Report: Postal Rate Increase Will Cost Amazon More Than $1B in 2019
The proposed increase in shipping and mailing fees at the U.S. Postal Service (USPS) could cost Amazon.com more than $1 billion in 2019, according to a Credit Suisse report. "As we roll forward the sensitivity analysis to 2019, we arrive at a potential incremental shipping expense range of $400 million to $1.1 billion, with the assumption that 40 percent to 50 percent of U.S. packages are shipped via the Postal Service," analyst Stephen Ju wrote Monday. The USPS announced on Oct. 10 that it filed notice with the Postal Regulatory Commission, the body tasked with regulatory oversight of the agency, of proposed price changes to take effect Jan. 27, 2019, if approved. If the governors of the Postal Service OK the proposed rate increase, package and box rates should rise by a range of 5 percent to 11 percent. And Parcel Select (i.e., last-mile delivery), the service most used by Amazon, could see a 9 percent to 12 percent increase in fees.
Total Retail's Take: Given its position as the unquestioned e-commerce leader and thus the volume of shipping it does, a postal rate increase is big news for Amazon. In fact, a possible postal rate increase is a concern for all retailers. As we've reported, the cash-strapped USPS is looking to increase postal rates as a means to remain competitive in the lucrative order-delivery business, as well as to provide a much-needed revenue infusion. With free shipping becoming a standard expectation for online shoppers, the question becomes how much Amazon and other retailers are willing to eat in terms of increased costs before passing on some of those expenses to consumers. Already an expensive line item, shipping costs could be rising higher, impacting Amazon especially.