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Why didn't FedEx, UPS, and USPS cut/drop prices in order to be competitive? They raise rates yearly like inflation but... shouldn't their costs be going down ye

Why didn't FedEx, UPS, and USPS cut/drop prices in order to be competitive? They raise rates yearly like inflation but... shouldn't their costs be going down year over year as they grow larger and larger? Volume discounts, efficiency gains. I don't have data in front of me so I'm sort of pulling numbers out of my a if you will but I'm pretty sure UPS + FedEx raise rates about 7% year over year for all sizable shippers at pretty much the same time of the year. Meaning, FedEx raises rates, the next week, UPS raises rates.

saas_sam 6y ago
FedEx & UPS are whole different beast vs. gov't run USPS, way out of my depth on that comparison. But in general, history is chock FULL of once-dominant, massively scaled businesses that decline sharply in the face of new competitors. The exact reasons vary. Sometimes it's people: execs, unions, culture being unwilling to change. Sometimes it's intrinsic characteristics of a business that make it impossible to adapt as fast as a new market entrant. The answer here is probably: software.
- throwaway5752 6y ago
  You used to pay lots of money to trade stock, and annual fees for credit cards!
- bronco21016 6y ago
  Software.... that's definitely Amazon's delivery advantage. Their software is ingenious in that it sends drivers circling my sub-division and pulling in and out of driveways to turn around. I don't watch FedEx and UPS trucks aimlessly wander. I wonder why that is.
  - bigtex 6y ago
    Or geofences that require the driver to be at a certain spot on your driveway in order to deliver the package, requiring a chat with Delivery support to move the geofence
  - Aperocky 6y ago
    If it looks crazy, it might just be the most optimized route. Like how google tells you to drive on a dike and then over some one lane dirt roads through a hill to get there 10 minutes faster.
    - bronco21016 6y ago
      It’s definitely not. They drive by a house, turn around, deliver a package there, then turn around again, and keep going. I don’t know the operation so I can say exactly what is happening but I would imagine some of the factors are: poor mapping software, poor routing software, poor training, high employee churn. Ever since Amazon began delivering in my neighborhood it’s been a disaster. Packages frequently say out for delivery and don’t show up for two days, after saying out for delivery. Packages frequently sit at the “distribution partner” for days. Delivery targets are missed frequently. Packages are just chucked into the front yard. All of this was pre-COVID. It’s obviously worse now. Prior to Amazon delivering, my packages typically came via USPS. The target was pretty much always made and I can’t remember a time where I had a rash of issues. Aside from all the issues of tracking and delivering packages, I generally find the Amazon vans drive more erratically and the drivers typically seem rushed, distracted, and overall less knowledgeable of the roads and respectful of the fact that it’s a residential road and not a divided highway as compared to FedEx, UPS, and USPS.
toomuchtodo 6y ago
Why reduce your margins for an adversarial customer who will squeeze you until they build their own distribution network with underpaid independent contractors? There is plenty of shipping volume for FedEx and UPS without Amazon deliveries. I would also be curious what happens when Amazon delivery contractors are reclassified as employees, since they only deliver for Amazon (Fedex lost a large legal [$240MM] dispute over this years ago [1]). [1] https://www.reuters.com/article/us-fedex-settlement-idUSKCN0Z229Q https://www.reuters.com/article/us-fedex-settlement-idUSKCN0...
- Alupis 6y ago
  When FedEx walked away from Amazon, people said they were crazy. Now, today, UPS has to bend-over-backwards to meet Amazon's demands for delivery days, pickup days, days worked, the price Amazon is willing to pay, etc. Amazon was even able to compel USPS to delivery Amazon packages on Sundays! Basically, UPS works for Amazon now - FedEx saw that coming, and saw Amazon buying up freighter aircraft and trucks, etc.
- zdragnar 6y ago
  During the holiday season, my rural post office will get multiple semi truck loads per day, just of Amazon packages to deliver. Don't discount the massive volume of deliveries from amazon. That said, regular mail is also on the decline, significantly so, as more people use technology instead of pen and paper- bills, letters, contracts, nearly everything is going digital. Packages make up an increasingly significant amount of post office revenue. That said, anyone who pays attention to Amazon at all knows that they show no remorse about screwing over business partners by entering the same market, and Amazon has been doing that for awhile now. Even so, I suspect that they aren't going to bother expanding delivery out to where I am now- paying the post office to deliver is almost certainly cheaper than keeping a regular workforce of independent delivery drivers way out here.
  - Alupis 6y ago
    > During the holiday season, my rural post office will get multiple semi truck loads per day, just of Amazon packages to deliver. Don't discount the massive volume of deliveries from amazon. Except, when we do napkin math, it's costing USPS more money to deliver each of those packages than they collected! They would literally make money by not delivering packages. They aren't making money off delivering your package, no - they lose money. If they were making money, they would not need billions of capitol injection routinely.
Waterfall 6y ago
I think it had more to do with contracts. I thought servers prices would go down but it is done in blocks of time as contracts. It's why itanium is still around. On scale it also applies to large entities not having much momentum
treis 6y ago
>Why didn't FedEx, UPS, and USPS cut/drop prices in order to be competitive? Amazon retail operates at basically 0 margin. It is very difficult to compete with them given their scale and willingness to forgo profit. The writing was on the wall once Amazon decided they wanted to handle their own shipping. No way Fed Ex et.al. could be competitive on price and make money.
- ABeeSea 6y ago
  This is not true. Amazon’s physical retail in NA has made a profit for a long time.
- me_me_me 6y ago
  - Amazon what is your business domain? - Yes Its scary what amazon will be in the future.
  - aglavine 6y ago
    We need to break it.
    - Florin_Andrei 6y ago
      Yes. It's at the point where it can strong-arm large chunks of the economy. That's too much power in the hands of a single for-profit entity.
  - missedthecue 6y ago
    They should only bring efficiencies and competition to a few places that 70 year olds in Washington permit them to?
- kooshball 6y ago
  >Amazon retail operates at basically 0 margin. This may have been true in the past but it's not an accurate any more. Especially the way you're phrasing it like how they don't make any money. Profit is low because they're using the cash flow to make further investment. Not because each item sold is not making any money.

saas_sam 6y ago

FedEx & UPS are whole different beast vs. gov't run USPS, way out of my depth on that comparison. But in general, history is chock FULL of once-dominant, massively scaled businesses that decline sharply in the face of new competitors. The exact reasons vary. Sometimes it's people: execs, unions, culture being unwilling to change. Sometimes it's intrinsic characteristics of a business that make it impossible to adapt as fast as a new market entrant. The answer here is probably: software.

throwaway5752 6y ago
You used to pay lots of money to trade stock, and annual fees for credit cards!
bronco21016 6y ago
Software.... that's definitely Amazon's delivery advantage. Their software is ingenious in that it sends drivers circling my sub-division and pulling in and out of driveways to turn around. I don't watch FedEx and UPS trucks aimlessly wander. I wonder why that is.
- bigtex 6y ago
  Or geofences that require the driver to be at a certain spot on your driveway in order to deliver the package, requiring a chat with Delivery support to move the geofence
- Aperocky 6y ago
  If it looks crazy, it might just be the most optimized route. Like how google tells you to drive on a dike and then over some one lane dirt roads through a hill to get there 10 minutes faster.
  - bronco21016 6y ago
    It’s definitely not. They drive by a house, turn around, deliver a package there, then turn around again, and keep going. I don’t know the operation so I can say exactly what is happening but I would imagine some of the factors are: poor mapping software, poor routing software, poor training, high employee churn. Ever since Amazon began delivering in my neighborhood it’s been a disaster. Packages frequently say out for delivery and don’t show up for two days, after saying out for delivery. Packages frequently sit at the “distribution partner” for days. Delivery targets are missed frequently. Packages are just chucked into the front yard. All of this was pre-COVID. It’s obviously worse now. Prior to Amazon delivering, my packages typically came via USPS. The target was pretty much always made and I can’t remember a time where I had a rash of issues. Aside from all the issues of tracking and delivering packages, I generally find the Amazon vans drive more erratically and the drivers typically seem rushed, distracted, and overall less knowledgeable of the roads and respectful of the fact that it’s a residential road and not a divided highway as compared to FedEx, UPS, and USPS.

toomuchtodo 6y ago

Why reduce your margins for an adversarial customer who will squeeze you until they build their own distribution network with underpaid independent contractors? There is plenty of shipping volume for FedEx and UPS without Amazon deliveries. I would also be curious what happens when Amazon delivery contractors are reclassified as employees, since they only deliver for Amazon (Fedex lost a large legal [$240MM] dispute over this years ago [1]). [1] https://www.reuters.com/article/us-fedex-settlement-idUSKCN0Z229Q https://www.reuters.com/article/us-fedex-settlement-idUSKCN0...

Alupis 6y ago
When FedEx walked away from Amazon, people said they were crazy. Now, today, UPS has to bend-over-backwards to meet Amazon's demands for delivery days, pickup days, days worked, the price Amazon is willing to pay, etc. Amazon was even able to compel USPS to delivery Amazon packages on Sundays! Basically, UPS works for Amazon now - FedEx saw that coming, and saw Amazon buying up freighter aircraft and trucks, etc.
zdragnar 6y ago
During the holiday season, my rural post office will get multiple semi truck loads per day, just of Amazon packages to deliver. Don't discount the massive volume of deliveries from amazon. That said, regular mail is also on the decline, significantly so, as more people use technology instead of pen and paper- bills, letters, contracts, nearly everything is going digital. Packages make up an increasingly significant amount of post office revenue. That said, anyone who pays attention to Amazon at all knows that they show no remorse about screwing over business partners by entering the same market, and Amazon has been doing that for awhile now. Even so, I suspect that they aren't going to bother expanding delivery out to where I am now- paying the post office to deliver is almost certainly cheaper than keeping a regular workforce of independent delivery drivers way out here.
- Alupis 6y ago
  > During the holiday season, my rural post office will get multiple semi truck loads per day, just of Amazon packages to deliver. Don't discount the massive volume of deliveries from amazon. Except, when we do napkin math, it's costing USPS more money to deliver each of those packages than they collected! They would literally make money by not delivering packages. They aren't making money off delivering your package, no - they lose money. If they were making money, they would not need billions of capitol injection routinely.

Waterfall 6y ago

I think it had more to do with contracts. I thought servers prices would go down but it is done in blocks of time as contracts. It's why itanium is still around. On scale it also applies to large entities not having much momentum

treis 6y ago

>Why didn't FedEx, UPS, and USPS cut/drop prices in order to be competitive? Amazon retail operates at basically 0 margin. It is very difficult to compete with them given their scale and willingness to forgo profit. The writing was on the wall once Amazon decided they wanted to handle their own shipping. No way Fed Ex et.al. could be competitive on price and make money.

ABeeSea 6y ago
This is not true. Amazon’s physical retail in NA has made a profit for a long time.
me_me_me 6y ago
- Amazon what is your business domain? - Yes Its scary what amazon will be in the future.
- aglavine 6y ago
  We need to break it.
  - Florin_Andrei 6y ago
    Yes. It's at the point where it can strong-arm large chunks of the economy. That's too much power in the hands of a single for-profit entity.
- missedthecue 6y ago
  They should only bring efficiencies and competition to a few places that 70 year olds in Washington permit them to?
kooshball 6y ago
>Amazon retail operates at basically 0 margin. This may have been true in the past but it's not an accurate any more. Especially the way you're phrasing it like how they don't make any money. Profit is low because they're using the cash flow to make further investment. Not because each item sold is not making any money.