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WSJ Op-Ed: The Post Office Is Delivering Amazon's Packages Below Cost (zerohedge.com) 188

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.

WSJ Op-Ed: The Post Office Is Delivering Amazon's Packages Below Cost

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  • by Anonymous Coward

    Same thing goes for all those packages from China. the USPS should at least break even not favor some over others!

    • You can bet that the letter you send to Cousin Bubba in Buttfuck, Idaho, hand-delivered, doesn't cover the costs either.

    • Re:Same with China (Score:4, Insightful)

      by ShanghaiBill ( 739463 ) on Saturday July 15, 2017 @06:32PM (#54816431)

      There is no rational reason that costs should be allocated equally across all classes of mail. Delivery of first class mail is the whole point of the USPS, and it is illegal for private companies to provide an equivalent service. If not for first class mail, there would be no reason to even have a post office, since there are already private alternatives for all other classes of mail. So it makes sense for FCM to bear the brunt of infrastructure costs.

      Disclaimer: I believe that the historical need for FCM is obsolete and the USPS should be fully privatized. Packages should be delivered by UPS and FedEx, bills should go by email, bulk mail advertising should disappear forever.

      • Private alternatives for parcel delivery do not exist in all locations. If you ship a package to some rural addresses by UPS or Fedex, the final delivery is done by the USPS. No USPS, no deliveries to those locations.
        • Re: (Score:2, Troll)

          No USPS, no deliveries to those locations.

          Capitalism doesn't work that way. For remote locations there is no incentive for UPS/FedEx to provide duplicate delivery against a competitor delivering below cost (urban and suburban postal customers subsidize rural customers). But once the USPS was gone, they would offer services. These would, of course, be more expensive than USPS, because the cross subsidies would be gone. But that is a good thing. There is no rational reason that one group of citizens should subsidize the lifestyle choice of anoth

          • by fortfive ( 1582005 ) on Saturday July 15, 2017 @09:47PM (#54817239)

            >subsidize...

            You are forgetting the benefit to many for having the option of first class delivery to everyone, everywhere. E.g. if you want to correspond with (or sue) someone off the grid in bfe.

          • by Agripa ( 139780 )

            But once the USPS was gone, they would offer services.

            Yep, just like ISPs provide universal service within their territories. Err, wait ... And even with effective monoplies, ISPs cannot be bothered to do this.

            There is no rational reason that one group of citizens should subsidize the lifestyle choice of another group.

            Universal postal service was originally considered important enough for subsidize to be used to provide a flat rate service. Whether that is the case today can be debated.

      • by Agripa ( 139780 )

        I believe that the historical need for FCM is obsolete and the USPS should be fully privatized. Packages should be delivered by UPS and FedEx, bills should go by email, bulk mail advertising should disappear forever.

        The same remote areas which private delivery services rely on the USPS for delivery would not be served by private delivery service and do not have ready access to internet services. So like these areas do not have internet service now, without the UPS they would not have delivery service now.

        Whether people should be living in these areas without being required to make other arrangements for mail delivery, package delivery, and internet is an interesting question just like is universal postal service required.

  • by Anonymous Coward

    Doesnt sound to different to net neutrality honestly...

  • All of my packages from Amazon, NewEgg and eBay all are shipped by UPS or FedEx. How do you get something shipped by USPS?
    • by xlsior ( 524145 )
      Depending on where you live, Amazon will ship your package most of the way by ups, with the final delivery being made by usps.
    • How do you get something shipped by USPS?

      Check out UPS Mail Innovations. FedEx and DHL have similar offerings. The delivery is made by UPS, etc., to your local Post Office. The local Post Office delivers the package to you.

      • by Osgeld ( 1900440 )

        and in my experience it cost the same as the USPS but add's 4-5 days to delivery *fuckin mouser

        the only thing we get from amazon via the usps is if it fits in a bubbleope, so they can stop their bitching about loosing money on boxes

    • by Joshuah ( 82679 )

      With UPS the service is called SurePost and Fedex is SmartPost. Pickup is by UPS/FedEx and delivered to the local USPS where USPS does the final delivery.

    • by EvilSS ( 557649 )
      I live in the US midwest and I'd say 99% of my Amazon packages come via USPS (primary, not smartpost or such)
    • They optimize for cost, and since they're still using UPS and FedEx in many cases, that means the USPS costs are higher than these privately run companies.

      I think the article is overstating the case, accounting is a somewhat subjective endeavor, and USPS rates make profit on some runs while taking a loss on others - putting the whole Amazon.com postal load on First Class mail is a gross oversimplification.

    • The USPS is the delivery service of last resort. In some out of way places, it doesn't make sense to have more than one delivery service for the last leg of the trip. Also as a country, we've decided that it was worthwhile for our postal system to subsidize the US locations that are remote and that do not get much mail traffic at all.

      Also, the article used the fixed costs of the post office to arrive at its final figure of what a fair share would look like. But of course, those fixed costs won't change even

    • Order something small. Things that only weigh a few ounces and can be shipped in a padded envelope will go by USPS because it's cheaper for packages like that. (If you have Prime they'll only go by USPS if they can offer two day delivery from an Amazon warehouse that stocks the thing you ordered.) Paperback books, optical discs, small electronic parts... things like that.
  • 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.
    • Re: Total Nonsense (Score:5, Informative)

      by negRo_slim ( 636783 ) <mils_orgen@hotmail.com> on Saturday July 15, 2017 @06:17PM (#54816355) Homepage
      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.
    • It's worse internationally ebay and amazon rip you off left right and centre.
      I bought a couple of light stands £3 to ship to the uk £20 ship to Ireland from Amazon but anpost now have a thing called addresspal ship to stalbans and then they ship to your door 6 euro if the package will fit in their postoffice dimensions its about 4 euro for up to 20kg (40 pounds) .

      There is a pretty good chance it would be delivered by anPost anyway.

      I'm looking at getting a little item the size of a bo

    • It's "total nonsense" that first class packages should cost more... and your evidence appears to be: because you personally want to pay less...

      "I want to pay less in taxes and for government services! Also I demand better quality of service from the government! And the private sector could do it better anyway, I wonder why they're not!"
      • The notion that businesses can handle things better than the government is propaganda. Vital services that are reliable come form government. your army, police, major hospitals, ambulance services all are governmental and all are unusually reliable. I remember the horrors of private companies running ambulance services and deaths actually occurring due to the poor ambulance services. When we had the government run our ambulance services the improvement was splendid.
  • by Anonymous Coward

    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!

    • by sims 2 ( 994794 )

      That never made any sense to me.
      If you want pudding then buy pudding If you don't want meat don't buy meat.

      • Perhaps it might help to watch this movie [imdb.com]. The lyric is about an adult forcing their policies and worldview on the children...you have to eat the "main course" first before you get the desert. Most children in the UK in the 50's couldn't afford to just go buy pudding. This explains [quora.com] it a bit too.
  • by Anonymous Coward

    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.
  • by Ken_g6 ( 775014 ) on Saturday July 15, 2017 @05:02PM (#54815955) Homepage

    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.

    • by anegg ( 1390659 )

      I have almost the same problem with Amazon shipments that are sent USPS (which is a fair number of them). My neighborhood has mailbox kiosks that USPS puts mail into. If a package won't fit in the kiosk, sometimes (depending on the USPS carrier) it will end up on my doorstop. There is also a good chance that I'll just get a slip of paper in my mailbox along with a notice that the USPS carrier "attempted delivery," and I have to drive to the post office the next day to pick up my package. I hate having

      • If you live somewhere where you "go into town" to go to the post office, boy will you be in for a rude awaking when the USPS stops subsidizing your route. See, people in the cities (high pickup/delivery density) subsidize rural mail deliver because the fees are uniform.

    • by fermion ( 181285 )
      This brings up a important issue. The USPS exists to subsidize costs so that service to and from rural areas are not exponentially greater than service to dense urban areas. For a long time this facilitated communication.

      The costs can be significantly differently. On the final mile delivery alone, while a dense urban setting might cost $60 a year per recipient in carrier salary, a city neighborhood twice that. a suburban recipient twice that again, and for a rural recipient might be twice that again.

  • by HornWumpus ( 783565 ) on Saturday July 15, 2017 @05:10PM (#54816003)

    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).

    • by markus ( 2264 ) on Saturday July 15, 2017 @06:11PM (#54816321) Homepage

      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.

      • Normally that's what would happen. But I've noticed the USPS Amazon deliveries don't always coincide with regular mail deliveries. I've had a couple other packages show up in my mailbox in the afternoon, when my regular mail delivery is in the early morning. And one package showed up in my mailbox on a Sunday. (I thought it was odd Amazon sent me a notice saying my package was delivered at these times. It wasn't in front of my door, so I checked the mailbox and there it was.)

        The USPS would still be m
        • by tlhIngan ( 30335 )

          Normally that's what would happen. But I've noticed the USPS Amazon deliveries don't always coincide with regular mail deliveries. I've had a couple other packages show up in my mailbox in the afternoon, when my regular mail delivery is in the early morning. And one package showed up in my mailbox on a Sunday. (I thought it was odd Amazon sent me a notice saying my package was delivered at these times. It wasn't in front of my door, so I checked the mailbox and there it was.)

          The USPS would still be making t

        • But I've noticed the USPS Amazon deliveries don't always coincide with regular mail deliveries.

          That is quite common, but it won't be a special Amazon delivery. You'll find it's a general parcel run or larger items run that carries Amazon stuff and those are not scheduled. You're right USPS would not be going to your house, but they will already be in your neighborhood, and quite likely already in your street.

      • The gripping hand is that USPS can't change prices without Congressional approval anyway.

    • To a point, but USPS delivers on Sundays here and I definitely don't get regular mail on that day.
      • That's all covered in the definition of 'marginal cost'. IIRC postal employees volunteer for those shifts and get paid by UPS. They love the overtime.

  • 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 transact

  • Guess some B&M stores decided to step up their lobbying and PR efforts.
    • by jedidiah ( 1196 )

      Clearly. Instead of improving their product selection or their prices, they would rather waste money on propaganda.

  • 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?
    • by markus ( 2264 )

      This is a common misconception that is surprisingly difficult to dispel. A quick look on the USPS web site would have told you:

      The Postal Service receives NO tax dollars for operating expenses and relies on the sale of postage, products and services to fund its operations.

      USPS is subject to all sorts of regulation that cost it a lot of money. During the Bush administration, a new law was passed that forced them to pre-fund retirement benefits to the tune of many tens of billions of dollars. They are on track to get there, but it is slow going.

      Also, USPS can't determine its own rates. For instance, in 2016, it was ordered by regulators to decrease the

      • Yes, the USPS is subject to stupid laws that make it less efficient. But it also receives huge indirect subsidies which (of course) it's not going to mention on its web site.

        Why would you trust the USPS's claims about itself?

        • by Zxern ( 766543 )

          Not paying taxes is hardly a subsidy when you are required by law to keep certain office locations open, inefficient delivery routes, and deliver to everyone in the US regardless of location.

  • 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.

  • by Artagel ( 114272 ) on Saturday July 15, 2017 @05:47PM (#54816207) Homepage

    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".

  • by swell ( 195815 ) <jabberwock AT poetic DOT com> on Saturday July 15, 2017 @06:40PM (#54816475)

    "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.

  • 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.

  • 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 failu

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