Just the Facts

President Trump's Issues With Amazon - USPS

By No Labels
April 7, 2018 | Blog

Over the course of the last week, the president has raised concerns over internet retail giant Amazon’s business practices. Among President Trump’s concerns is an accusation that Amazon exploits the United States Postal Service (USPS). The accusation follows that Amazon’s use of the USPS causes the postal service’s losses that contribute to their continued financial frustrations. 

The postal service consistently reports annual financial losses. In fact, the USPS has not reported a net income since fiscal year 2006. The USPS’s losses have decreased in recent years, reporting losses of $2.7 billion in the 2017 fiscal year. While that is a large number, it is just about half of the losses reported in each of the three previous years. 

While there is no doubt the USPS is struggling financially, the losses cannot be exclusively attributed to Amazon’s use of the postal service. The USPS says that traditional mail is its “main source of revenue and contribution.” In today’s internet-driven era, people do not send birthday cards, or baby shower invitations. Companies do not mail out advertisements as frequently and more consumers opt for paperless billing, eliminating mail delivery of bills. While traditional mail has declined, package business, like packages sent by Amazon, is an area of growth for the USPS. 

Despite that growth, analysis provided by Citigroup in 2017 said that USPS was undercharging for package delivery. If the USPS were to increase package delivery costs, the Citigroup report concluded that Amazon’s shipping costs would increase by close to $2.6 billion.  

Amazon ships in such large volumes that the company has a good position from which to negotiate shipping deals. The USPS shipping contract with Amazon is not public but is subject to annual review by the Postal Regulatory Commission.  

Package delivery itself, according to the USPS, is profitable for the agency but the Citigroup report suggests it might be even more profitable, and thus might help to make up for losses in traditional mail delivery.  

 

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