January 2, 2018
USPS really does make deals with Amazon. It all starts with how the postal system works: According to Kevin Kosar, vice president of policy for the R Street Institute, a free-market think tank, USPS is basically two separate entities: the monopoly side and the market side.
The monopoly side processes regular, first-class mail — wedding invitations, baby announcements, birthday cards, and bills. There isn’t much competition for sending an ordinary letter.
The market services are parcel services, which competitors like UPS and FedEx also provide — and which means more competition.
An independent agency, the Postal Regulatory Commission, oversees and reviews the rates the US Postal Service sets for both the monopoly and competitive sides, basically reviewing and giving the okay for any changes — including a one cent stamp increase.
But USPS, Kosar explains, also cuts individual deals with companies that mail or ship in bulk — what are called “workshare discounts.”
“The prices that the company pays is going to be haggled and based on how much [the companies] prepare whatever is being shipped before handing it over to the Postal Service,” Kosar said.
That preparation includes making sure goods are packaged in the right size boxes, or parcels are outfitted with a bar code that works with the post office — basically anything that makes the USPS’s job easier and cuts down on some logistical and processing costs.
And a massive company like Amazon, with the infrastructure and resources to do what the Postal Service needs, will probably get a more favorable deal. “Obviously bigger companies are better at doing this, that’s how they eke out nice little margins, but driving those costs down,” Kosar said.
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