Last week President Trump reiterated his thoughts on the role Amazon could be playing in the continued economic challenges being experienced by the U.S. Postal Service.
At the heart of the matter is the deal that USPS has with Amazon. Facing about $70 billion in losses, USPS delivers a lot of packages for Amazon. For an organization that is losing business due to a drop in overall mail usage and growing competition from UPS and FedEx, the opportunity to take on Amazon deliveries seems like a good idea.
The problem is that Amazon has been primarily utilizing the USPS to make deliveries to more rural or less densely populated areas. So, the negotiated rate between the two organizations would be favoring Amazon, as these deliveries consume more time, fuel and resources.
In the meantime, Amazon is doing its own deliveries in more densely populated areas, and using the funds generated from these deliveries to build a stronger logistics infrastructure, i.e. more warehouses, delivery vehicles and personnel.
President Trump feels that because of this dynamic, the USPS needs to significantly increase Amazon’s rate structure. He was quoted as saying that, “If they (USPS) raise the price of a package like they should — four or five times, … or let Amazon build their own post office, which would be an impossible thing to do because the post office … serves every little piece of the country ... it would be a whole new ball game.”
It’s worth noting that while the USPS faces huge operating losses, Amazon reached a market value of over $1 trillion dollars earlier this year.
The President’s comments come on the heels of discussions for providing the USPS with an emergency loan to help overhaul its structure and management. The loan would first need to be first approved by the Treasury Department.
