Analyst claims USPS is subsidizing Amazon

Is the US Postal Service giving Amazon preferred treatment at the expense of other mailers? Investment advisor Josh Sandbuite of Greenhaven Associates thinks so, according to a column he wrote for today’s Wall Street Journal:

In 2007 the Postal Service and its regulator determined that, at a minimum, 5.5% of the agency’s fixed costs must be allocated to packages and similar products. A decade later, around 25% of its revenue comes from packages, but their share of fixed costs has not kept pace. 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. It is as if every Amazon box comes with a dollar or two stapled to the packing slip–a gift card from Uncle Sam.

Amazon is big enough to take full advantage of “postal injection,” and that has tipped the scales in the internet giant’s favor. Select high-volume shippers are able to drop off presorted packages at the local Postal Service depot for “last mile” delivery at cut-rate prices. With high volumes and warehouses near the local depots, Amazon enjoys low rates unavailable to its competitors. 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.

Note: Sandbuite’s firm has close to ten percent of its portfolio invested in FedEx stock.

Source: Why the Post Office Gives Amazon Special Delivery; A Citigroup analysis finds each box gets a $1.46 subsidy. It’s like a gift card from Uncle Sam.

  • Piastadik

    It’s totally true in Westchester District the postmasters and supervisors have to complete a form and fax or email to the Disttict every night to make sure that every Amazon has been attempted or delivered. Priority mail can sit on a shelf but Amazon must go and their are teleconferences to make sure we deliver all Amazon and we make two trips so the mail to the customers is delayed. District manager Conte and op manager Radackowitz and del programs manager Mein and Pom Welch know all about it

  • salty

    Let’s add in the cost of overtime that is often needed to complete delivery because of increased Amazon packages. Also they deliver Amazon Fresh ( groceries ) that have to be delivered by 10:00 A.M. This often requires a carrier to deviate from his or her normal travel to deliver the package on time . This also results in overtime on many occasions. The only winners in this are Amazon and U.S.P.S. management. Why management you ask? To get the information you’d have to file FOI . But someone should research the % of annual incentive raises that Postal Management has awarded to …. ITSELF since the Amazon contract. Postal managers are lining their pockets. So the post office actually loosing money on this deal doesn’t bother them at all. The President should demand the resignation of the P.M.G. and all of the executives involved with writing and approving this contract with the devil.

  • salty

    Bad contract