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Report: Amazon Gets Cheap Post Office Delivery Prices

| by Michael Allen
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Amazon is a billion-dollar company that can certainly afford normal postage, but a new report says the online giant gets help from the government when shipping goods via the U.S. Postal Service.

Writing in The Wall Street Journal, Josh Sandbulte, co-president of money management firm Greenhaven Associates that owns FedEx common stock, says Amazon has an unfair advantage over local traditional retailers.

According to Sandbulte, the Postal Service is delivering fewer letters these days, but more boxes (likely because of online shopping).

Because the Postal Service has to compete with UPS and FedEx for package deliveries, the 2006 Postal Accountability and Enhancement Act banned the Postal Service from pricing package deliveries below their actual cost, but that's what is happening.

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The Postal Service decided in 2007 that 5.5 percent of the Postal Service's fixed costs would go to packages and similar types of products.

Sandbulte notes that in 2017 the 5.5 percent fixed cost rate to deliver packages has not kept up with the actual cost.

According to Sandbulte, an analysis done by Citigroup showed that if package delivery costs were accurately rated by the Postal Service, then packages would cost $1.46 more to deliver than the current fixed cost.

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Sandbulte writes: "It is as if every Amazon box comes with a dollar or two stapled to the packing slip -- a gift card from Uncle Sam."

Sandbulte also notes that some "high-volume shippers" are allowed to drop their presorted packages at local Postal Service depots to get very low "last mile" delivery prices. Amazon reportedly has warehouses near many of these local Post Office depots, so the Seattle-based company gets lower rates than its rivals.

Sandbulte estimates "around two-thirds of Amazon’s domestic deliveries are made by the Postal Service. It’s as if Amazon gets a subsidized space on every mail truck."

Sandbulte admits he uses Amazon, but worries about competing retailers -- online and offline -- not getting the same treatment as Amazon.

This would not be the first time Amazon has received a sweet government deal.

Bloomberg reported in March that Amazon received millions in tax breaks when it opened a warehouse in a Minneapolis suburb in 2016. In exchange for the tax breaks, Amazon hired 1,000 workers.

This was not a one-time bargain. The Houston Chronicle reported in 2016 that Amazon has received $241 million from state and local governments to build warehouses, including one in Houston that cost $7 million.

The government giveaway data was gathered by Greg LeRoy, who heads Good Jobs First, an organization that fights corporate welfare.

"Some public officials have figured Amazon out," LeRoy stated. "Now it's time for all of them to say no more deals."

Sources: The Wall Street Journal via Archive.is, Bloomberg, Houston Chronicle / Photo Credit: TORLEY/Flickr, Matthew Oliphant/Flickr, Pbalson8204/Wikimedia Commons

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