Does the USPS really make money delivering for FedEx and UPS?

The Wall Street Journal says critics are raising concerns about the US Postal Service’s growing “last mile” delivery business. While the USPS has seen significant revenue growth from the service, some wonder if the agency is charging enough to make it worthwhile:

FedEx Corp.and United Parcel Service Inc. increasingly are moving their own packages through the U.S. Postal Service, putting pressure on the agency and raising questions about whether the USPS is charging enough for the service.

For FedEx alone, the post office delivers an average of 2.2 million packages a day, or about 30% of the express-mail company’s total U.S. ground segment.

According to the Journal, “Analysts estimate Amazon pays about $2 to mail a package via the Postal Service versus $7 or $8 for UPS or FedEx ground.”

The story also quotes PMG Pat Donahoe defending the program: “We make money on it. We wouldn’t do it if we didn’t make money on it,” but notes that neither the USPS or its partners will reveal the terms of their agreements.

Read more: U.S. Mail Does the Trick for FedEx, UPS – WSJ.

  • Melody Gannaway

    I am pretty sure we are losing in this go round. I think we only get 1 or 2 dollara a package.

  • rula

    By using rural carriers, who are on salary and not hourly, the USPS does make $$, on last mile packages. They would not if they used city carriers.

  • Accounting Ace

    Every package delivered by the USPS as a “last mile of deliver” saves UPS/FED EX a great deal of money, especially in rural areas, where they do not have to drive a dozen miles or so, saving them labor and vehicle expenses. While the PO does make a small (really small, and no one really knows how much) fee for each, the 9000 pound elephant in the room is this….why doesn’t the Post Office go for the whole thing, instead of just the final delivery part. I have always said that our own marketing department should be sending messages to the mailer of every LMOD package, letting them know that they obviously spent too much money on shipping, if UPS?FED EX can afford to reship it through the PO. This is just like presorted mail, giving too large of a postage discount, just to get numbers up.

  • Robert Meegan

    I guarantee that usps loses money on it. The time it takes to scan sort scan route scan and deliver equals to more than 2 dollars in man hours. Postmaster is clueless!

  • Uncle Ben

    A very special and opaque deal under eVS does not cover cost and strengthens FedUPS to advocate for privatization of USPS.
    Another giveaway is to DHL and banks who can mail personal checks as standard flats–this is costing USPS millions.
    If you dig more there are increasing number of special deals.

  • Mona

    Most of our packages come from FedEx and UPS. Sure wish they would pay us more. Or better yet, people should just use USPS and save some money!

  • sinatra

    DON’T FORGET STAMPS. COM. THAT IS ANOTHER STORY. HOW MUCH DOES THE USPS GET FOR THAT? HMMM. RETIRED LETTER CARRIER-NYC

  • 007jayc

    PMG isn’t clueless, he’s probably taking money under the table for these deals

  • big daddy

    its a $1 per package

  • Michael F

    Use our delivery network to pull in last mile deliveries, all while dismantling that network by the use of cluster boxes. We will eventually not make enough money to justify tendering their packages, simply because we won’t be going to “every house”. PMG needs to go

  • You’ve been baited

    The goal being to dismantle the Postal Service of corse no profit is being realized. Just like the staples deal no one knows the details. They will blame the unions and electronic communication as the cause of postal collapse. As long as carriers exist in some form to deliver bulk business mail at huge discounted rates the goals of PMG Donahoe have been met.

  • Stellar Steve, Window Tech

    You are right about items considered First Class material being sent as standard mail by this plan, costing us money in revenue. Another thing I have brought up is the matter of material accepted by UPS or FED EX and given to USPS for delivery, that may be considered hazardous and would not have been accepted by any postal retail clerk…we really have no clue what is inside many of these packages. Since they are not First Class/Priority, they are open for inspection, but no on has the guts to question any of these packages.

  • soma

    I read somewhere it was 25 cents per package. To give us the visibility.

  • Theft 101

    Here is the truth my friends, PC Postage and Parcel Select were developed to capture some of the market the USPS has lost over time. Many large shippers frown on USPS because of historical issues or that the competitors have positioned themselves better and provided services needed by the shippers. USPS Headquarters has given away the farm now with “competitive pricing” to UPS and Fed Ex without ever being able to verify costs. This situation screams OIG and Congressional investigation-many USPS employees nationwide have brought payment issues to light but have been squashed by management telling them it’s none of their business. Unfortunately revenue protection is every employees job so it troubles me that the top doesn’t listen and the competitors keep sopping up the profits from antiquated revenue reporting platforms used by the USPS. I remember one shipper who was investigated 3 times because they were printing duplicate labels for outbound shipments but only being charged once. My advice to Pat and his idiot cronies at HQ-before you implement any payment method change insure you can ACCURATELY assess charges before launching programs to the general public.

  • @!@#f$%*(&

    Donahoe: “We make money on it. We wouldn’t do it if we didn’t make money on it,”

    Really, Pat? How many pennies do you make on parcels UPS and FedEx hand over to you because they would lose money delivering them to ‘unprofitable’ areas?

  • T-Sizzle

    Seems to me to be contractors contracting contractors to contract contractors

  • Buj Moose

    Since the Postal Service is a “PUBLIC” entity, shouldn’t there arrangements with mass shippers be available to the public? if you ship a parcel that weighs 1 pound, you pay about 5-6 dollars with the USPS. How much you want to wager that Amazon probably pays about 1 dollar?

    Reminds me of the old joke, a CEO said his company loses 5 dollars on every item they sell, he was asked how do they expect to make a profit and he replies, “by increasing volume”.

  • HBK

    i don’t get your ceo joke LoL

  • HBK

    ???

  • flyingburgers

    You don’t know what you are talking about. Amazon, UPS, Fedex and DHL use a service called Parcel Select DDU Delivery. Amazon pays other carriers to bring a truckload of packages from its warehouse to the post office your carrier leaves from. Amazon pays the USPS only to move the package from the post office to your house.

    Are you going to drive your package to the destination post office? Or do you want the USPS to move the package across the country for you? That’s why you pay more.

    Please learn a little before proposing that you have the solution to everything.

  • Randy Peterson Sr

    UPS/FEDEX/ US POSTAL SERVICE
    One thing that you guys are not considering is the fact that after December 1, most post offices bring in subs to help deliver overrun of packages, which cost the postal service more money. While the regular carrier gets paid for his or her days work, the sub is getting paid by the hr and mileage., whither that being said, I’m sure the the postal service is not losing money. As Donhue said, they wouldn’t do it if they didn’t make some money.

  • Bob Delmar

    I understand UPS pays about $1.35 per package for the last mile. Think about it….

  • YUGE

    Privatize the USPS. Get govt out of idiot.

  • http://sorky.com Frostproofed

    I wouldn’t mind paying them if they weren’t consistently garbage for estimated delivery times. I dread every incoming package that uses them.

  • greywolf2018

    So they lose something during the holiday, the rest of the year they make it up and then some, those holiday subs are going to be hired ANYWAY as they always have been.
    People who have a post office box cost nothing extra for the PO to deliver since the stupid box is right there on the wall! People who get delivery at their house dont cost more either since the mailman is going there ANYWAY and it doesn’t matter if they put 2 letters in the mailbox or 15 letters and a package.

  • greywolf2018

    Amazon ships billions of dollars a year, an individual ships MAYBE one package in 6 months and requires customer service at the counter, stamps, weighing and more, Amazon’s packages would be pre-paid for, pre-sorted and ready to go.

  • greywolf2018

    “Amazon pays the USPS only to move the package from the post office to your house.”

    Yeah, and the PO makes a killing on that, especially on those like me who have a PO Box, all they do then is take delivery from UPS etc at the back door, drop the stuff in the PO Boxes 10 feet away, they don’t even get their shoes wet going outside then! If they are delivering to the home they are going there ANYWAY to deliver bills, magazines, newspapers, JUNK MAIL, political junk, letters and packages shipped via parcel post or priority mail.

  • greywolf2018

    “The time it takes to scan sort scan route scan and deliver equals to more than 2 dollars in man hours.”

    The employee is already on the clock and being paid ANYWAY, whether they stand there doing that, mopping the floors or sitting behind the counter waiting for people to come in. The ONLY time it costs more is if people have to work MORE HOURS- overtime- , or the PO has to add more help because they couldn’t keep up.

    People delivering the mail on the route are being paid ANYWAY, they are driving the route every day delivering letters, junk mail, circulars, store fliers, first class letters, bills, priority mail etc anyway, adding another package or envelope going to that home’s address doesn’t change anything.

  • greywolf2018

    “the matter of material accepted by UPS or FED EX and given to USPS for
    delivery, that may be considered hazardous and would not have been
    accepted by any postal retail clerk…we really have no clue what is
    inside many of these packages.”

    You have no clue what’s inside ANYWAY unless you physically open and inspect every one of them.
    If the packages went thru UPS or Fedex then there’s no problem, especially if they went via air- that carrier did 99% of the transportation with no problem.