http://multichannelmerchant.com/opsandfulfillment/warehouse/...
tl;dr: They move packages from their distribution centers to one of these "sortation centers" (they may be co-located, it's hard to tell from either article). From the sortation center they truck packages directly to the USPS distribution center (DDU) closest to the customer, and then the USPS carries the package on the last leg to the customer. This means they bypass UPS/FedEx/DHL/OnStar in favor of USPS's much cheaper non-express rates because it sounds like once a package is at the DDU it will be in the customer's hands same or next day.
Edit: I believe this is how FedEx SmartPost works as well. FedEx does the merchant -> DDU leg and then USPS takes it the rest of the way.