How Amazon's Trying to Save the Post Office (Update 1)

Updated from 8:55 a.m. EST to provide additional analysis in the eleventh paragraph.

NEW YORK ( TheStreet) -- Amazon ( AMZN) is trying to do something the United States Government refuses to do: Save the U.S. Post Office.

In a press release early Monday morning, Amazon announced it would be using the United States Postal Service to help deliver packages in the New York and Los Angeles metropolitan areas on Sundays. Amazon and the Postal Service said the service would be rolled out further in the U.S., going to major metropolitan cities in 2014 including Dallas, Houston, New Orleans and Phoenix.

"As online shopping continues to increase, the Postal Service is very happy to offer shippers like Amazon the option of having packages delivered on Sunday," said Patrick R. Donahoe, Postmaster General and Chief Executive Officer in the press release. "With this new service, the Postal Service is now delivering packages seven days a week in select cities. Customers can expect the same reliable and valued service that the Postal Service currently provides."

Amazon, led by CEO Jeffrey P. Bezos, has continued to expand its offerings in innovative new ways that show the online e-commerce giant thinks about its business in ways others do not.

Amazon has set up delivery lockers in certain stores around the country, and also recently set up mini-distribution centers in Procter & Gamble ( PG) plants to ship directly to customers, continuing to cut down on costs and increase speed in which buyers receive their goods.

Though terms of the deal were not disclosed, Amazon's deal with the Postal Service will provide a much-needed revenue boost for the government agency. It's been mired in declining revenue, as a result of slowing mail volume, for years.

The Postal Service, which generates all of its revenue from the sale of stamps and services, has been on the brink of closing its doors, and could wind up needing a bailout from the federal government, as Congress makes the agency pre-fund its health care benefits to postal workers.

The decision by Amazon to bypass UPS ( UPS) and FedEx ( FDX) is a curious one, given the two logistics giants handle so many of Amazon's packages already. Amazon could not be immediately reached for comment as to why neither the Atlanta-based UPS or Memphis-based FedEx were not chosen.

Investors did not appear worried about the long-term health of the two shipping giants, though. Shares of both UPS and FedEx were slightly higher in Monday trading, despite the news.

Over the years, the Postal Service has had to close offices, and has proposed stopping Saturday deliveries as a way to cut costs.

Though volume on Sundays is likelier to be slower than on other days, it shows Bezos' continued push to be more entrenched into consumers lives. Amazon has pushed itself as a leader in e-readers, with its popular Kindle devices, and the company has upped its game in the tablet market, with the recently revamped Kindle Fire HDX. Amazon is also reportedly working on a smartphone, with 3D imaging, as well as a set-top box, akin to Apple ( AAPL) TV.

Amazon has looked at several different ways to get consumers to buy more goods from it, outside of the aforementioned alternative delivery methods. It is expanding into delivering groceries, with its Amazon Fresh initiative, in the Seattle and Los Angeles area, and recently launched a Login & Pay service for websites, similar to what PayPal offers.

By offering deliveries on Sunday, Amazon is hoping to have more people sign up for its $79-a-year Amazon Prime service. The service allows for free two-day shipping, and also offers a wide variety of movies and television shows, akin to Netflix ( NFLX) services, which has more than 30 million users in the U.S.

Amazon does not publicly disclose Prime members, but it did note in last quarter's earnings release it signed up "millions of new Prime members," on the way to reporting $17.09 billion in revenue.

-- Written by Chris Ciaccia in New York

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