Trump thinks Amazon’s destroying the post office. Here’s what’s really happening.
USPS really does make deals with Amazon. It all starts with how the postal system works: According to Kevin Kosar, vice president of policy for the R Street Institute, a right-leaning, pro-free-markets think tank, USPS is basically two separate entities: the monopoly side and the market side.
[…]
“The prices that the company pays is going to be haggled and based on how much [the companies] prepare whatever is being shipped before handing it over to the Postal Service,” Kosar told Vox back in December.
That preparation includes making sure goods are packaged in the right size boxes, or parcels are outfitted with a bar code that works with the post office — basically anything that makes the USPS’s job easier and cuts down on some logistical and processing costs.
And a massive company like Amazon, with the infrastructure and resources to do what the Postal Service needs, will probably get a more favorable deal. “Obviously bigger companies are better at doing this, that’s how they eke out nice little margins, but driving those costs down,” Kosar said.
[…]
And that’s the bottom line here. Amazon is a giant and, as Kosar calls it, “is in a class of its own” when it comes to shipping. The perception is that Amazon doesn’t need the United States Postal Service to do business. It can and does use a variety of delivery services — and probably can play those services off each other. But the same isn’t necessarily true for the USPS.
Which means maybe the USPS chooses to be a little “poorer” in hopes of capturing a huge chunk of business from the ecommerce behemoth, especially since its first-class mail business is going to keep diminishing over time. In some ways, the USPS may be following the playbook that made Amazon, well Amazon — short-term losses for long-term gains. “That would make perfect business sense in their eyes,” Kosar said. “Amazon was willing to take losses year after year … and it worked. It worked.”
[…]
The Postal Regulatory Commission (which currently has a Republican majority) approved a jump in stamp prices 2 percent beyond the rate of inflation, as part of a larger review of postage rates. This could pave the way for increased shipping rates in the future.
This is a bit of a testy issue, as Kosar explains that some of the postal system’s competitors believe USPS could use this increased revenue to help keep those parcel prices low — essentially using its monopoly (first-class mail) to subsidize its competitive business.
[…]
Which brings up a larger question: “What do we want from the Postal Service in the 21st century?” as Kosar put it. “And we haven’t had that conversation.”
