Is Amazon Taking Advantage Of US Postal Service - PostalExperience

By Gavin | July 26, 2018

Is Amazon Taking Advantage Of US Postal Service - PostalExperience

I definitely think that if you look at the research, I've read that they're getting as much as a $1 46 cent subsidy on a per package basis, so I do think that in the case of the US Postal Service Amazon is definitely getting a sweetheart deal.

Donald, what about you? Absolutely you know what the bottom line is, the post offices subsidized its parcel delivery through its first-class mail for years for decades, that's why it's running it a twenty to thirty percent discount to the rates. You're going to see via UPS or FedEx, and the beneficiary of that, of course, is Amazon or anybody else who uses them for that last mile, and to what the point that Morgan made just a few minutes ago, they're going anyway to deliver first-class mail. But when they're going specifically on Sunday, then the bleeding turns into massive hemorrhaging, and they're doing so for the benefit of one customer, which from the outside looking it doesn't make sense, but you know what I mean, we seem to be blaming their losses on Amazon, but the post office has been losing money well before Amazon was ever invented. We're not specifically but we're thinking, and the president's tweet suggests that it's Amazon.

That's causing the Postal Service to lose much money, it is because it doesn't charge enough at this point, so how do we solve the post offices problem in this case? First of all, this president would be the first policy maker to gloss over the details, but it is said the bottom line is that you should not be for the benefit of one customer in a fashion, that is detrimental to private companies that pay their own way subsidizing Amazon. Whether it's Amazon or any of the others? this should be fairer, a real balance in what the cost and delivering that parcel, whether it is for Amazon or for or for nobody ever heard of, it should be a price that more fairly reflects the cost to make that package happen, and indeed that's what happens when you pay FedEx or UPS to deliver it.

Tom, my understanding is this has come about, because in part mail volume is down 40% from its peak, so the US Post Office has the spare capacity that it's basically just letting Amazon boxes right on, and in 2006 there was a congressional act requiring the post office not to under charge anybody, and I think to harmonize what it charges period, it is up to Congress now to either enforce that better, or you know in the post office, tomorrow just say, okay, we're going to raise the rates for Amazon. And what happens to taxpayers if Amazon then goes elsewhere and doesn't use that service.

I think if you step back for a minute, you look at retail there's clearly a need for a third participant beyond FedEx and UPS, which arguably operated duopoly, but I think what we're talking about here is getting Amazon to pay a fair rate for the service from the Postal Service, and then, generally speaking, getting the volume of sales and the Postal Service to be enough for them to offset their cost, but you bring up a good point.

Kelly, basically the challenge is that the first-class mail volumes continue to go down for a lot of different reasons, but clearly commerce is headed in the right direction, and if they can get both an increase in volume and perhaps a more fair market rate from Amazon, that could go a long way, but as Amazon going to stay, Tom continued to use the post office, if it has to pay more, if you look at what Amazon's doing, in general, they're increasing their own first party logistics efforts, because they need to be, and they realize that they're over reliant on FedEx UPS, and then I guess to a lesser degree the US Postal Service it's good news, though Amazon continues to grow.

I think it'll be an opportunity for an increase in volume with all three of those carriers - UPS, FedEx and the US Postal Service, so I do think there's an opportunity that if they charge a fair rate, there will still be lots of volume from Amazon for them to take care of.

Thanks for checking out CNBC on YouTube, be sure to subscribe to stay up-to-date on all of the day's biggest stories, you can also click on any of the videos around me to watch the latest from CNBC. Thanks for watching.