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WSJ Op-Ed: The Post Office Is Delivering Amazon's Packages Below Cost (zerohedge.com)
schwit1 shares a pay-walled op-ed from the Wall Street Journal (also excerpted at the URL below):
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... First-class mail effectively subsidizes the national network, and the packages get a free ride. An April analysis from Citigroup estimates that if costs were fairly allocated, on average parcels would cost $1.46 more to deliver...
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... 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.
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... 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.
Same thing goes for all those packages from China. the USPS should at least break even not favor some over others!
The executives of the US Post Office should be charged for violating the Postal Accountability and Enhancement Act.There needs to be accountability.
Doesnt sound to different to net neutrality honestly...
Most Amazon packages come through UPS or an Amazon employee. What packages does Amazon even ship using the post office?
Seems more likely that some big money decided to short AMZN when it hit $1000 and now is pushing this bogus anti-trust stories to drive down the price. Either that or Walmart is working hard to smear Amazon instead of innovating.
I got a Black Amazon Dot, which matches my vintage 2006 Black MacBook.
All of my packages from Amazon, NewEgg and eBay all are shipped by UPS or FedEx. How do you get something shipped by USPS?
All of us always support services that we do not use or rarely use. I send maybe one letter a year by snail mail. Why should I support a post office at all? The idea that first class mail supports the entire postal system is sort of warped. Sending packages already costs all of us too much money. I would hate to even know the sums that Amazon and Ebay spend on shipping. Those shipping charges are passed on to the buyers in the product costs.
Is Zerohedge (and author Tyler Durden) a site I should trust? At first glance it looks like not at all
If you can't complete with Amazon, FAIL ALREADY! We don't need no education! We sure don't need no thought control! Because, if you don't eat your meat, how can you have any pudding? How can you have any pudding if you don't eat your meat!
A lot more of my packages are being delivered by Amazon themselves, probably over 75% now. I order from Amazon at least once a week.
The important quote from the article:
An April analysis from Citigroup estimates that if costs were fairly allocated, on average parcels would cost $1.46 more to deliver.
So this has nothing to do with Amazon specifically, but with:
Mr. Sandbulte is co-president of Greenhaven Associates, a money-management firm that owns FedEx common stock.
zerohedge and schwit1 are posting this because they don't like Jeff Bezos' Washington Post. EditorDavid posted it most likely because it will bring ad money, and slashdot stopped being news for nerds a decade ago.
... the Post Office will make it up in volume.
The funny thing is that USPS doesn't deliver to my door. I have to go to the post office to pick up my mail. I got Prime thinking a Amazon would deliver to my door via UPS or FedEx. Since they deliver through USPS now, this makes Prime a bad deal for me, and I think I may cancel it soon.
(T>t && O(n)--) == sqrt(666)
It's almost as if a fedraly funded and fedraly regulated government agancy does a job better than the "free market" competition. I would have never guessed that was the case. FYI I still prefer priority mail to UPS or FedEx.
this sounds like an american problem, dont care.
It makes a big difference.
It's normal buisness to price marginal goods based on marginal costs + profit. Average cost includes sunk costs. The truck and postman are already going, not taking the UPS handoffs won't save a penny (which is what's going on, the whole 'Amazon' part is just clickbait).
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
Why does it matter that it's Amazon? Unless EVERY individual transaction is profitable, across all levels, someone will be "taxed" to pay for someone else's "subsidy." This is extremely obviously clear in the case of (relatively zero-sum) governments, but it's also the case in corporate transactions. If I lose money on a business transaction, that loss needs to be covered (subsidized) by the profitability of another transaction (tax.)
Businesses should be free to decide if they want to lose money on transactions (loss-leaders, market share grab, whatever...) but whenever a government is involved this, it becomes a bit less clear. Still, the Post Office is probably one of the best run Federal agencies, sitting on the least shaky financial ground. I'm inclined to say "Who cares? Let those running the post office decide how to run the Post Office. They're doing a pretty good job."
The feds need to pull their thumbs out of their butts and do their jobs. Turning a blind eye in this country has gotten waaaay out of hand, back when we used to actually enforce our laws, Amazon would've gotten laughed out of the building. Enough is enough.
Guess some B&M stores decided to step up their lobbying and PR efforts.
I browse on +1 so AC's need not respond, I won't see it.
Even seen Postal Trucks delivering Amazon on Sundays! And the postal service wanted to get rid of Saturday deliveries at one time due to costs....
Tax payers have been subsidizing the postal service and package delivery for many years. It has always been a bad idea. What's the difference if Amazon is now the main beneficiary, instead of Sears or any of the previous mail order businesses?
Why don't you go full on fearmonger if you are going to cite zerohedge?
Retired Green Beret Warns: "There Could Be A Nuclear Strike Against The US Coming Soon"
That was "news" from just yesterday.
Stop using zerohedge because that site is tabloid garbage.
Anons need not reply. Questions end with a question mark.
The story focuses too much on Amazon. It is a postal pricing policy that applies broadly. The fact is that if the post office has mispriced the service, it has done so for all participants, not just Amazon. This is done all too often by news outlets to pump up eyeballs on the story.
Sure, the Post Office should price its services correctly. But how do you know if it is wrong? Marginal cost is hard to estimate when you are driving the route already. And if the post office changed its pricing, it could well be that a different package last-mile business would step in. The post office is staffed with union employees, and it could be possible to beat the post office's last mile service on price if the price was raised $1.50 a package.
Wait 2 years, the current congress is a shitshow. and I am betting the "calculations" are really far off and in reality there is a "nothing to see here".
Do not look at laser with remaining good eye.
Even though the USPS is explicitly authorized by the US Constitution, Congress could authorize changes that would make it VERY profitable.
For example:
1. Eliminate Saturday delivery
2. Eliminate direct door-to-door delivery in favor of mailbox clusters
3. Eliminate the`requirement to fully prefund employee retirement health benefits
4. Eliminate subsidized rural delivery
5. Allow the shipment of alcohol and marijuana in compliance with state law
It is unlikely that Congress would do this. since there are less painful ways for them to commit suicide.
"My analysis of available data suggests that around two-thirds of Amazon's domestic deliveries are made by the Postal Service."
If your 'available data' is 6 months old, than your 'analysis' is outdated. Amazon does not sit still. This year (the last 6 months) all the deliveries to my building (44 units) have been by Amazon employed drivers. Even my hot pizza was delivered by an Amazon driver. In the past there was a mix of UPS & USPS, mostly USPS.
However you can expect USPS to continue to handle rural deliveries, and possibly at a financial loss.
...omphaloskepsis often...
Zerohedge is CNN level fake news, but it's just an associated bit of link farming. The story is in the WSJ.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
This article is intentionally misleading, because of the philosophical leanings of the Wall Street Journal.
Essentially this is standard operating procedure for high capital industries. It doesn't matter if the post office is pricing the shipping below it's cost. It only matters if it is pricing its service below its variable cost, which it is almost certainly not doing. Just as other capital intensive suppliers do, they can sell some capacity at below their actually cost as long as it is above their variable cost. What this means is that a very large volume purchaser will get steep discounts, but that money will help pay down some of the fixed cost as long as it is above the variable cost. This allows then to sell to customers that could or would not buy at the actual theoretical unit price. This is business pricing theory 101.
Actual Cost = Fixed Cost + Variable Cost
And if you aren't sure that this is correct, ask your self this question, do you think that the wall street journal gives a flying fig about traditional retailers.
Amazon is not the problem - as noted in the article EVERY parcel USPS carries is subsidized by 1st class postage.
"An April analysis from Citigroup estimates that if costs were fairly allocated, on average parcels would cost $1.46 more to deliver... "
It isn't just parcels from Amazon that are subsidized, it is also the birthday present you send your nephew or the item you bought from an eBay seller and every other package shipped via USPS.
Ken
Here's more great stories: Deus Ex Alpha Centauri: Buy Euros Now As SETI May Have Discovered Aliens"
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It all depends on where you live.
Where I live, I get about 90% USPS, 9% UPS, 1% FedEx. There is a Amazon center in Kenosha (MKE5) which most of it comes out of. If it's something a little different, it comes out of CVG. The only things I ever see come from UPS are declared hazmat (li-ion batteries) or oddly shaped things.
Also... being someone who delivers for FedEx Express (catch the coward?)... the only things we really deliver for Amazon are the things that are shipped from the other side of the country or the crap that is too big for the post office. I've delivered more rugs, mattresses, and furniture sets that I'd like to count for Amazon.
I wish Amazon would stop using us. They always slap the barcode over the seam of the box making it difficult to scan and they can't tape and package worth shit.
Sounds like an important one to government accountability, and we know that the Washington Post values government accountability...
Amazon should just buy the USPS. Then it would be run a lot more efficiently.
Zerohedge.com is a right-wing opinion wank, not a- oh. Wall Street Journal. Whom have a paywall and - right, carry on.
My wife and I run a small business (we sell a modest number of laser-cut models online). The cost of shipping our product is about 30% of our sales price - so we must work hard to minimise postage charges. USPS is vastly cheaper than UPS/FedEx/etc...and we avoid USPS "Flat Rate Shipping" because it's three times the price of doing it the traditional way. We always tell the post office desk staff "Ship the cheapest way possible" (no tracking, no insurance, no nothing) because the number of "shipping failures" is negligible and paying for these items isn't cost-effective.
But some of the ways USPS operates are ludicrous. We COULD do all of our shipping work online and just drop the packages off at the post office - but they charge MORE for doing that than handing a pile of ~100 packages to the desk clerk and waiting for them to painstakingly enter the Zip code for each one - then stick THREE labels onto each envelope and finally, use a little rubber stamp to mark them "First Class". I try to go to the post office when there isn't a long line ahead of me - but you can be 100% sure that when I'm done, a long line has built up behind me. I'd be in and out in under a minute if they didn't charge me so much for doing the work for them! But spending 40 minutes watching the desk while they do all of this is very cost-effective for me.
This is doubly stupid because our $100 label printing machine automatically looks up the Zip code we get from our customers and converts that into a kind of bar code that it prints at the bottom of every label...so a simple hand-scanner would reduce the time it takes them to enter the data considerably...and having their label printing contraption put ALL of the data onto one sticker rather than three (plus a rubber stamp) would also streamline the process immensely.
Amazon has clearly negotiated a way around these crazy rules - but small businesses can't do that. I'm quite sure that much of the $1.46 that Amazon is costing us could be eliminated by simply giving all small businesses the ability to pay online WITHOUT the huge up-charge.
www.sjbaker.org
They plan to make up for it in volume.
Government-owned business operates badly. Who could have expected that?
Anyone who knows much about the Soviet Union, for starters.
There's no time like the present. Well, the past used to be.
This is exactly why the Post Office needs to be privatized. A for-profit business wouldn't be able to survive doing this for Amazon. It would make things fairer for everyone (and probably reduce the cost of a first class postage stamp.)
"Politicians always tell the truth, when they're calling each other liars."
Corporate welfare makes a mockery of free enterprise and the last company that needs corporate welfare is Amazon. Who did they pay off to get a deal like this?