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The postal service is a networked delivery service, just like the Internet. The difference is that the data packets are physical envelopes. Now, the cost of ru
by scholia 11y ago
The postal service is a networked delivery service, just like the Internet. The difference is that the data packets are physical envelopes.
Now, the cost of running the postal service is the cost of supporting the whole network of delivery vans, sorting offices, collections and so on, including all the staff.
The cost of supporting the network is the same whether it carries a very large number of packets or zero packets (up to the point where you have to add infrastructure to cope with extra traffic. Yes, like the Internet).
This economic structure means you can carry traffic at a marginal cost if you know the cost of supporting the whole network is covered.
All of which was worked out before Sir Rowland Hill launched the Uniform Penny Post in the UK in 1840. This disrupted the whole messenger business (where you paid for distance traveled) and was widely copied everywhere else. After that, nations formed a Universal Postal Union on the basis that "we'll deliver your letters if you deliver ours" (like the Internet).
In the early days of the public Internet (early 1980s), I used to explain how it worked by comparing it to the penny post. It's nice to be able to do the reverse ;-)
- mikeash 11y agoShips, airplanes, trucks, and postal workers have substantial ongoing costs. The marginal cost of additional traffic is still pretty high, and indications are that these sellers are getting away with paying less than that actual marginal cost.
- scholia 11y ago> Ships, airplanes, trucks, and postal workers have substantial ongoing costs. Yes, those are the network costs, ie the cost of supporting the collection-and-delivery network. They're assumed to be (more or less) constant, regardless of traffic. You don't make any money running a network with empty vans.
- mikeash 11y agoBy "ongoing costs" (maybe the wrong term) I mean costs related to the amount of traffic. The number of trucks or airplanes you need to run on any given day depends on how much traffic you carry. The amount of fuel you need to buy then depends on that. So does much of the maintenance you do, and how much you pay the workers. A postal network carrying zero traffic will be a lot cheaper to run than one carrying lots of traffic. The analogy to the internet is not very good. A network link with a 100Gbit capacity costs about the same to run for a day whether it carries a petabyte or nothing. A postal route with a million parcel/day capacity costs way more to run for a day if it actually carries a million parcels than if it carries nothing.
- Retric 11y agoOnce you need to send a truck to someone's house, have someone get out and drop off one letter then adding a second letter has a tiny extra marginal cost. Further, there are some fuel savings from sending an air craft 1/4 full vs. 3/4 full but again there minimal in comparison to keeping the aircraft flying in the first place. Thus, from the post offices perspective they are much better off with a steady stream of traffic than random spikes. Which is a large part of why the post office is willing to deliver spam aka junk mail so cheaply.
- mikeash 11y agoSure, but once the truck is full, sending one more letter needs an entire second truck. Average this across the system, and a route's costs per parcel are roughly equal to (cost of running one truck) / (number of parcels the truck carries).
- deleted 11y ago[deleted]
- Retric 11y agoThe normal solution to that is just wait a day to deliver some mail. With some intelligent routing you basely never send a truck out that's not close to normal capacity.
- hamiltonkibbe 11y agoNagle's algorithm[0]. So long as you haven't recieved a "Where the hell is my mail" phone call, just keep adding stuff to the second truck until that second truck fills up, and send it later. [0]: https://en.wikipedia.org/wiki/Nagle%27s_algorithm https://en.wikipedia.org/wiki/Nagle%27s_algorithm
- whoopdedo 11y agoI'm sure that a router sitting idle is going to consume less electricity and require less cooling than one operating at full load.
- 11y ago
- Scoundreller 11y agoI also guess registered mail is common or very cheap in China. I'll have $5 packages shipped registered, which must incur a dollar or two in direct costs by the mail carrier.
- gshubert17 11y agoCharles Babbage (and Thomas Colby) also argued for uniform rates in the British postal system.
- tomp 11y agoI don't buy this argument. This might explain free shipping to France (the country), but not free delivery to the OP (the physical address). There's not way you can make even a short 1km delivery profitable for 3 cents (except if you're delivering for a whole building at once, which seems very unlikely).
- guelo 11y agoWhether the mailman delivers the 3 cent button or not he still gets up in the morning, does his delivery rounds and collects the same paycheck.
- scholia 11y agoI'm reminded of the famous "discovery" that it costs $10 (or whatever) for a secretary to send a letter. Actually, the secretary costs $10 whether she sends a letter or not ;-)
- hobs 11y agoThe point is that transaction is not profitable but overall the system is. They get soaked on the 3c button, but as most people dont do this, they can absorb that cost and subsidize it with the rest of their profits.
- monochromatic 11y agoFine, but why would they? They're running the system anyway, sure... but why take a marginal loss on that 3 cent transaction?
- monochromatic 11y agoThat only gets you so far though. > assuming it takes the mailman as little as 10 seconds to deliver the package, and given he is paid the minimal legal wage here, that would already cost… 3 cents already! The marginal cost for delivering that button (even assuming the button itself was free) was more than 3 cents.
- jrockway 11y agoWhat if it's like airlines, where the full-fare and business class passengers subsidize the economy class? Maybe for every 3 cent button, someone is paying more than the marginal cost for their shipping, so it all evens out in the end?
- monochromatic 11y agoI mean, I'm sure it is like that. But you have to ask yourself, why bother with the 3 cent transaction?
- pdxandi 11y agoRepeat business on presumably larger transactions?
- rhino369 11y agoEven in airfare, the economy seat costs more than the marginal cost.
- xanderstrike 11y agoThat's what I'm figuring. AliExpres's bread and butter is dirt cheap computer components and wholesale chargers and stuff for gas stations and the like. Their margin on that $100 android tablet is big enough to cover the shipping loss on hundreds of $0.03 buttons.
- nebula1 11y agoAliexpress won't loss money, but vendors do.
- mhb 11y agoIf that made sense, why can't I get 3 cent wooden buttons shipped to me within the US for free?
- cmdrfred 11y agoHow does that support the cost of the infrastructure? There would have to be some cost involved.
- RealGeek 11y agoChina's Government subsidies logistics to increase exports.
- rahimnathwani 11y agoI've heard this before, but not seen any primary sources. Can you point to any?
- spinlock 11y agoFree shipping on $0.03 buttons.
- RealGeek 11y agoJust searched and found this http://fortune.com/2015/03/11/united-nations-subsidy-chinese-shipping/ http://fortune.com/2015/03/11/united-nations-subsidy-chinese...
- rahimnathwani 11y agoThat article has no mention of subsidies from the Chinese government.
- RealGeek 11y agoI heard about Chinese Govt. subsidizing logistics on a news channel a while ago. I Googled about it yesterday and found this insightful article instead.
- cha5m 11y agoBut regardless why would a US delivery service allow the Chinese company to deliver things at zero cost, when they could clearly charge them more?
- incompatible 11y agohttps://en.wikipedia.org/wiki/Universal_Postal_Union https://en.wikipedia.org/wiki/Universal_Postal_Union agreements mean that postal services are obliged to deliver foreign mail, and the amount they are paid for it is unrelated to their actual delivery costs.
- aaron695 11y agoThis is just not true. The internet example for starters is incorrect. See AWS for some idea on real costings. It's just most internet plans are a all you can eat style system. The real answer is subsidies and trade agreements. PS The penny post would be around one pound in today's figures, more than current letters costs.
- emilyfm 11y agoOne penny in 1840 would be around 20p today (http://www.nationalarchives.gov.uk/currency/ http://www.nationalarchives.gov.uk/currency/). First class post in the UK is 62p, so in real terms around 3 times as expensive as in 1840. (and the service in the 1840's had multiple collections and deliveries per day).