Why the Post Office Gives Amazon Special Delivery

[Auburn85 436]

https://www.wsj.com/articles/why-the-post-office-gives-amazon-special-delivery-1499987531?mod=e2fb

 

In my neighborhood, I frequently walk past “shop local” signs in the windows of struggling stores. Yet I don’t feel guilty ordering most of my family’s household goods on Amazon. In a world of fair competition, there will be winners and losers.

But when a mail truck pulls up filled to the top with Amazon boxes for my neighbors and me, I do feel some guilt. Like many close observers of the shipping business, I know a secret about the federal government’s relationship with Amazon: The U.S. Postal Service delivers the company’s boxes well below its own costs. Like an accelerant added to a fire, this subsidy is speeding up the collapse of traditional retailers in the U.S. and providing an unfair advantage for Amazon.

This arrangement is an underappreciated accident of history. The post office has long had a legal monopoly to deliver first-class mail, or nonurgent letters. The exclusivity comes with a universal-service obligation—to provide for all Americans at uniform price and quality. This communication service helps knit this vast country together, and it’s the why the Postal Service exists.

In 2001 the quantity of first-class mail in the U.S. began to decline thanks to the internet. Today it is down 40% from its peak levels, according to Postal Service data. But though there are fewer letters to put into each mailbox, the Postal Service still visits 150 million residences and businesses daily. With less traditional mail to deliver, the service has filled its spare capacity by delivering more boxes.

Other companies, such as UPS and FedEx , compete with the Postal Service to deliver packages. Lawmakers, to their credit, wanted a level playing field between the post office and its private competitors. The 2006 Postal Accountability and Enhancement Act made it illegal for the Postal Service to price parcel delivery below its cost.

But with a networked business using shared buildings and employees, calculating cost can be devilishly subjective. When our postal worker delivers 10 letters and one box to our home, how should we allocate the cost of her time, her truck, and the sorting network and systems that support her? What if the letter-to-box ratio changes?

In 2007 the Postal Service and its regulator determined that, at a minimum, 5.5% of the agency’s fixed costs must be allocated to packages and similar products. A decade later, around 25% of its revenue comes from packages, but their share of fixed costs has not kept pace. First-class mail effectively subsidizes the national network, and the packages get a free ride. An April analysis fromCitigroup estimates that if costs were fairly allocated, on average parcels would cost $1.46 more to deliver. It is as if every Amazon box comes with a dollar or two stapled to the packing slip—a gift card from Uncle Sam.

Amazon is big enough to take full advantage of “postal injection,” and that has tipped the scales in the internet giant’s favor. Select high-volume shippers are able to drop off presorted packages at the local Postal Service depot for “last mile” delivery at cut-rate prices. With high volumes and warehouses near the local depots, Amazon enjoys low rates unavailable to its competitors. My analysis of available data suggests that around two-thirds of Amazon’s domestic deliveries are made by the Postal Service. It’s as if Amazon gets a subsidized space on every mail truck.

I do not know which stores in my neighborhood will be gone five years from now, but I am certain my household will continue to receive numerous boxes from Amazon. I also believe that society would be better off if competing retailers, online or brick-and-mortar, continue to thrive. Congress should demand the enforcement of the Postal Accountability and Enhancement Act, and the Postal Service needs to stop picking winners and losers in the retail world. The federal government has had its thumb on the competitive scale for far too long.

Mr. Sandbulte is co-president of Greenhaven Associates, a money-management firm that owns FedEx common stock.

[Auburn85 436]

https://www.usatoday.com/story/money/2017/12/29/trump-says-u-s-postal-service-should-charge-amazon-much-more-shipping/989942001/

 

President Trump ramped up his criticism of Amazon Friday, tweeting that the e-commerce giant should be socked with sharply higher shipping charges by the U.S. Postal Service.

"Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer? Should be charging MUCH MORE!" Trump said in the early-morning tweet during a Christmas season vacation at his Mar-a-Lago estate in Florida.

 

Donald J. Trump

 

✔@realDonaldTrump

 

Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer? Should be charging MUCH MORE!

7:04 AM - Dec 29, 2017

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The tweet is the latest in a series of critical tweets that Trump has directed at Amazon, whose founder and CEO, Jeff Bezos, also owns The Washington Post — the national news organization that has broken many news stories that spotlighted shortcomings involving the president and his White House administration.

For instance, Trump in July tweeted that the "Amazon Washington Post" fabricated information about his decision to end U.S. payments to rebels fighting the forces of Syrian President Bashar Assad.

 

Donald J. Trump

 

✔@realDonaldTrump

 

The Amazon Washington Post fabricated the facts on my ending massive, dangerous, and wasteful payments to Syrian rebels fighting Assad.....

8:23 PM - Jul 24, 2017

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That same day, Trump similarly tweeted many Washington Post news stories about him were "fake news."

 

Donald J. Trump

 

✔@realDonaldTrump

 

So many stories about me in the @washingtonpost are Fake News. They are as bad as ratings challenged @CNN. Lobbyist for Amazon and taxes?

8:28 PM - Jul 24, 2017

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Trump's new tweet on Friday at least temporarily shifted Amazon shares from positive to negative. The company's stock finished the day 1.4% lower at $1,169.47 a share but ended up more than 55% for the year.

Representatives of Amazon and the postal service did not immediately respond to emails seeking comment.

After reporting a surplus in 2006, the postal service has reported net losses during each of the 11 succeeding fiscal years. The 2017 net loss totaled $2.7 billion, the postal service reported in November. Most of the losses resulted from changes in interest rates, "outside of management's control" that reduced workers' compensation costs.

Earlier in December, the Postal Regulatory Authority moved to stem the red ink by allowing the postal service to raise the cost of a first-class stamp, currently 49 cents, by 2% above the rate of inflation. The move eventually is expected to raise shipping costs for Amazon and other companies, as well as for magazines, prescriptions, and other mail.

The postal service's data shows its volume of first-class single-piece mail, consisting of bill payments, letters, personal correspondence, and cards, totaled 19.7 billion last year. That represents a 4.8% decline from 2015, and less than half of the 42.3 billion volume handled in 2007.

However, total shipping/package volume rose to 5.2 billion last year, a nearly 16% increase over 2015, the postal service data shows.

The Postal Accountability and Enforcement Act enacted in 2006 blocks the postal service from using its essential monopoly over letter deliveries to subsidize lower costs for package shipping that could hurt private shippers like UPS and FedEx.

File photo taken in 2014 shows Amazon CEO Jeff Bezos demonstrating the company's Fire Phone, in Seattle. (Photo: Ted S. Warren, AP)

 

In contrast to the postal service, Seattle-based Amazon has become a global retail giant, shipping books, clothing and a broad array of other products to consumers who increasingly prefer to do their shopping online. Amazon's stock for the first time topped $1,000 a share in April, and have continued to climb.

Shipping expenses represent a major expense for Amazon. Although the company sends some deliveries through the U.S. Postal Service, it also relies on UPS and Federal Express for shipping.

FedEx and UPS shares fell in October amid news reports that Amazon was testing its own delivery system to whisk packages from the company's warehouses to consumers' homes.

 

[AU64 10,122]

JMO but Trump is correct to question the preferred rates that USPS gives Amazon but I'm afraid this will be come a political issue and folks will take sides based on how they feel about DT rather than considering that taxpayers are subsidizing Amazon to the detriment of their local business community.         

And another opinion not based on any specific facts .....just surmising.....but I'm thinking that USPS became concerned that it would be out of business at some point in the future that it could project because of the declining volume of mail and went looking for something that would allow it to maintain it's bureaucracy.   And knowing that deficits get made up by the government , they decided they could even take business at a loss in order to maintain volume, maintain employment levels and make an effort at covering a generous but underfunded pension plan.      Thus,  it can "afford" to lose $2-$5 B  each year,  though It would be hard to figure how much of that loss is Amazon related I guess.   This is a good deal for Amazon of course because UPS and Fed Ex would have to charge rates that allow it to make a profit, not having the government to bail them out. 

So....I'm a big Amazon shopper and why not when most of the stuff I buy is delivered to my doorstep with free shipping.  

[TexasTiger 14,070]

12 minutes ago, AU64 said:

JMO but Trump is correct to question the preferred rates that USPS gives Amazon but I'm afraid this will be come a political issue and folks will take sides based on how they feel about DT rather than considering that taxpayers are subsidizing Amazon to the detriment of their local business community.         

And another opinion not based on any specific facts .....just surmising.....but I'm thinking that USPS became concerned that it would be out of business at some point in the future that it could project because of the declining volume of mail and went looking for something that would allow it to maintain it's bureaucracy.   And knowing that deficits get made up by the government , they decided they could even take business at a loss in order to maintain volume, maintain employment levels and make an effort at covering a generous but underfunded pension plan.      Thus,  it can "afford" to lose $2-$5 B  each year,  though It would be hard to figure how much of that loss is Amazon related I guess.   This is a good deal for Amazon of course because UPS and Fed Ex would have to charge rates that allow it to make a profit, not having the government to bail them out. 

So....I'm a big Amazon shopper and why not when most of the stuff I buy is delivered to my doorstep with free shipping.  

Trump's reasoning is all about being angry that the WA Post reports things he doesn't like. It's always about the narcissist.

[AU64 10,122]

11 minutes ago, TexasTiger said:

Trump's reasoning is all about being angry that the WA Post reports things he doesn't like. It's always about the narcissist.

So he's not right? dd

Not defending DT's style or anything else...just noting in response to the OP that I agree on the concern about Amazon's favorable position with USPS and how USPS is competing unfairly with UPS and Fed Ex....

No matter what DT's reason....the point is reasonable...but your response is what I was talking about.....immediately went to who he is and not the point of the comment. 

[TexasTiger 14,070]

12 minutes ago, AU64 said:

So he's not right? dd

Not defending DT's style or anything else...just noting in response to the OP that I agree on the concern about Amazon's favorable position with USPS and how USPS is competing unfairly with UPS and Fed Ex....

No matter what DT's reason....the point is reasonable...but your response is what I was talking about.....immediately went to who he is and not the point of the comment. 

I'm not contributing to the myth that Trump is framing any issue because he's thought it through. If you want to raise an issue about Amazon, fine. I'm sure you've given it more thought.

[TexasTiger 14,070]

32 minutes ago, AU64 said:

So he's not right? dd

Not defending DT's style or anything else...just noting in response to the OP that I agree on the concern about Amazon's favorable position with USPS and how USPS is competing unfairly with UPS and Fed Ex....

No matter what DT's reason....the point is reasonable...but your response is what I was talking about.....immediately went to who he is and not the point of the comment. 

Here's what you either miss or don't care about. Trump's not a just a right wing media personality.

 

 

Richard W. Painter

 

@RWPUSA

 

 

This has nothing to do with the USPS and everything to do with Trump’s anger at Jeff Bezos and the Washington Post. Abuse of power yet again.

Donald J. Trump

 

@realDonaldTrump

Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer? Should be charging MUCH MORE!

6:03 PM · Dec 29, 2017

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[AU64 10,122]

The OP was about why Amazon got a special deal from USPS....not about DT......I wanted to talk about that issue....not DT but the discussion immediately turned to the political side of things and DT's motives.....and not the issue which was pretty well spelled out in the WSJ article.  

I don't care what DT's motives are in this case....., but I do think (and have thought for a while) that USPS should be reformed and enforcement of pertinent law would be a good place to start. 

[TexasTiger 14,070]

9 minutes ago, AU64 said:

The OP was about why Amazon got a special deal from USPS....not about DT......I wanted to talk about that issue....not DT but the discussion immediately turned to the political side of things and DT's motives.....and not the issue which was pretty well spelled out in the WSJ article.  

I don't care what DT's motives are in this case....., but I do think (and have thought for a while) that USPS should be reformed and enforcement of pertinent law would be a good place to start. 

On your first point, fair enough. My mistake.

On your second, you're saying you don't care what the President's motives are. I think that pinpoints the biggest disconnect we have.

[AU64 10,122]

1 minute ago, TexasTiger said:

On your first point, fair enough. My mistake.

On your second, you're saying you don't care what the President's motives are. I think that pinpoints the biggest disconnect we have.

Gosh.....does anyone really expect people in DC to have pure motives for the stuff they propose?    Every president has a constituency and is speaking to them.....we had 8 years of it with Obama.....pandering to his supporters.....and Obama's famous "punish your enemies"  comment was.  That's politics after all.  In this case, a legitimate point has been raised....not by DT as you point out...but he's grabbed onto it which is fine with me. ....but if Chuck Schumer had grabbed onto it I would be just as happy. 

[SaltyTiger 8,526]

1 hour ago, TexasTiger said:

Trump's reasoning is all about being angry that the WA Post reports things he doesn't like. It's always about the narcissist.

We understand that Tex. Can not tell you the above is wrong. 

Side note, would love to see a little rise in traditional mail (letter). Means a lot to to the recipient. I do it from time to time and get one every now and then.

Wish it would become a regular again. 

[TexasTiger 14,070]

3 hours ago, AU64 said:

Gosh.....does anyone really expect people in DC to have pure motives for the stuff they propose?    Every president has a constituency and is speaking to them.....we had 8 years of it with Obama.....pandering to his supporters.....and Obama's famous "punish your enemies"  comment was.  That's politics after all.  In this case, a legitimate point has been raised....not by DT as you point out...but he's grabbed onto it which is fine with me. ....but if Chuck Schumer had grabbed onto it I would be just as happy. 

This has nothing to do with Trump's constituents. It's purely personal, as is everything with him.

You mischaracterize Obama's comment by claiming an analogy here. Obama was talking to citizens that don't vote, thus rewarding those who don't support their interest:

https://www.cbsnews.com/news/obama-explains-his-remark-about-punishing-enemies/

This is a President abusing his power to damage those that engage in the First Amendment activity of a free press. Do you really not see the distinction?

[Brad_ATX 13,654]

On the main topic, this is just a stupid thing to say by POTUS.  If USPS were to make it more expensive for Amazon to ship, then the customer will end up taking the hit by paying higher prices via shipping costs or higher Prime fees.  Amazon isn't giving up their profit margins anytime soon.  There's a serious lack of thought in that tweet by Trump when it comes to the Average American.

[AU64 10,122]

Brad..your view on the subsidy could not be more off.    Under that view the government should subsidize all internet merchants, not just just Amazon.  l am hoping you were making a joke and don't actually believe it I good for the average American.....for those who don't shop Amazon to help pay shipping costs for Amazon customers..  If so, why just Amazon. ?

Quote

 

 

[TexasTiger 14,070]

Perhaps Amazon should pay more. But they do already lose 7 billion a year on shipping and at a certain cost point probably take over most shipping themselves and then undercut every other shipping business since they can afford to lose money doing what others primary business is. It's a issue for serious internal discussion-- not tweets designed to bully and effect stock prices.

[AU64 10,122]

1 hour ago, TexasTiger said:

Perhaps Amazon should pay more. But they do already lose 7 billion a year on shipping and at a certain cost point probably take over most shipping themselves and then undercut every other shipping business since they can afford to lose money doing what others primary business is. It's a issue for serious internal discussion-- not tweets designed to bully and effect stock prices.

Don't care how much they are losing in shipping.....good business says you don't deliberately take business at a loss....maybe short term but this long term strategy has monopolistic overtones......driving the rest of the competition out of business.   DT did not originate this discussion....just latched onto it and whether for personal reasons or not.....it's still a good argument.....the USPS should not be contracting for business at a loss.      If someday Amazon decides to do its own delivery, good for them...and then they will have to pay what it costs them....without a subsidy by the American tax payer. 

If the purpose of the OP was to engage in another slamfest about DT, then the title should have indicated that instead of the false premise that this discussion would be about the fairness of USPS pricing and how it aids one major company in a commercial battle with others.   No matter what the subject, some folks can manage to shift the discussion to what an a** DT is....I accept that....so it's not necessary for every topic to deteriorate into some way to criticize him....and use that as the basis for objecting to some policy or view that he has.    How about working on the message, not the messenger. 

As for Jeff and his first amendment rights....how about talking about the ethics of a multi-billionaire hiding behind the first amendment to carry out a personal battle with DT....you do accept that it is personal both ways.....and also hoping some folks will take some interest in protecting the first amendment rights of the Koch brothers too. 

[TexasTiger 14,070]

1 hour ago, AU64 said:

Don't care how much they are losing in shipping.....good business says you don't deliberately take business at a loss....maybe short term but this long term strategy has monopolistic overtones......driving the rest of the competition out of business.   DT did not originate this discussion....just latched onto it and whether for personal reasons or not.....it's still a good argument.....the USPS should not be contracting for business at a loss.      If someday Amazon decides to do its own delivery, good for them...and then they will have to pay what it costs them....without a subsidy by the American tax payer. 

If the purpose of the OP was to engage in another slamfest about DT, then the title should have indicated that instead of the false premise that this discussion would be about the fairness of USPS pricing and how it aids one major company in a commercial battle with others.   No matter what the subject, some folks can manage to shift the discussion to what an a** DT is....I accept that....so it's not necessary for every topic to deteriorate into some way to criticize him....and use that as the basis for objecting to some policy or view that he has.    How about working on the message, not the messenger. 

As for Jeff and his first amendment rights....how about talking about the ethics of a multi-billionaire hiding behind the first amendment to carry out a personal battle with DT....you do accept that it is personal both ways.....and also hoping some folks will take some interest in protecting the first amendment rights of the Koch brothers too. 

He injects himself. Blame everyone else if you want, since you have trouble holding him accountable for anything.

[Brad_ATX 13,654]

4 hours ago, AU64 said:

Brad..your view on the subsidy could not be more off.    Under that view the government should subsidize all internet merchants, not just just Amazon.  l am hoping you were making a joke and don't actually believe it I good for the average American.....for those who don't shop Amazon to help pay shipping costs for Amazon customers..  If so, why just Amazon. ?

 

Why does Amazon have to ship USPS?  USPS is making a choice, in order to be relevant based on their current model, to be the primary for Amazon.  That's a choice that can be changed.  The government isn't subsidizing Amazon.  It's subsidizing USPS and then the people that run USPS made a decision to cut a sweetheart deal with Amazon because USPS was losing too much business.  That's actually a smart business by Amazon to take advantage of a weak position by USPS (something Trump would do as a smart businessman).

But let's say subsidies go away.  If you think prices and fees would stay the same for end user consumers after shipping suddenly got more expensive for Amazon, then I've got a deal some oceanfront property in Wyoming for you.  And the average American who uses Amazon would be pissed off because they only care about what they pay now.  So yes, in my view, Trump is advocating for a price increase with that tweet.

[homersapien 12,172]

My understanding was the USPS made money in this arrangement.

Is the argument they aren't making enough profit from it?

[homersapien 12,172]

18 hours ago, AU64 said:

JMO but Trump is correct to question the preferred rates that USPS gives Amazon but I'm afraid this will be come a political issue and folks will take sides based on how they feel about DT rather than considering that taxpayers are subsidizing Amazon to the detriment of their local business community.  

Did you read Trump's tweets?  Trump is the one who is making this a political issue.   

You bemoan all the excessive political criticism (in your mind) directed at him, it's Trump who is creating the furor in the first place.  It's quite deliberate on his part.  It's the "reality show defense". 

[Grumps 3,706]

21 hours ago, TexasTiger said:

Trump's reasoning is all about being angry that the WA Post reports things he doesn't like. It's always about the narcissist.

So if he asks a good question for a bad reason then does that make the question bad?

[Grumps 3,706]

13 hours ago, Brad_ATX said:

On the main topic, this is just a stupid thing to say by POTUS.  If USPS were to make it more expensive for Amazon to ship, then the customer will end up taking the hit by paying higher prices via shipping costs or higher Prime fees.  Amazon isn't giving up their profit margins anytime soon.  There's a serious lack of thought in that tweet by Trump when it comes to the Average American.

I agree with AU64 that you don't really believe what you posted.

[TexasTiger 14,070]

45 minutes ago, Grumps said:

So if he asks a good question for a bad reason then does that make the question bad?

He didn't ask a question.

[Brad_ATX 13,654]

1 hour ago, Grumps said:

I agree with AU64 that you don't really believe what you posted.

Yeah, I do.  It's simple, basic math and I'm a man of my word.  If I don't believe it or am typing a joke, I make sure to put "sarcasm" in there.  Also, read my follow up post in this thread.  It goes further into what I'm talking about.

[wdefromtx 3,494]

I'd care more about the subsidy given to Chinese companies to ship smaller items to the US practically for free than Amazon's contract with the USPS. They make it seem as if Amazon is only using USPS to ship things. I'd say more of mine comes UPS or FedEx. 

 

I suspect there is a select few USPS people or someone in the oversight committee that has a significant under the table "share" in Amazon. Business as usual in DC. LOL