Amazon and eBay Account for Huge Revenue Injection for United States Postal Service   - 2,991 Views, 2 Comments

The United States Postal Service (USPS), which at one time had a reputation for being run in the red (hence those infernal increases in the cost of postage), is now not only running in the black, but seeing a substantial increase in revenue thanks to Amazon and eBay and, perhaps to a lesser extent, other mail-order Internet services, notably such services as NetFlix, which ships nearly 2 million DVDs a day via the USPS.

Where revenue had been trending downwards for the post office (down 1%, for example, in 2005), with the explosion in people using Amazon and eBay, post office revenue is now trending upward at a growth rate of about 3% per year.

In fact, at an eBay conference in 2006, one of the main sponsors was the USPS, and Postmaster General John E. Potter himself gave a speech at the event, in which he said “I have one message today for the entire eBay community. We, the Postal Service, we love you. We love every buyer, every seller, every power seller. Thank you for shipping with the United States Postal Service.”

And if the post office hearts eBay, it must really love Amazon, with the advent of the Amazon Prime service - by which for a flat $79.00 per year you can have unlimited free 2-day shipping - via the Postal Service.

So exactly how much of the Post Office’s revenue increase is directly attributable to Amazon and eBay?

For eBay, the answer is unknowable, because, of course, eBay shipping is being done by millions of individual sellers, and is not centralized.

However, for Amazon it is knowable, or at least inferrable.

According to Amazon’s annual investor reports, in 2005, Amazon spent $750 million on shipping. In 2006, Amazon spent $884 million on shipping, and in 2007 Amazon spent nearly $1.2 billion on shipping! While not all of that $1.2 billion went to the Post Office, as Amazon also uses other package services, such as UPS, anecdotal evidence suggests that the lion’s share of it went to the U.S. Postal Service.

In 2005, the United States Postal Service reported revenues of $69.9 billion, in 2006 they had revenues of $72.6 billion, and in 2006 they reported revenue of $72.6 billion.

So it would seem that in 2006, Amazon by itself contributed to as much as 1% or more of the Post Office’s entire revenue for the year.

So, with Amazon, eBay, NetFlix and other online services contributing so much to the Postal Service’s coffers, and the Post Office running in the black - one question remains:

Why do they keep raising the cost of a first class stamp?