After sharp criticism by President Donald Trump, which accused Amazon of underpaying the United States Postal Service (USPS) for delivering its products, the retail giant has teamed up with other retailers to create a lobbying group. Their purpose — to ensure that the USPS continues offering them cheap delivery service.
Amazon and the USPS
Since 2007, the USPS has accumulated losses totaling US$65 billion. In the 2017 fiscal year, it posted a net loss of US$2.7 billion. The postal service is in such bad financial shape that it is not even able to pay its retiree health benefit obligations.
In March, President Trump went all-out against Amazon. He felt the company was profiting from the USPS through unfairly low delivery charges. Trump also issued an executive order aimed at revamping the postal service and helping it get back to healthy financial numbers.
“While we are on the subject, it is reported that the US Post Office will lose US$1.50 on average for each package it delivers for Amazon. That amounts to Billions of Dollars. The Failing NY Times reports that ‘the size of the company’s lobbying staff has ballooned,’” he had said in a tweet.
In reaction, Amazon teamed up with retailers like Walmart, Target, and other small businesses to form The Package Coalition, a lobbying group aimed at ensuring they continue to get the cheapest possible rates for shipping their products through the USPS.
“Here are the realities of the Postal Service’s packaged business: It is one of the very few bright spots of the U.S. Postal Service. All of our members provide solid financial footing to the Postal Service. The last thing you want to talk about is disrupting one of the few bright spots of the Postal Service,” Forbes quotes the chairman of The Package Coalition.
Trump’s plan to save the USPS
President Trump issued an executive order in April. The task force set up for this purpose was supposed to look into the operations of the USPS, its competitors, business model, costs, workforce, pricing, and any other metric that would help in charting a new course for the postal service.
“Amazon has built its business model on the shoulders of the USPS and Trump is not just talking the talk, but now walking the walk with this executive order as a first step, in going after this potential relationship,” CNBC quotes Daniel Ives, Chief Strategy Officer at GBH Insights.
One idea put forward by Trump is to double the rates that USPS charges to Amazon and other retailers. Though many have attacked the notion, doubling the delivery charges does look like a reasonable idea to help the USPS get back on its feet.
According to analysts on Wall Street, Amazon pays the USPS only 50 percent in charges compared to what it would have paid had it shipped the products through FedEx or the United Parcel Service. If this is true, then charging double the rate or at least increasing the current charges by 50 percent should do the USPS a lot of good when it comes to its finances.
Without raising the package delivery charges, the USPS will simply continue losing money. As President Trump says, the business model of the USPS is absolutely unsustainable and only a complete restructuring will prevent a bailout funded by taxpayer money.