Trump tweets aside, Amazon aids USPS
President Trump again took aim at Amazon on Thursday, blasting it for hurting retailers as well as the U.S. Postal Service. Do his criticisms ring true? Many brick-and-mortar stores have closed as retail chains struggle to compete with the convenience of online shopping, a transformation led and dominated by Amazon.
The U.S. Postal Service has been roiled by the same gale-force technology winds, as Americans abandoned mail for email and other electronic communication. But the post office has benefited, more than suffered, from Amazon, financial analysts say.
Along with UPS and FedEx, the Postal Service helps deliver packages in the “last mile” of their Amazon journey. That has translated to more packages and package-related revenue, in part thanks to Amazon.
In the October-December 2017 quarter, the service handled 7% more packages than in the same period a year before, as mail declined about 5%.
“Although we continue to win customers and grow our package business, these gains are not sufficient to offset continuing declines in our mail business, which is our main source of revenue and contribution,” Postmaster General and CEO Megan Brennan said last month.
The service has a decade-long string of fiscal net losses, which has led to more than $120 billion in unfunded liabilities, mostly retirement, health and pension benefits. In 2006, Congress mandated that the postal service prepay benefits, a special requirement other agencies do not face.
“We’re trying to pass reform legislation that will allow USPS to compete without the multibillion-dollar burden imposed on it by Congress in 2006,” Rep. Gerry Connelly, D-Va., a member of the House Oversight Committee, said in a statement. “Singling out favorite Trump villains like Amazon is a distraction from our bipartisan effort.”
The Postal Service and Amazon declined to comment on their relationship. The postal service’s contract with Amazon must be approved by regulators and must generate a profit for the service.
Amazon could hurt the postal service — and other package companies — if it successfully shifts more of its delivery to its own delivery network, which it has been slowly building out over the past few years. But with that network in its early stages, it’s a paying customer of the post office.
“Amazon has been a huge cash-flow generating machine for the U.S. Postal Service given the scale and scope of the company’s global distribution,” said Daniel Ives, chief strategy officer and head of technology research for GBH Insights.
Among tech companies, Amazon is Trump’s favorite target. On Wednesday, a news report in Axios, citing five unidentified sources, said the president is considering whether to change Amazon’s tax treatment because the online retailing giant doesn’t pay its fair share of taxes and has hurt smaller competitors. Shares dropped 4%, but they rebounded Thursday.
Trump tweeted Thursday that he had voiced concerns about the company before his election. “They pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!” he tweeted.
Amazon did not initially collect state sales taxes when it began selling books online in 1995. However, Amazon and other big e-commerce companies now routinely collect state sales taxes.