The Postal Service has a legal monopoly to deliver first-class mail and non-urgent letters. It is the only entity that can put something into a mailbox or through a mail slot. It is legally obliged to provide the service at the same level and price nationwide. That means, even with mail volume down 40 percent since 2006, the Postal Service still must visit 155 million mailboxes every day.
Since 2007, the Postal Service has been required to allocate 5.5 percent of its fixed costs to package delivery and to incorporate that into its pricing. That figure made sense then, but today, 25 percent of the Postal Service's business is package delivery. And thanks to features of the Amazon deal – such as Sunday delivery, grocery delivery, even delivery from fish markets to local restaurants – the expenses have climbed.
In fact, they've climbed so much, according to a recent analysis by Citigroup, that the Postal Service should be charging Amazon $1.46 more per package than the $2 or so it does now. "Amazon now enjoys low rates unavailable to its competitors"...
There is no question the Postal Service must change to survive. What we need from it has changed. We now pay bills online. We email rather than write letters. We evite rather than send invitations. At the same time, we buy online and need the Postal Service to deliver.
But its finances are not in order. The Postal Service has had one profitable quarter in the last five years. Even with monopoly protection on its most valued service, it has fallen more than $120 billion behind in pension and retiree health expenses and has chewed through a $15 billion line of credit from the Treasury...
If you're in a deal where you lose money and your partner profits wildly, maybe deal-making is not for you.
Monday, September 04, 2017
Losing Money on Every Package
I'm periodically told that the US Postal Service doesn't cost any taxpayer money, that it's a self-functioning and self-supporting agency. How much money must they have had squirreled away if they can have only one profitable quarter in 5 years? Something tells me that some taxpayer dollars are at play here, and not just in retirement benefits: