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.

Comments

Marginal or Average cost?

[HornWumpus]

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).

Re:Marginal or Average cost?

[markus]

I wish I had moderator points today. I can't believe I had to scroll down this far for somebody to explain what's happening.

USPS could hypothetically decide to increase rates so that Amazon needed to pay average instead of amortized cost. But that would simply force Amazon to use a different shipping company. The cost for Amazon would be minimal (but of course not zero). The cost for USPS would be a large amount of lost profit. They benefit from the extra volume of mail that Amazon ships and pays for.

By charging amortized cost the USPS is doing exactly the correct thing to maximize profits -- and that's in the interest of all postal customers.

Story is a bit misleading

[Artagel]

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.

Re: Total Nonsense

[negRo_slim]

You should support it because it's hugely useful to the country overall and it's an institution enshrined in the Constitution. We're in this together irregardless of what's benefiting to just you.

Re: Same with China

[ChrisMaple]

The headline and summary are deliberately misleading. Amazon takes advantage of discounts for presorting and local delivery that any entity with enough shipment volume can also take advantage of.

Apparently, those discounts are excessive. As are the discounts for junk mail.