The USPS has major problems, but the specific deal the USPS has with Amazon is a winning proposition for the Postal Service.
If you are reading this sometime in the future (say, anytime more recent than April 4, 2018), you may recall a week in 2018 when, as described by NYTimes.com reporter Nick Wingfield, “President Trump has pointed his Twitter arrows at Amazon over what he insists is a bad deal for the United States Postal Service.”
Trump, who, granted, is never a stickler for facts, has been blasting the U.S. Postal Service for the way they charge Amazon, “(that costs) the United States Post Office massive amounts of money for being their Delivery Boy.”
While the details about the Amazon-USPS deal are not public, some of the available evidence suggests that Amazon has been a boon to the Postal Service.
As Hammock Inc. has managed, on behalf of our clients, the mailing of millions of individual magazines and other material during the past 27 years, I have been an interested observer of the challenges and woes the USPS has faced across that era.
Ten years ago, the USPS handled the shipment of 212 billion pieces of mail. Last year, that number had dropped to 149 billion. (Look in your email inbox or text message client and you’ll understand why.)
The reality is that the specific deal the USPS has with Amazon is a winning proposition for the Postal Service. Bloomberg has one of many articles that explain why.
The short version is this: While email has crushed snail mail, the business of package shipping, including Amazon orders, grew to 5.7 billion packages last year from 3.3 billion in 2008.
Several years ago, the Postal Service added Sunday delivery for Amazon packages. Do you think the USPS loses money on this? No way.
But there is no doubt that the USPS loses money — like $2.7 billion on revenues of $69.6 in revenues in its last fiscal year.
Moreover — and dating back as far as I can recall — the USPS faces mind-boggling obligations related to its retirement pension. In effect, it is bankrupt.
Most analysts view Amazon’s use of the USPS to ship its products as a boon for the service.
Quote from NYTimes.com:
“It is one thing to demand better financial performance from the U.S.P.S., but something very different, in our view, to equate the U.S.P.S. financial struggles with the rise of Amazon,” Colin Sebastian, an analyst at Baird, a stock research firm, wrote in a research report on Tuesday. “If nothing else, the U.S.P.S. was already generating billions of dollars in operating losses well before Amazon became a large customer.”
The Postal Service says all such deals it makes are profitable — and must be by law.
But in one of his tweet attacks, Mr. Trump seemed to dispute whether Amazon was covering the Postal Service’s costs, saying that “it is reported that the U.S. Post Office will lose $1.50 on average for each package it delivers for Amazon.”
Where did Trump’s claim come from (other than his hatred of the Washington Post and, thus, its owner, Jeff Bezos.)? See Snopes.com.