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Sat June 22 2019 22:48:21

Would Life Be Grim without Postal Shipping?

By: Ina Steiner

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What would happen if the USPS raised prices for shipping packages, or was forced to stop delivering packages altogether? Those are questions the Package Coalition addressed in a tweet, painting serious consequences of life without USPS package delivery. 

For small online sellers, the picture is especially concerning since they have little bargaining power as individual shippers, and so many rely on the Postal Service for shipping packages.

The Package Coalition, of which Amazon and the National Retail Federation are members, pointed to analysis by a consulting firm SLS Consulting that estimated the cost to American households of such changes to be between $16.2 billion and $35 billion annually - with between half and all of it benefiting the shareholders of UPS and FedEx.

The Package Coalition tweeted the following on Wednesday:

"Members of the #PackageCoalition rely on affordable, reliable package delivery services to grow their business, create jobs and exceed customer expectations. Raising prices for package delivery will hurt small businesses and consumers. More info here: http://ow.ly/zEpA50iYuQt."

The SLS Consulting report stated that the Postal Service is under pressure to increase prices for packages and said some are trying to force the USPS to exit the market completely. What would be the impact of such moves?

"It is difficult to confidently predict competitors' responses to increased prices or market exit," the report stated. "Under these circumstances, scenario analysis provides a useful framework for discussing policy options."

In the first scenario, the consultants imagine the impact of a USPS price increase of shipping rates of $1.50 and say it's reasonable to assume those costs would be passed on to households - about $16.2 billion. 

In the second scenario where the USPS completely withdraws from the market under new legislation requiring it to do so (remember, this is all hypothetical), the consultants layout what might happen: "UPS and FedEx don't increase their prices but all shipping that used to run through the Postal Service now switches to them. Prices for these shipments reflect average current price differentials in a variety of markets, about $5 a piece. Of course, if this number turned out to be only half of that, impacts would be reduced by half."

In that case (scenario two), the impact of the USPS withdrawal would cost American households about $25 billion dollars annually, it estimated.

The third scenario is the same as the second, except that without competition from USPS, UPS and FedEx increase their own prices by a dollar. "All shipping that used to run through the Postal Service now switches to them. Prices for these shipments reflect average current price differentials in a variety of markets, about $5 a piece, plus the $1 additional increase."

In that case, it estimates that a withdrawal of USPS from the package business and a resulting price increase from rivals would cost American households about $35 billion annually.

You can read the full report published on the Package Coalition website (PDF file).

The fact that companies are seriously contemplating a world without USPS shipping is eye-opening, and there's no doubt small sellers would be impacted. 

However, it's worth noting the analysis leaves out one wildcard: the possibility that Amazon could open up package-delivery to online sellers.



Comments (30) | Permalink

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by: Silver Ice King This user has validated their user name.

Sat Jun 22 23:34:22 2019

What USPS needs to do before making either one of these choices is to:

1) - eliminate the E-packets completely ( I know these changes are in the works, but this needs to happen before either of these options are put into place).  The increase in revenue from this move or the reduction in packages processed should be analyzed completely.

2) - Terminate the ridiculous contract with Amazon where they are working Sundays and delivering packages on Sunday.  Amazon can renegotiate their deal with USPS but the ability to control them like it is now needs to be eliminated.

3) - Revise the contracts with UPS and Fed-EX for their final delivery to residences by USPS at such low prices.  These companies can deliver their own packages or pay enough to make it worthwhile for USPS to do so, not just be filler income to try and pay for its current infrastructure.  If they cannot make enough profit on these companies to eliminate the need to constantly increase the shipping costs well above the Cost of Living to the American Public, then eliminate the services they are providing to them and adjust their fixed costs down to help adjust for these changes.  

There is no reason that the American Public should have to continue financing the profits these companies make due to these stupid contracts that USPS seems to continually negotiate with them.  USPS knows full well that since they cannot lose money the American Public will have to pick up the additional costs so they don't seem to care if these contracts end up being good or bad for them in the long run.

After these changes have been made there should be more than enough money remaining to offset these huge changes that the government and USPS seem to continually dump on the American Public.  If there is not enough business to justify them being as large as they are then they can sell off some assets, close facilities and layoff personnel just as any other company would have to.   Truthfully, I think that once these changes are made, that USPS needs for a huge change in shipping costs will not be necessary, especially after Amazon, Fed-Ex and UPS raise their costs to make up for the cost savings that the American Public is currently already picking up for them through their agreements with USPS.

Perminate Link for Would Life Be Grim without Postal Shipping?   Would Life Be Grim without Postal Shipping?

by: sasikat9 This user has validated their user name.

Sun Jun 23 05:31:14 2019

We not longer care how much the post office charges for packages. Our days of shipping packages is over. If it can't be sent in an envelope with first class postage we don't sell it.

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by: comments This user has validated their user name.

Sun Jun 23 08:15:17 2019

We are headed there. USPS raises their prices by the maximum allowed and now that first class package service is now reclassified as business mailing we can expect to see even sharper increases. Since the USPS stops at most delivery addresses for letter mail it is absurd to think they would benefit by exiting the market.

If they want to save money they should innovate and update their technology for greater accountability. They should also do more to ensure carriers are getting scans and signatures on signature confirmation and insured packages.

Given that USPS supplies priority mail boxes, it is pretty obvious that they are directing customers to that mailing option because it is profitable.  

Perminate Link for Would Life Be Grim without Postal Shipping?   Would Life Be Grim without Postal Shipping?

This user has validated their user name. by: toolguy

Sun Jun 23 10:17:51 2019

If the USPS pulled out of shipping packages the chinese small seller market would dry up overnight. . . .

The USPS could be more then profitable if they charged the chinese a fair price for shipping!

The USPS reminds me of the NRA. . . .

Perminate Link for Would Life Be Grim without Postal Shipping?   Would Life Be Grim without Postal Shipping?

by: leathermermaid8 This user has validated their user name.

Sun Jun 23 10:28:30 2019

Good points have been made and if the USPS could rework their Government mandated pension funding a bit, they might have more money to invest in modernizing further.

After seeing what LESS competition does for prices, quality control and ethics in many ways, why would I think losing the USPS would be a good thing?

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This user has validated their user name. by: RKTOYS

Sun Jun 23 11:29:20 2019

I would be done mailing packages, that's for sure.  There are reasons I choose the post office over their subsidized competition.

Buying...I don't know.  Shopping in person has become so difficult due to retailer ineptitude.  If I was able to stick to it, I would have a whole lot less stuff but a whole lot more money too.

Perminate Link for Would Life Be Grim without Postal Shipping?   Would Life Be Grim without Postal Shipping?

by: ebayout This user has validated their user name.

Sun Jun 23 13:37:16 2019

Shipping cost is determined by the COST OF DELIVERY.
A huge percent of that is driver's pay, and in the case of the post office, it's also funding the USPS retirement plan.
Is anybody bemoaning those costs, and not the final price?

Perminate Link for Would Life Be Grim without Postal Shipping?   Would Life Be Grim without Postal Shipping?

by: TomH This user has validated their user name.

Sun Jun 23 14:13:18 2019

re: ebayout:
''Shipping cost is determined by the COST OF DELIVERY.''

The retirement plan funding forced/mandated by Congress is onerous compared to most any other non-government plan and has much to do with base costs the Postal Service tries to over come.  

Perminate Link for Would Life Be Grim without Postal Shipping?   Would Life Be Grim without Postal Shipping?

This user has validated their user name. by: Lightning

Sun Jun 23 15:01:33 2019

@sasikat9
I suspect almost EVERYTHING you sell is over 1/4" thick, making it a First Class PACKAGE, not a letter or a flat.  Your days of shipping packages aren't over, you just don't know what one is.

Perminate Link for Would Life Be Grim without Postal Shipping?   Would Life Be Grim without Postal Shipping?

This user has validated their user name. by: NoMoreEbay

Sun Jun 23 16:47:38 2019

USPS's new round of money grabs takes affect today, i.e Dimensional Weight Pricing. I did a few mock calculations and the new prices are outrageous. In one case an almost 100% increase.

This will effectively put large item sellers out of business.  

Perminate Link for Would Life Be Grim without Postal Shipping?   Would Life Be Grim without Postal Shipping?

by: BobNJ This user has validated their user name.

Mon Jun 24 02:19:42 2019

I buy, sell and trade collectibles all the time and my insurance on my collection also covers every package I send and receive AS LONG AS IT'S NOT VIA UPS!!!!  They will NOT insure any package shipped via UPS. And this insurance company insures a very large number of collections. If USPS were to stop shipping packages it would have a pretty large impact on collectibles.

Perminate Link for Would Life Be Grim without Postal Shipping?   Would Life Be Grim without Postal Shipping?

by: Chicago48 This user has validated their user name.

Mon Jun 24 05:02:14 2019

"2) - Terminate the ridiculous contract with Amazon where they are working Sundays and delivering packages on Sunday.  Amazon can renegotiate their deal with USPS but the ability to control them like it is now needs to be eliminated."
I do believe AMZ is making its own 7-day, weekend deliveries through it's Prime delivery.
I would like to see AMZ take over the Post office operations.  I was super- surprised at the one-day delivery.  Didn't think it could happen, but AMZ has done it.

Perminate Link for Would Life Be Grim without Postal Shipping?   Would Life Be Grim without Postal Shipping?

by: purpleiris This user has validated their user name.
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Mon Jun 24 05:34:49 2019

If I didn't have the USPS, I would no longer sell my own inventory and sell nothing but affiliate products and maybe digital downloads.

People seem to keep forgetting that the USPS belongs to The People. To have any organization, including the Federal government, even attempt to force the USPS out of business would be unconstitutional, going against The People as a whole, as well as every single small business out there. The latter would be a matter of unfair trade and even antitrust-type issues.

As difficult as it has been to get people to take action against all the things they see that are wrong, I worry that The People would just sit back and let it happen, too. I sure as heck hope The People fight for its USPS.

Perminate Link for Would Life Be Grim without Postal Shipping?   Would Life Be Grim without Postal Shipping?

by: cvsharkey This user has validated their user name.

Mon Jun 24 05:48:14 2019

Please explain how Canada's Postal Service was recently decrease the cost of postage to the U.S. while we're poised to make new increases?  

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by: angryllama This user has validated their user name.

Mon Jun 24 07:00:03 2019

YES !    Grim would be a Severe UNDERSTATEMENT.

Those who keep on complaining about USPS rates are living in a fantasy world.

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This user has validated their user name. by: DeathFromAbove

Mon Jun 24 07:32:01 2019

It's going to hurt everywhere.  But as ebay is still the main platform of small business sellers - it's totally unbelievable that ebay did NOTHING to counteract this.  No negotiation, nil, nothing.  It just passed.  Lazy and stupid.

For instance one box I have here would have cost $10 to Zone 4 for Priority Mail if sent on Friday.  Today it's $32.30.  Soo....now it goes FedEx for $18.  buyer paid more, I pay more.  Things are supposed to be getting CHEAPER now that they have all of this infrastructure in place.  LIke any commodity - once the system is figured out, volume increases and costs are supposed to decrease.  Consumers of said commodity/service will then pay less.  So as they are charging exponentially more every year for the past 6 years -  it means one of two things:  Greed along with a false need to demonstrate "growth" where there is no actual growth; or volume is actually decreasing so they have to charge more.  Which is it?

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by: KeysParkPro This user has validated their user name.

Mon Jun 24 08:42:32 2019

Amazon will buy more planes and vans. Then they will take out the USPS if the Government does not stop them. Same day delivery.  Delivery every day. Amazon in 5 years will change the way people buy and sell. They will then change the store price to $29.99 a month with 3000 listings. Then eBay sellers will all be on Amazon.  

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by: purpleiris This user has validated their user name.
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Mon Jun 24 08:48:35 2019

''So as they are charging exponentially more every year for the past 6 years -  it means one of two things:  Greed along with a false need to demonstrate ''growth'' where there is no actual growth; or volume is actually decreasing so they have to charge more.  Which is it?''

Neither. Volume significantly increased with Amazon adding to their workload -- not to mention all the other internet sales.

The problem lies in the USPS subsidizing the costs for so many other countries to ship to the US (China, for one). You also have the problem with the federal government requiring them to pay for planned pensions several years in advance -- not something corporations are required to do. So, greed on the USPS's part is not a factor.

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by: purpleiris This user has validated their user name.

Mon Jun 24 08:53:07 2019

One thing I don't get is how they got permission to use drones for delivery packages. Can you image seeing drones flying everywhere? LOL What if one drops a box on someone's head?

I just don't see the viability of that, much less the public safety.

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by: redheadedlady This user has validated their user name.

Mon Jun 24 09:06:10 2019

I personally would NEVER sell on Amazon.  I sell on ebay, ecrater, bonanza and have 3 websites.  Amazon can take a long, long walk off a short pier.  I tried to set up an account on there (I have over 1,200 items right now on ebay) and I can only sell 40 items.  Huh??  So, I went to the next area, business.  When I tried, they said I need a letter from my employer stating that I am able to sell there.  What???  I am the owner.  Do I have to send a letter to myself???  They are worse than ebay in my estimation.
As to USPS - the retirement fund is correct.  Every time the workers went out on strike, they wanted more money in the retirement funds.  So, they agreed to it and now it is costing millions to keep it going.  
What they need to do is break that union so they don't have to pay those high costs on retirement funds.  And the ridiculous salaries for people to just stand around and talk!  I see it every day when I go to the post office.

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