In a nut shell. Sad, but succinct, and true.
USPS
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In a nut shell. Sad, but succinct, and true.
brah
While this thread has swerved to the point that it probably belongs in the PRC forum, raising prices in response to increased demand is common for goods and services that are supply-constrained.
Basic microeconomics comes down to a supply curve where supply increases with increasing price, and a demand curve where demand decreases with increasing price. Market equilibrium occurs where the 2 curves intersect. And this basic relationship is why one might think that as demand goes up, price will come down. But supply curves aren't always linear, and an increasing supply with increasing price assumes that there's enough time for new suppliers to enter the market.
For holiday delivery by the USPS, there is limited opportunity for new players to enter the market to increase supply at the same cost (although there is certainly some use of temporary workers by all the delivery companies to handle the increased demand). But the bigger issue here is that the supply curve has some flat spots and steps due to fixed costs and quantized capacity. A delivery truck running a route costs (roughly) the same to operate whether it has a single letter in it, or is at full capacity. So the marginal cost for each additional package added to a truck not yet at capacity is almost zero. But the marginal cost for a package that won't fit on the truck is the cost for another truck on the route (or a move to a larger truck). And if you can't add additional capacity, the marginal cost for that package that won't fit on the truck is infinite.
In practice, this means that for fixed supply, as demand increases (the demand curve shifts vertically), the price increases until the demand drops to what the supply can handle. And this effect can be seen with congestion pricing for transportation (which is common in the airline industry), and in the so-called "price gouging" that occurs when panic buying occurs.
Given the the number of shipping companies that rely on the USPS for "last mile" delivery (because the USPS already has trucks on the route and usually has excess capacity, so can offer the service at a better price than for someone who would need to add a truck), a price increase by the USPS to signal that they expect to be capacity constrained is absolutely rational. And announcing the price increase in advance gives the other shipping companies time to ramp up their capacity.
I pay most all my bills online, and use Pirate Ship for parcels..
The good ol days of stamp collecting is over.
The good ol days of stamp collecting is over.
All I will say is this. "Competitive" means to force a lowest bidder at the highest relative quality. Staying "competitive" in the corporate world means to hold onto your status quo. At least two things went awry with the whole tariff thing. #1, either our domestic industry is so reliant on China either directly or indirectly that producers were FORCED to raise prices to maintain their revenue/profit MARGINS, OR, more likely, the corruption and conflation of the term "competitive" to "staying in power". I imagine it's some combo of the two, but more likely the greedy bean counters raising the prices just because they can. As I mentioned in another post, a percentage of a percentage is MULTIPLICATIVE in nature, and companies shouldn't be raising prices across the board just because imports are more expensive. If Made in China goes up, companies that increase to China tariff level pricing even if other goods cost less should be penalized.
Give Apple a few more minutes. I'm sure one of their "skunk works" employees are working on an iShippit gizmo to make a zillion more bucks for them.
I am completely, totally, and admittedly clueless where business practices / principles are concerned. Totally. It's completely beyond my expertise, and I try to stay in my lane.
I have noted, however that most companies I do business with do occasionally either raise baseline prices for goods / services, or lower them, likely based on many factors (cost, demand etc. ??), most of which I probably don't fully understand, and don't expect to.
One thing that stands out to me is that while I know raising prices / rates periodically is something USPS is 'famous' for doing as surely as the sun rising in the East, I can't recall when they have ever reduced / lowered pricing on anything.
This rather unique difference leads me to wonder if USPS business practices are in fact based on typical, standard / accepted business practices at all (as some might suggest). I suspect that their business model is perhaps different from that of most other businesses, and if so, I don't know why that would be. I can only assume that there are other factors in play which don't recessarily apply to most other businesses, and if so I believe that may be problematic, and perhaps unique to that entity.
The only constant seems to be that quality declines, and prices rise. That fundamentally doesn't sound healthy or sustainable to me.
I have noted, however that most companies I do business with do occasionally either raise baseline prices for goods / services, or lower them, likely based on many factors (cost, demand etc. ??), most of which I probably don't fully understand, and don't expect to.
One thing that stands out to me is that while I know raising prices / rates periodically is something USPS is 'famous' for doing as surely as the sun rising in the East, I can't recall when they have ever reduced / lowered pricing on anything.
This rather unique difference leads me to wonder if USPS business practices are in fact based on typical, standard / accepted business practices at all (as some might suggest). I suspect that their business model is perhaps different from that of most other businesses, and if so, I don't know why that would be. I can only assume that there are other factors in play which don't recessarily apply to most other businesses, and if so I believe that may be problematic, and perhaps unique to that entity.
The only constant seems to be that quality declines, and prices rise. That fundamentally doesn't sound healthy or sustainable to me.
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jtr1962
Flashaholic
The reason for this is that USPS is a defacto monopoly in many ways. Sure, it has competitors in the package delivery part of its business but even those sometimes outsource last mile delivery to USPS. For paper mail USPS is a monopoly. It has no real competitors, nor could any company hope to compete without first spending many billions in capital outlays.
Think of other things where the price goes nowhere but up, like electricity (there are fluctuations due to supply costs but the trend is always up) and transit. In both cases the enormous amount of capital needed to compete means these sectors are virtual monopolies. They're regulated in that fare or rate increases must be approved but I've never heard of prices being approved in the other direction. These types of businesses typically have fixed costs that never decrease, only increase. Labor is also a large component of their costs. Labor costs go nowhere but up. As a result, prices only go up.
Yes, and the same type of analysis applies to the other two virtual monopolies I mentioned. This is why transit agencies or electric companies often have either higher peak hour rates, or lower off-peak rates (really two ways of expressing the same thing). The incremental cost of an extra unit of service is often close to zero during off-peak periods, but much higher during peak periods. Electric companies may need to start expensive to run peaking plants. Transit agencies may need more buses or trains, along with people to operate them.
jtr1962
Flashaholic
Unfortunately this is today's business mentality. All the years I've been in business if my costs rise at most I charge my customers the extra amount of the cost increase so my profit remains the same. If the cost increase is temporary, as it was when there was a MOSFET shortage, I often just absorb the extra cost for a few months. I never do stuff like charge $1 more if my costs rose $0.25 but large corportations do this all the time. Even worse, when their costs drop you rarely see the full amount passed on. In the example I just gave if costs fell by $0.25, meaning they were back to where they were before the price was increased by $1, a large corporation might lower their prices by $0.15. They should lower them by $1 to be consistent with their method of increasing prices but that never happens. So now they make $0.75 more profit when their cost goes up by $0.25, and an additional $0.10 more profit when it falls by $0.25!
No wonder so many corporations have been posting record profits the last few years.
Recently I did have to raise my prices due to the tariffs. The amount is simply too large to absorb. My invoices bill for the tariffs as separate line items. I also indicate that if a future court decision reverses the tariffs and they're refunded to me, my customers will get a credit on future invoices.
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Re: USPS: I don't know why I suspect it (possibly my own ignorance), and it could be irrelevant, but could it be that unwise practices related to their labor costs and long term pension obligations are coming home to roost and are threatening / compromising their viability now? If that were a big factor, I'd then say they may have made their own bed, and now they should have to lie in it.
I'm purely speculating, but I do know this has been the case with some other organizations. It has seemed to affect outfits where either the government or unions (or both) have been involved. I believe that both might apply where USPS is concerned(?)...
I'm purely speculating, but I do know this has been the case with some other organizations. It has seemed to affect outfits where either the government or unions (or both) have been involved. I believe that both might apply where USPS is concerned(?)...
IMA SOL MAN
Flashlight Enthusiast
I think that you have now hit upon half of the base of the problem. Anytime you involve unions or government bureaucracies, you increase inefficiencies; the two together are a nightmare.
The other half of the problem, in my opinion, is the devaluing of the dollar. People whine when the postal rate goes up, but don't tell their employer not to give them that COLA raise. The fact that the dollar has been losing value does not stop at the post office door--it enters, and affects everything, just like it does in your home and workplace. USPS has a huge fleet of vehicles to maintain and fuel, delivery drivers to pay, and buildings to maintain. Isn't anyone amazed that you can send a letter from Key West Florida to Seattle Washington for less than a dollar? I thought the French were spoiled children, but now I really have to examine Americans. Technology and living in metropolises has spoiled us. We live in a nation were you can be lying on the sofa watching TV, phone to have food delivered, and in less than 30 minutes have it delivered to your door. With cell phones you can communicate at will almost everywhere in the world. You can get on a jet, and in a few hours (relatively speaking) be half way around the world. With climate control settings at our finger tips, we live in comfort. And we whine when our postal rates increase, but no one is screaming about the devaluation of our "money", which isn't really money, it is fiat currency. Gold and silver coins are real money. We The People, have been robbed, and now we are told to believe "cryptocurrency" is "real money". Look at the King's new clothes. Will anyone tell the King that he is naked? 🙄
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