- Shipping and packages is the only major component of USPS's revenue stream that is increasing, growing by $2 b in 2017 over 2016.
- First class mail and marketing mail revenue are down by $3 b over the same period.
- USPS costs are largely fixed. Delivery takes place over the same routes every day; the same sorting and shipping operations take place each day as well, subject to some seasonal fluctuations.
- Unlike any private company, USPS must pre-fund its pension and retiree health benefits for the next 75 years. This costs $6b annually and accounts for most of USPS annual losses.
As long as the Amazon contract covers the variable costs of weekend deliveries, USPS comes out ahead. Could USPS charge Amazon a higher rate? That depends on whether Amazon could find close substitutes for package delivery. I would not underestimate them.
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