For every Amazon package the USPS delivers...

[Mike Mercury]

it loses $1.46


https://www.washingtonexaminer.com/for-every-amazon-package-it-delivers-the-postal-service-loses-146

An old salesman joke: A salesman says, "We sell below cost." A customer asks how he can do that. "Simple," he says. "We buy below cost."

For a day or so last week, Jeff Bezos passed Bill Gates as the richest man in the world. And that's pretty much how he did it.

Bezos runs Amazon, which is primarily a shipping business. It relies on the U.S. Postal Service to deliver two-thirds of its packages. In many places now, it locates a depot near a post office, presorts the packages, and delivers them to the post office. The Postal Service, which has a monopoly on last-mile delivery, does the rest.

The Postal Service is happy because it can report healthy increases in sales in the package delivery department. Postal employees are happy because it means work seven days a week — the Postal Service operates on Sundays almost solely to deliver for Amazon.

And Amazon is happy because it has a deal that takes advantage of a loophole in the law that gives it a taxpayer-subsidized deal none of its competitors could get or match.

That's how it is that, according to a recent piece in the Wall Street Journal, "The U.S. Postal Service delivers the company's boxes well below its own costs."

Bezos can sell shipping below cost because he buys it below cost. He buys below cost because of what the Journal piece termed "an unappreciated accident of history."

The Postal Service has a legal monopoly to deliver first-class mail and non-urgent letters. It is the only entity that can put something into a mailbox or through a mail slot. It is legally obliged to provide the service at the same level and price nationwide. That means, even with mail volume down 40 percent since 2006, the Postal Service still must visit 155 million mailboxes every day.

Since 2007, the Postal Service has been required to allocate 5.5 percent of its fixed costs to package delivery and to incorporate that into its pricing. That figure made sense then, but today, 25 percent of the Postal Service's business is package delivery. And thanks to features of the Amazon deal – such as Sunday delivery, grocery delivery, even delivery from fish markets to local restaurants – the expenses have climbed.

In fact, they've climbed so much, according to a recent analysis by Citigroup, that the Postal Service should be charging Amazon $1.46 more per package than the $2 or so it does now. "Amazon now enjoys low rates unavailable to its competitors," the Journal story said. "It's as if Amazon gets a subsidized space on every mail truck."

It's not just the free ride in the truck. It's the $200 million three years ago to furnish carriers with 270,000 Internet-connected handheld scanners needed for real-time package tracking. It's the $5 billion or more to replace the Postal Service's 190,000 delivery vehicles with new ones better equipped to handle packages.

The Postal Service has followed this formula to $60 billion in losses since 2007. It expects to lose about $6 billion more this year. But first-class mail volume is down, junk mail is about the same, packages continue to grow 8 percent or so per year, and Postmaster General Megan Brennan's position is that "we're obviously looking to get additional customers who are interested in that type of customized delivery."

http://savethepostoffice.com/wp-content/uploads/amazon_usps_sunday_delivery_0.jpg

The Postal Service has made significant gains in automation and other cost-cutting moves. But the deals it is operating under are unsustainable. It's about selling something over and over and over again to your biggest customer — who also is one of your biggest competitors in spaces such as same-day delivery — for $2 when you should be charging 75 percent more.

[snide]

Government at work. :doh:

[VITE1]

The USPS worked well until the Employees were allowed to unionize and the politicians and liberal idiots turned it into a jobs program instead of a service.

[FasterTraffic]

The USPS worked well until the Employees were allowed to unionize and the politicians and liberal idiots turned it into a jobs program instead of a service.

It's not all Amazon's fault...

The United States Postal Service’s financial troubles have been well publicized in recent years. The worst of it came in 2012, when the USPS lost a whopping $15.9 billion dollars, followed by $4.8 billion and $5.3 billion in 2013 and 2014, respectively.

Post office officials have often attributed the losses to the decline in demand for first class mail in favor of more efficient modes of communication, and congressional mandates that the USPS do things like deliver mail on Saturdays and to unprofitable parts of the country. In fact, the USPS claims that if it weren’t for such requirements, it would more or less break even.

But as Robert Shapiro—former Treasury undersecretary and chairman of the economic consultancy Sonecon—points out in a new analysis, American taxpayers subsidize the USPS at a rate that surpasses the costs associated with any Congressional mandate. He estimates that, all told, the subsidies and legal monopolies that Congress bestows upon the post office is worth $18 billion annually. These include:

Laws that bar any other shipping service from delivering mail and packages directly to residential and business mailboxes. Shapiro estimates that this gives the Post Office a $14 billion annual boost, more than three times what the Postal Regulatory Commission estimates it to be. Shapiro argues that the PRC’s analysis doesn’t take into account the productivity gains that the Post Office would be forced to make if it really had to compete for mailbox delivery. He points out that productivity at USPS has only grown by 0.7% per year versus 2.5% for its competition.

Tax breaks. The Post Office is exempt from state and local property and real estate taxes, along with other burdens like tolls, vehicle registration fees, and parking tickets. These exemptions save the USPS $2.18 billion per year.

Cheap borrowing. The Postal Service, writes Shapiro, “can borrow from the U.S. Treasury through the Federal Financing Bank, at highly-subsidized interest rates.” It currently borrows the legal limit of $15.2 billion at a rate of 1.2%. Without this access, it would be paying somewhere between $415 million and $490 million per year more in interest.

Finally, Shapiro points out that the USPS pays its workers salaries and benefits far above the rates paid to similar workers in the private sector. Labor accounted for 78% of the organization’s costs in 2014, “with about 89% of those costs involving employees represented by collective bargaining.” These higher labor costs, plus the absence of a need to innovate due to government-granted monopolies, has freed the USPS from $20 billion in labor and productivity costs per year, Shapiro estimates. “While we do not technically count this as a subsidy,” he writes, it represents an economic burden on others arising directly from USPS’s monopoly position.” Postage, for instance, would likely be cheaper for everyone if the organization were subject to the same competitive pressures as private firms.

[69camfrk]

Government at work. :doh:

Only organization that I've ever seen that would spend $10 million dollars just to save a dollar. Will never make sense.

[mrvette]

Been tooooo many years, that I lived in a normal residence, parked my car.....but the PO did not deliver mail to that location.....I remember going to some PO sub location in a store and picking up my mail there.....way in hell tooooooooo long ago to recaullll awl the deetails.....


:issues:

[Bill]

Been tooooo many years, that I lived in a normal residence, parked my car.....but the PO did not deliver mail to that location.....I remember going to some PO sub location in a store and picking up my mail there.....way in hell tooooooooo long ago to recaullll awl the deetails.....


:issues:

I have a friend that used to live in a tiny town called Little River, TX. The Post Office wouldn't deliver mail to his house because he lived too close to the Post Office, so they made him rent a P.O. Box.

Irony: His next door neighbor was.....the mailman.

[Grey Ghost]

I must be the only soul on earth to have never ordered a thing from Amazon.

[markids77]

I must be the only soul on earth to have never ordered a thing from Amazon.

Nope, but I bet we are a rare breed.:seasix: