last 20 years - since I've been able to vote.
The USPS hasn't actually made those payments in years.
All that the USPS has to do is put aside enough money to pay for pension obligations they incur. That's not "pre-funding" anything. It's paying for an expense that the business incurs. If they can't do it then they're bankrupt and should be reorganized so that they don't incur expenses they can't pay. Coal companies going bankrupt and shedding pension obligations is exactly the thing that's trying to be avoided.
They should probably just switch to defined-contribution plans and abandon the pension program altogether. I imagine politics got in the way of that, and that pre-funding the pension is the compromise position.
This is misinformation that unfortunately has become quite widely spread.
Private employers generally are required to pre-fund their pension obligations: https://en.wikipedia.org/wiki/Employee_Retirement_Income_Sec.... FedEx and UPS both have around a 90% funded pension fund: https://www.investmentnews.com/article/20180509/FREE/1805099...; https://www.pionline.com/article/20190221/ONLINE/190229950/u....
What the 2006 postal reform legislation did is require the USPS to pre-fund its retiree health benefits as well. While it's technically true that private employers don't have that same requirement, that is only because their employees are eligible for Medicare. Like other private employers, FedEx and UPS, and their employees, pay the employer/employee Medicare taxes. Postal employees, by contrast, do not pay into Medicare and are not eligible for Medicare benefits.
There is some crazy idea out there that Congress somehow required the USPS to fund its employee health benefits to make government services look bad. That is complete nonsense. When the reforms were enacted, the postal service had a $75 billion unfunded liability for health benefits: https://taxfoundation.org/primer-postal-service-retiree-heal.... Congress saw the impending disaster, and (pretty much unanimously) voted to impose the funding requirement.
And personally I haven't had them lose mail in years. I know this varied by region, so maybe it's just where I live now. But if anybody can make a large organization up their game, it's another large organization who is paying a lot of money.