Just Amazon’s or everyone’s? The mandate to deliver to everyone everywhere can’t be cheap. You have to wonder if they ever should have privatized them at all since they’re in a kind of limbo.
If you print the labels yourself you can access a substantial discount. USPS is very open about the costs of retail shipping. You can get a discount on their website, or access larger discounts through third party websites.
Those discounts aren't even close to what large customers like Amazon are getting.
They are likely getting around 50 cents a pound (based on FBA inbound averages that they charge sellers) from UPS and FEDEX, which means in cases where they are shipping via USPS, they are getting an even lower rate.
Try printing your own label and ship a 2 lbs package an hour away for $1.
>You have to wonder if they ever should have privatized them at all since they’re in a kind of limbo.
There are already private options, USPS just isn't correctly funded and government keeps trying to gut it. The requirement to pre-fund pensions and retiree healthcare so far in the future doesn't allow them to invest money into new research and development.
Well, first of all you seem to be presenting this as coming from multiple sources which would make it more authoritative. However, the only source is Citibank, correct?
Without looking into it further, I tend to be immediately skeptical because (a) the figure of $1.46 sounds inappropriately precise and (b) the Post Office has publicly stated that they are required by law to cover their costs, and are audited to that end.
To me, the innapropriately precise number doesn't mean anything except that when you are working with estimates, you should not round your final answer any more than necessary.
If I estimate cost A is $1 and cost B is $2, I'm going to say that my estimated average cost is $1.50, not $2
As far as required profitability, as any non gaap accounting numbers can attest, you can make anything look profitable if you meddle with the numbers long enough.
Well, inappropriate precision just highlights the question of what the uncertainty is. If it's plus or minus $5, that's different than if it's plus or minus $0.50. That's assuming the analysis is otherwise valid.
Secondly, I don't see how "non gaap accounting" is relevant when the claim is that they are audited by an independent entity using standards which are not under their control.
"By law our competitive package products, including those that we deliver for Amazon, must cover their costs. Our regulator, the Postal Regulatory Commission (PRC), looks carefully at this question every year and has determined that they do."
It isn't so easy to determine if costs are covered.
Suppose you have a store that sells rutabagas and phonebooks. You buy at wholesale prices of $1 per rutabaga and $2 per phonebook. You need a markup to cover the cost of rent, bond payments, volcano insurance, and heating oil. You could mark up each product by 50% or by $0.75 or whatever. You can do the same percentage, the same per-item amount of dollars, the same amount of dollars for the total of all items sold, or something else. If you sell rutabagas for $1 each and phonebooks for $5 each, does that count? You didn't exactly take a loss on the rutabagas, but on the other hand they didn't contribute toward paying for that volcano insurance. Maybe selling the rutabagas cheaply will bring in more customers, many of whom will buy overpriced phonebooks. If a rutabaga sold at $0.79 causes an average of 3.14 phonebooks at $8.05 to be sold, does that rutabaga cover costs?
"It isn't so easy to determine if costs are covered."
I suppose I agree that it's not easy to attribute costs, but if this is a defense of Citibank or Trump's claims about Amazon, it seems like special pleading. If it isn't so easy to determine if costs are covered, and if the Post Office is not giving them any deal other major shippers don't get, and they are audited according to some standards that people defined as acceptable, then it seems as though people should stop claiming the USPS is subsidizing Amazon.
Thank you for these. My main takeaway from it is that the (growing) package business is subsidizing the (shrinking) regular-mail business.
Also, it's mostly UPS and Fedex doing the most whining. It reminds me of the Far Side cartoon with the dog outside the window urging the sleeping owner "Puuut the caaaat ouuuuut".
Incidentally, that second article wasn't paywalled for me.
I am in no way saying it has to come from multiple sources. Evidence...no matter how strong or weak, only needs to be legitimate.
The whole article awkwardly stresses twice that the argument is without evidence. Which is simply not true.
How about the fact Amazon after deductions has paid ZERO federal taxes? Despite billions of dollars in US sales.
I pulled those sources up with a quick Google search since I remember reading about it. For a journalist to say or imply the Wall Street Journal published something, and Citibank published something...without evidence is scandalous and false. Trump is merely parroting the news.
Says much more about the integrity of the article more than anything else.
If Amazon retail is barely profitable when using traditional delivery networks, and their own Flex offering is a dumpster fire due to abusing independent contractors, they’re going to have to burn way more cash to compete at the last mile.
It's not the invisible hand when the USPS loses $1.50 per shipment at the benefit of Amazon while USPS -- a federal service to all Americans -- struggles to stay afloat.
That's how bulk shipping works. If you are a bulk mailer like, a cc company for example, then you would presort your mail to 5/9/11 digit and you get presorted discount from USPS even for first class mail.
So a postage stamp that costs you .50, costs a big mailer, may be, .40 depending on the sorting level and amount of mail.
So where are the market forces that make USPS become more efficient and allow it to be competent?
Isn't it fundamental proposition of the Republican party - "Small government"
I am genuinely curious, who put a gun to USPS head and asked it to lose money on every package delivered?
They could have increased their prices. But that would mean losing business from Amazon, which, in a "small government" system go to more efficient and competitive players.
The USPS doesn't lose $1.50 per Amazon parcel. Legally, they can't price at a loss. Under the Postal Accountability and Enhancement Act of 2006 they have to charge rates that cover their costs.[0] The number you're referring to comes from an analysis that suggested USPS charges $1.46 below market rates. That's not the same as saying it's a "loss" (as most people understand it--i..e, it costs you more than you make) or even a subsidy. The USPS and the independent Postal Regulatory Commission.
The USPS profits from these parcels. It's a smaller profit, yes, but that's because the deal involves trading a greater profit for guaranteed, predictable number of future parcels they'd otherwise likely not get. Such deals are common in the shipping industry.
Far from making it harder for the USPS to stay afloat, their deal with Amazon and e-commerce shipping in general are the main reasons why they've been able to survive the decline in bulk mail and the onerous regulations (retirement prefunding requirements, etc.) that have drastically impaired the USPS.
> onerous regulations (retirement prefunding requirements, etc.) that have drastically impaired the USPS.
Onerous regulations? They are just being asked to act like every other company. If you want to offer pensions, fine, but you have to have a funded pension plan.
Companies and government agencies generally don't prefund retirement healthcare benefits to 100%. Rapid USPS funding requirements starting 2007 were frontloaded for the first ten years. And while there are arguments for prefunding versus a pay-as-you-go approach with current retirees, it's a balance between short-term liquidity and long-term benefits.[0] Per the Postmaster General's testimony in 2017:
> Our significant financial losses are due in large part to the legally mandated RHB prefunding requirement. Such a requirement to prefund retiree health care obligations is not imposed on most other federal entities or private-sector businesses that offer retiree health benefits, let alone on an accelerated basis. The Postal Service’s funded level for RHB far exceeds that of civilian federal government entities, state governments, and those private sector companies that offer retiree health benefits at all.[1]
Changes in mailing behavior were worse than the USPS expected in 2006, and RHBF payments became much more of a problem than was initially expected. It's not so much that prefunding is bad per se, but that the requirements as enacted limited the USPS's liquidity and options. The USPS IG[2] also put out a white paper[3] on the subject that argues some of the assumptions behind the funding requirements. You'll find a range of arguments out there from suggesting that the only problem for the USPS is the impact of the RHBF payment requirements to them being just a symptom of broader problems, but but the GAO report on the subject is a pretty even-handed take on the subject.[4]
With private companies, it makes great sense for stockholders or corporate executives trying to extract as much current value from the company as is legally allowed (or can get away with). Future value is of much less consequence to them. That's exactly why they have done so historically and continue to do so.
With government agencies, the incentive is similar, in that prefunding means they have to public funds today. It's much more attractive to leave the problem for future politicians, literally decades later.
However, if the USPS actually has to prefund its retirement plans, then it's fair to say that's an onerous regulation, compared with private industry, which doesn't, no matter how many "should"s you throw at them.
I don't think it's sufficient to say "who cares about X" where X is what the President is attacking at the moment, because the consequences may be unforeseen, and go beyond the specific target. His goals are also unclear, which sows instability and uncertainty.
In this case, people reasonably suspect that part of the motivation is his dislike for the WaPo and Bezos, and that he wants to attack Amazon due to its association.
However, part of the process seems to be spreading non-factual information about the USPS. It's got to be nerve-wracking for the employees, thinking that this might be an indicator that the federal government is working on new ways to undermine them while pretending to "help".
Then too, Bezos is not the only owner of a newspaper which has or might criticize the President, so people are justifiably concerned about the implications of this vendetta for a free press.
All this is separate from whether the welfare of Amazon is particularly vital to a person.
The article makes clear that the analysis and exact numbers of loss are difficult to calculate. So there is in most cases an estimation.
The author stated twice as fact, that there is no evidence for the USPS loosing money. Trump is pulling it out of his ... without evidence. And that it blatantly false. A simple google search pulled up that analysis by Citibank and multiple mainstream news articles. Including the WSJ.
I appreciate you providing the article. More solid that the interpretation of news.
On page 4 it says they are losing money and basically subsidizing the shipping or parcels?
"We
contend that this floor for competitive (parcel) products has been maintained at
artificially low levels, creating large-scale systemic economic inefficiencies
engendered by what is effectively a government-enforced taxpayer subsidization of
the USPS’ irrational pricing."
Again, even if the whole argument is weak, it was published with multiple news sources, and comes up with a Citibank study with even a quick Google search....this whole article is absolute hog wash man. Dishonest.
Unless anyone wishes to completely invalidate the Citibank study and WSJ article. I've seen no opposing evidence.
The fundamental annoyance I have is not only Amazon's (apparently) preferential pricing, but the e-Packet from China pricing.
As a consumer I can see the advantage to me, but it seems wildly unfair to Mouser / Digikey and the 1000s of much smaller businesses in the USA to have to pay more to ship a small parcel from Denver CO to somewhere in CA, than an e-Packet from HongKong to e.g. Plattsburgh, NY. It has to be hurting the ability to compete of lots of US based businesses...
Exactly. I don't have the stats on packages getting shipped from China to US on dirt cheap forced upon prices but it is quite likely that they match Amazon. This is mainly because most things ship from China first and then to US domestic market.
IMO, as someone who runs a small business reliant on USPS, it's even worse than that.
Other countries like the EU and Canada like to charge an inspection fee for small packages (+ VAT)... it's usually a flat ~$15 (even if the package is worth $5). What do they do during the inspection? Calculate the VAT charge of $0.50. They don't even open the envelope.
VAT itself is bad enough... The US doesn't have VAT, and the WTO says it's illegal to put a tariff on imports to fund the US government.. but VAT, the WTO is ok with... which is an across the board tariff on every good shipping into the EU/Canada/etc. Then to tack on the "inspection fee" on top...
So not only is there a difference in shipping cost, but when it arrives at the border, their country makes it even more expensive for the customer... discouraging them from ordering from the US in the future.
> So not only is there a difference in shipping cost, but
> when it arrives at the border, their country makes it even
> more expensive for the customer... discouraging them from
> ordering from the US in the future.
Note that a customer living (let's say) in Europe is supposed to pay VAT on everything regardless of the origin, so it's not like the US company is treated differently.
In fact until recently it was the other way for online services (AWS for example) because some of them were not adding VAT, giving them an advantage to their European counterparts.
(Edit: this of course applies to final customers, for business customers it is a completely different matter).
It might not have the effect President Trump anticipated. In my area (south eastern MA) Amazon has switched to it's own delivery system for the "last mile" at least. This will only accelerate this direction until the "Drones" takeover.
47 comments
[ 4.4 ms ] story [ 114 ms ] threadI like the dream of decentralized delivery agents where no central authority can take a cut or intercede.
Edit: What the hell, it turns out amazon deliveries are government subsidized to the tune of ~$1.5/each.
They are likely getting around 50 cents a pound (based on FBA inbound averages that they charge sellers) from UPS and FEDEX, which means in cases where they are shipping via USPS, they are getting an even lower rate.
Try printing your own label and ship a 2 lbs package an hour away for $1.
There are already private options, USPS just isn't correctly funded and government keeps trying to gut it. The requirement to pre-fund pensions and retiree healthcare so far in the future doesn't allow them to invest money into new research and development.
How about this article in the Wall Street journal and the analysis done by Citibank?
https://www.wsj.com/articles/why-the-post-office-gives-amazo...
The Washington Examiner?
https://www.washingtonexaminer.com/for-every-amazon-package-...
Without looking into it further, I tend to be immediately skeptical because (a) the figure of $1.46 sounds inappropriately precise and (b) the Post Office has publicly stated that they are required by law to cover their costs, and are audited to that end.
If I estimate cost A is $1 and cost B is $2, I'm going to say that my estimated average cost is $1.50, not $2
As far as required profitability, as any non gaap accounting numbers can attest, you can make anything look profitable if you meddle with the numbers long enough.
Secondly, I don't see how "non gaap accounting" is relevant when the claim is that they are audited by an independent entity using standards which are not under their control.
Here is the link to the statement from the Post Office: http://about.usps.com/news/statements/080117.htm
"By law our competitive package products, including those that we deliver for Amazon, must cover their costs. Our regulator, the Postal Regulatory Commission (PRC), looks carefully at this question every year and has determined that they do."
Suppose you have a store that sells rutabagas and phonebooks. You buy at wholesale prices of $1 per rutabaga and $2 per phonebook. You need a markup to cover the cost of rent, bond payments, volcano insurance, and heating oil. You could mark up each product by 50% or by $0.75 or whatever. You can do the same percentage, the same per-item amount of dollars, the same amount of dollars for the total of all items sold, or something else. If you sell rutabagas for $1 each and phonebooks for $5 each, does that count? You didn't exactly take a loss on the rutabagas, but on the other hand they didn't contribute toward paying for that volcano insurance. Maybe selling the rutabagas cheaply will bring in more customers, many of whom will buy overpriced phonebooks. If a rutabaga sold at $0.79 causes an average of 3.14 phonebooks at $8.05 to be sold, does that rutabaga cover costs?
I suppose I agree that it's not easy to attribute costs, but if this is a defense of Citibank or Trump's claims about Amazon, it seems like special pleading. If it isn't so easy to determine if costs are covered, and if the Post Office is not giving them any deal other major shippers don't get, and they are audited according to some standards that people defined as acceptable, then it seems as though people should stop claiming the USPS is subsidizing Amazon.
https://www.npr.org/templates/transcript/transcript.php?stor...
It is based on an article in Business Insider (paywalled) from Josh Barro
http://www.businessinsider.com/trump-amazon-twitter-attacks-...
Also, it's mostly UPS and Fedex doing the most whining. It reminds me of the Far Side cartoon with the dog outside the window urging the sleeping owner "Puuut the caaaat ouuuuut".
Incidentally, that second article wasn't paywalled for me.
The whole article awkwardly stresses twice that the argument is without evidence. Which is simply not true.
How about the fact Amazon after deductions has paid ZERO federal taxes? Despite billions of dollars in US sales.
I pulled those sources up with a quick Google search since I remember reading about it. For a journalist to say or imply the Wall Street Journal published something, and Citibank published something...without evidence is scandalous and false. Trump is merely parroting the news.
Says much more about the integrity of the article more than anything else.
This is not a bad thing.
So a postage stamp that costs you .50, costs a big mailer, may be, .40 depending on the sorting level and amount of mail.
Isn't it fundamental proposition of the Republican party - "Small government"
I am genuinely curious, who put a gun to USPS head and asked it to lose money on every package delivered?
They could have increased their prices. But that would mean losing business from Amazon, which, in a "small government" system go to more efficient and competitive players.
The USPS profits from these parcels. It's a smaller profit, yes, but that's because the deal involves trading a greater profit for guaranteed, predictable number of future parcels they'd otherwise likely not get. Such deals are common in the shipping industry.
Far from making it harder for the USPS to stay afloat, their deal with Amazon and e-commerce shipping in general are the main reasons why they've been able to survive the decline in bulk mail and the onerous regulations (retirement prefunding requirements, etc.) that have drastically impaired the USPS.
0. http://about.usps.com/news/statements/080117.htm
Onerous regulations? They are just being asked to act like every other company. If you want to offer pensions, fine, but you have to have a funded pension plan.
> Our significant financial losses are due in large part to the legally mandated RHB prefunding requirement. Such a requirement to prefund retiree health care obligations is not imposed on most other federal entities or private-sector businesses that offer retiree health benefits, let alone on an accelerated basis. The Postal Service’s funded level for RHB far exceeds that of civilian federal government entities, state governments, and those private sector companies that offer retiree health benefits at all.[1]
Changes in mailing behavior were worse than the USPS expected in 2006, and RHBF payments became much more of a problem than was initially expected. It's not so much that prefunding is bad per se, but that the requirements as enacted limited the USPS's liquidity and options. The USPS IG[2] also put out a white paper[3] on the subject that argues some of the assumptions behind the funding requirements. You'll find a range of arguments out there from suggesting that the only problem for the USPS is the impact of the RHBF payment requirements to them being just a symptom of broader problems, but but the GAO report on the subject is a pretty even-handed take on the subject.[4]
0. https://fas.org/sgp/crs/misc/R43349.pdf
1. https://about.usps.com/news/testimony/2017/pr17_pmg0207.htm
2. https://www.uspsoig.gov/blog/be-careful-what-you-assume
3. https://www.uspsoig.gov/sites/default/files/document-library...
4. https://oversight.house.gov/wp-content/uploads/2014/03/Todis...
So? Shouldn't all retirement healthcare benefits be prefunded?
It makes no sense not to do so.
With private companies, it makes great sense for stockholders or corporate executives trying to extract as much current value from the company as is legally allowed (or can get away with). Future value is of much less consequence to them. That's exactly why they have done so historically and continue to do so.
With government agencies, the incentive is similar, in that prefunding means they have to public funds today. It's much more attractive to leave the problem for future politicians, literally decades later.
However, if the USPS actually has to prefund its retirement plans, then it's fair to say that's an onerous regulation, compared with private industry, which doesn't, no matter how many "should"s you throw at them.
In this case, people reasonably suspect that part of the motivation is his dislike for the WaPo and Bezos, and that he wants to attack Amazon due to its association.
However, part of the process seems to be spreading non-factual information about the USPS. It's got to be nerve-wracking for the employees, thinking that this might be an indicator that the federal government is working on new ways to undermine them while pretending to "help".
Then too, Bezos is not the only owner of a newspaper which has or might criticize the President, so people are justifiably concerned about the implications of this vendetta for a free press.
All this is separate from whether the welfare of Amazon is particularly vital to a person.
The author stated twice as fact, that there is no evidence for the USPS loosing money. Trump is pulling it out of his ... without evidence. And that it blatantly false. A simple google search pulled up that analysis by Citibank and multiple mainstream news articles. Including the WSJ.
I appreciate you providing the article. More solid that the interpretation of news.
On page 4 it says they are losing money and basically subsidizing the shipping or parcels?
"We contend that this floor for competitive (parcel) products has been maintained at artificially low levels, creating large-scale systemic economic inefficiencies engendered by what is effectively a government-enforced taxpayer subsidization of the USPS’ irrational pricing."
Again, even if the whole argument is weak, it was published with multiple news sources, and comes up with a Citibank study with even a quick Google search....this whole article is absolute hog wash man. Dishonest.
Unless anyone wishes to completely invalidate the Citibank study and WSJ article. I've seen no opposing evidence.
As a consumer I can see the advantage to me, but it seems wildly unfair to Mouser / Digikey and the 1000s of much smaller businesses in the USA to have to pay more to ship a small parcel from Denver CO to somewhere in CA, than an e-Packet from HongKong to e.g. Plattsburgh, NY. It has to be hurting the ability to compete of lots of US based businesses...
Other countries like the EU and Canada like to charge an inspection fee for small packages (+ VAT)... it's usually a flat ~$15 (even if the package is worth $5). What do they do during the inspection? Calculate the VAT charge of $0.50. They don't even open the envelope.
VAT itself is bad enough... The US doesn't have VAT, and the WTO says it's illegal to put a tariff on imports to fund the US government.. but VAT, the WTO is ok with... which is an across the board tariff on every good shipping into the EU/Canada/etc. Then to tack on the "inspection fee" on top...
So not only is there a difference in shipping cost, but when it arrives at the border, their country makes it even more expensive for the customer... discouraging them from ordering from the US in the future.
> when it arrives at the border, their country makes it even
> more expensive for the customer... discouraging them from
> ordering from the US in the future.
Note that a customer living (let's say) in Europe is supposed to pay VAT on everything regardless of the origin, so it's not like the US company is treated differently. In fact until recently it was the other way for online services (AWS for example) because some of them were not adding VAT, giving them an advantage to their European counterparts.
(Edit: this of course applies to final customers, for business customers it is a completely different matter).