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Comment by Reedx | Hacker News Reader

Well, UPS/etc can also cherry pick or negotiate terms if it doesn't make sense. They don't have to take those (or any) deliveries from Amazon.

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This is why I was suggesting this might not be sustainable. Carriers have built their business based on certain assumptions. The big assumption is that customers prefer having predictable pricing. This assumption is correct for every other business they deal with, for the carriers Amazon is an aberration. Since Amazon only provides a small percentage of their business, carriers must invest significantly in building out a system for destination based pricing just for Amazon. The alternative is to simply assume all of Amazon's package traffic is going to be lowest-margin and price appropriately.

> The alternative is to simply assume all of Amazon's package traffic is going to be lowest-margin and price appropriately.

This seems like the simplist way. The company could take a sample of 100 Amazon parcels, analyze the marginal cost of delivering each (how full was each van, how much did it add to each route, etc), and use that as the basis for price negotiations with Amazon.

If that means Amazon pays more than other customers, fine.

USPS does not have that leverage, they are obligated to provide last mile support at a loss if necessary.

My house is two miles down a paved road from the nearest village (800 full-time residents in the Western Sierras), and USPS doesn't deliver mail, although they do provide a free PO Box in the village. UPS and Fedex both deliver to my door.

Anecdotally, your claim doesn't seem correct, but I'm not sure what the exact rules are.

Here is USPS's "Universal Service Obligation" https://www.uspsoig.gov/sites/default/files/document-library...

There is no set and clear definition of the Postal Service’s USO; it is generally assumed to be a collection of various laws and regulations.

from the document

Which is perfectly fine, because the USPS is a service, not a business. It's not supposed to be profitable anymore than the military or the EPA are supposed to be profitable.

Under the assumption that they are funded to provide that service.

The problem is when a company can leverage that loophole to make even more money, which is what Amazon is doing.

Isn't that kind of the point of most public infrastructure though? That its losses can be subsidized because the net economic gain and overall improvement to people's lives is worth it? How many companies depend the "loophole" of roads and public transport being publicly subsidized in order to operate in any capacity whatsoever?

This is just factually incorrect. USPS does not provide to the door service for massive swaths of the country.

I know this because as I type this I’m sitting in a house in a rural area of upstate NY that doesn’t have USPS delivery. When clueless e-commerce merchants send me things via USPS anyways they never arrive and eventually get sent back.

This situation is not uncommon at all.

Maybe this is why Amazon sends a huge chunk of their packages via USPS. Part of the deal between the USPS and Amazon included some pretty big incentives to deliver Amazon packages on time. My wife worked for USPS for years and Amazon packages were given pretty high priority.

Amazon has the leverage

That doesn't really make sense to me.

Do they?

If what is being said is actually true, then amazon doesn't have any leverage at all. (again if what is being argued is true) These last mile providers might be taking a small hit to deliver amazon packages, so why deliver them at all?

If you answer is: "if they don't deliver these they won't get amazon's business." It would appear they are not getting any of amazon's profitable business (2/3 of delivers), so who cares about getting amazon's crap business?

It's more that Amazon packages can comprise such a a large % of deliveries/orders that the UPS/etc may need to keep that business, even at near 0 profit, to keep their infrastructure above water. That contract possibly covers a ton of last mile region they want to cover anyway to stay competitive but couldn't keep going due to lack of volume vs cost without Amazon.

It's a bit of a catch-22, they can reform their route and coverage to similarly profitable state with less coverage, potentially dooming them in the long run, or they can take the near 0 profit contract from Amazon and stay competitive while having almost no cards at the negotiation table. Amazon knows their business is huge and needed by these groups and is not afraid to point that out.

FDX booted them last year, their stock is way up now...there's a whole lot more to ecommerce than Amazon (though admittedly they are a huge piece).

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