Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
Amazon and Netflix differ on whether their businesses will suffer without Saturday delivery.
Cutting Saturday delivery is a bad idea, argued an Amazon.com Inc. executive at a congressional hearing today, while a Netflix Inc. representative said the proposed cutback would have little impact on the e-retailer’s business. And an industry expert foresees minimal impact on consumers’ willingness to buy online if the U.S. Postal Service halts Saturday delivery.
The joint House-Senate hearing on the potential effects of the Postal Service cutting Saturday delivery was held by the House Oversight and Government Reform subcommittee on the Postal Service and the Senate Homeland Security and Governmental Affairs Committee’s subcommittee on federal services.
Paul Misener, Amazon.com’s vice president for global public policy, argued against the cuts.
“While first class and standard mail volumes are decreasing, parcel volume is increasing,” said Misener. “This makes sense, for although there are online or virtual substitutes for letters, bills and advertising that decrease use of the mail, online shipping actually increases the need for physical shipments.”
Moreover, he said, Amazon.com customers have come to appreciate and expect Saturday delivery.
“While they may be willing to wait until Monday or Tuesday for a bill they don’t really want, an advertisement they didn’t ask for, or a magazine to which they subscribed long ago, they expect the items they purchased this week to be delivered as soon as possible,” he said.
But Andrew Rendich, chief service and DVD operations officer at Netflix, said the effect of the cuts would be relatively small for the online retailer of DVD rentals. That is, in part, because Netflix offers its customers video streaming directly over the Internet, he said. But even with that delivery option, the physical delivery of DVDs is a major portion of the company’s business. In fact, the company expects to spend $600 million on postage this year.
“We believe that those subscribers who currently rely upon Saturday postal delivery to receive and watch movies on the weekend would adjust their rental habits to account for the Postal Service’s change in delivery and would plan their DVD rental selections around the fact that mail would not arrive on Saturday,” he said.
However, Netflix does not favor ending Saturday delivery, he said. Rather the company believes doing so is a reasonable proposal in light of the difficult challenges facing the Postal Service.
Would cutting Saturday delivery significantly impact online retailing? Lauren Freedman, president of The E-tailing Group, who was not at today’s hearing, thinks not. Shoppers looking for instant gratification or who have procrastinated making a purchase might rethink making an online purchase if service were cut—but that’s only a small portion of online shoppers, she says.
“Eliminating Saturday delivery only would only affect a limited number of online shoppers,” Freedman says. “I don’t think it matters to the guy who orders a package and requests delivery in three to five days if he doesn’t get his package on Saturday.”