President Donald Trump reiterated his attacks on Amazon on Tuesday, claiming that the company is costing the Post Office – and American taxpayers – money because the retail gaint isn’t paying enough to ship packages.
“I am right about Amazon costing the United States Post Office massive amounts of money for being their Delivery Boy. Amazon should pay these costs (plus) and not have them bourne [sic] by the American Taxpayer. Many billions of dollars. P.O. leaders don’t have a clue (or do they?)!” he tweeted early Tuesday
Trump has been assailing Amazon almost every day for a week – when a report emerged that Trump was planning to “go after” the online company. In a series of tweets over the course of several days, he has accused Amazon of creating loss for the U.S. Postal Service. That’s not true.
Competition (including from Amazon’s efforts to develop its own supply chain) is limiting the U.S. Postal Service’s ability to negotiate higher shipping rates. And the Post Office’s problems are a lot deeper than Amazon getting discounts for some packages.
Despite the president’s claims that these online retailers are creating a loss for the Postal Service, Amazon and other e-commerce sites have been helping to stanch the Post Office’s declining cashflow. Shipping and package revenue is on track to surpass first-class mail revenue. The Post Office itself said that e-commerce was helping to keep it afloat. Amazon has also pointed out that the Postal Regulatory Commission has found the USPS’s contract with Amazon to be profitable, the New York Times reported.
The Post Office brought in $19.5 billion from shipping packages like Amazon’s last year, one of the few bright spots in a balance sheet marked by a $1.9 billion decline in revenue from first-class mail. Mail delivery that shrank by 5 billion pieces (4%), but package shipments rose by 589 million (11.4%). Package revenues were also up by about $2.1 billion year over year.
While Trump is not wrong in saying that the U.S. Postal Service has been losing money for years, the biggest factor is that Americans just don’t send nearly as much mail anymore.
Trump’s argument, which he has used before, may stem from an April 2017 analysis from Citigroup that claimed the U.S. Postal Service should be charging Amazon and others $1.46 more per package because of a quirk in the rules governing how the Post Office budgets package shipments.
Amazon uses the Postal Service – as well as companies like FedEx and UPS, for “last mile” deliveries – shipments from fulfillment centers to local addresses. Because these packages are only going a short distance, the Post Office gives Amazon and other major e-commerce retailers a discount for these deliveries, according to the Wall Street Journal.
Trumps seems to have been hinting at this when he tweeted (inaccurately) that “it is reported that the U.S. Post Office will lose $1.50 on average for each package it delivers for Amazon.”
Scott Devitt, an analyst for financial services firm Stifel, also notes that the Post Office likely couldn’t charge Amazon more, even if it wanted to.
“Amazon also uses all major logistics companies in the U.S. Amazon does use USPS but, if an arrangement were to become uneconomic to Amazon, Amazon has plenty of options. What are the options for the USPS?” Devitt wrote in a report on the subject.
It should also be noted that the company does collect sales taxes for Washington D.C. and all 45 states that have statewide sales taxes. Third-party sellers on Amazon, however, which make up about half of Amazon’s marketplace, do not, Devitt noted. He adds that other e-commerce sites like eBay and Google Transactions are third-party platforms with smaller scales of sales tax collection.
“These are toxic times,” Devitt continues. “The attack by POTUS on these topics does not seem well-informed or detrimental to Amazon. Amazon’s business is built and managed to benefit consumers, not inefficient members of the retail society. Long-term oriented investors should patiently wait and take advantage of noise in the system because common sense suggests it is just that, noise.”
Amazon’s stock dipped 6.7% on March 29 after Axios reported that Trump wanted to “go after” Amazon. The stock has continued its slide, falling nearly 8% since the Axios report.