The cost to businesses and consumers of a slower post office
Recent moves by the new Postmaster General that are slowing delivery times for letters and packages have been viewed largely through a political lens. It is, after all, an election year and much focus has been rightly focused on the potential effects on people’s ability to vote absentee during the COVID-19 pandemic.
But, what does this mean outside of the political world? The news is all bad, unless you’re name is Jeff Bezos. Here’s some stats to consider:
By revenue, the USPS handled about $23 Billion in billing statements, $16 Billion in direct mail, and $23 Billion in packages in 2019.
That same year, US conducted approximately $602 Billion in eCommerce transactions.
At the risk of getting too technical, I’m gonna say this : That’s a lot.
Higher Transactional Costs
So, businesses rely heavily on the United States Postal service to conduct its business. FedEx and UPS do carry a significant load. But, if you’re a small business paying retail rates for shipping, those carriers are typically at least twice as much for packages (often 5X or more for letters).
For small businesses, the USPS is, by far, the best game in town. Or, it is until the USPS becomes too slow to please your customers relative to how fast they can get things from Amazon, which has its own logistics network. And that slower service or higher shipping costs makes it harder for these businesses to compete with Amazon. This further tilts a heavily tilted playing field away from online players of all sizes toward Amazon (ironic given President Trump’s very public dislike of Amazon).
Higher Debt Costs
When the slow down first started, I got a call from my mortgage provider because they hadn’t received my payment. Though I mailed the check at the same time I always did, it was now taking two days longer to get there. The people at the bank were nice about it and I was able to avoid a late fee. But, receiving a payment two days later does cost the bank money.
If payments become two days later on average, for every billion dollars in receivables a company has (assuming a 6% interest rate/cost of capital), that’s about $4 million a year that must be eaten by the company or assessed as fees to the consumer. (FYI, the GDP of the United States is almost $21 Trillion).
And, last but not least, this shift of the competitive landscape toward Amazon will help the Tech Titan gain additional power to crush it’s suppliers and charge higher prices to consumers. The USPS may seem like a dinosaur, but it’s a dinosaur we desperately need.
