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Why Is Trump Attacking Amazon for Giving Work to the Post Office?

By Motley Fool Staff – Apr 11, 2018 at 1:48PM

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The U.S. Postal Service is suffering from a long period of financial troubles. The rise of e-mail has more to do with them than the rise of e-commerce.

In this segment from MarketFoolery, host Mac Greer, Million Dollar Portfolio's Jason Moser, and Hidden Gems Canada's David Kretzmann review the latest in President Trump's war of words against (AMZN -1.93%), which he blames for the financial troubles of the U.S. Postal Service.

The Fools take issue with Trump's assertion that the Post Office is losing money from delivering the e-commerce giant's packages -- mostly because it's not backed up by the facts. In fact, he has the situation totally backward.

A full transcript follows the video.

This video was recorded on April 4, 2018.

Mac Greer: President Trump continuing his war on Amazon. On Tuesday, Trump tweeted that Amazon is costing the United States Post Office massive amounts of money for being their "delivery boy." I want to set the table with some not-so-fun facts here. Ready? The U.S. Postal Service has lost money for 11 straight years. They have significant pension and healthcare costs. Around two-thirds of Amazon packages pass through the U.S. Postal Service at some point. That's a lot.

Amazon's network of warehouses is so extensive now that it pays sales tax in every state that has a sales tax. But, Amazon also facilitates third-party sales, and those third-party companies do not need to pay sales taxes in states where they don't have a physical presence. Finally, the Postal Service has a monopoly on regular mail delivery, as we all know. And you may have noticed that's a declining business.

David Kretzmann: Even with the monopoly status.

Greer: There you go. So, what do you think about President Trump's war on Amazon? Are we all Amazon shareholders here?

Jason Moser: Yes, I am.

Kretzmann: Yes.

Greer: What does that mean for you?

Kretzmann: I'll kick it off here. I think in this case, the USPS needs Amazon more than Amazon needs the USPS. The President's claims that Amazon is hurting the USPS, I don't know if there's actually a whole lot of facts behind that to back it up. In a way, it's that parcel and package delivery business that's actually been a growth driver for USPS. And that's driven, of course, by Amazon and the plethora of e-commerce activity we're seeing. So, that's something I would need to look into more.

But, at this point, like you mentioned, Mac, what used to be the USPS' bread and butter, first class mail delivery, that's been a declining business for a long time now. That package and parcel business with Amazon and others is where the growth has been. So, I think if USPS had to renegotiate its rates with Amazon, Amazon can go to FedEx (FDX -2.15%) or DHL or UPS (UPS -0.99%). Amazon is already testing out its own delivery service in LA. I suspect that's something that the company will roll out nationwide as they start to get that under their belt more. So, for me, it comes down to, USPS needs Amazon more than the other way around.

Moser: I absolutely agree with that. It's not like the USPS' business just went to crap overnight. It's been bad for a long time.

Greer: Take heart, you've been crappy for a while.

Moser: My entire life is like a Seinfeld episode, I relate to things via Seinfeld. I can always go back to that episode where Kramer tries to have the Post Office stop sending him mail, and Newman takes over and his bosses go crazy. So, there's an interesting situation here with the USPS, because it does seem like, when I get my mail every day, it goes from the mailbox to the trash can. I could do without it.

I also find it very interesting that he was not targeting FedEx and/ or UPS in this process. Perhaps that's because they don't necessarily have the ties to the government that USPS does. But Amazon has a lot of stuff that flows through the UPS services and FedEx services, as well. It's not like Amazon isn't paying for stuff to be shipped. If you look at it as a percentage of net sales, fulfillment was 12.5% of net sales in 2015, 13% in 2016, and 14.2% in 2017. Also keep in mind that throughout this entire stretch, Amazon Web Services has become a bigger part of Amazon's business as well. This is all just to say that Amazon is paying -- and this is a technical term -- a buttload in shipping and fulfillment costs every year. It's not like the USPS is getting the short-ended here.

Greer: So they're not getting a free ride.

Moser: No, they're not getting a free ride! And I can't help but feel like this is maybe a bit of a personal vendetta. I think there's probably some questions.

Greer: Jeff Bezos owns The Washington Post.

Moser: Yeah. So, I just think there's a little bit more here than meets the eye. I consider it a non-issue. I think it's kind of a soap opera, more or less, a little sideshow that's probably going to fade into the background pretty quickly. I mean, it would be one thing if Amazon's services and what they're doing wasn't benefiting customers. But people love Amazon. Customers are winning from using Amazon. It makes things better for us, it's bringing down costs, it's giving us more time. It'd be different if Amazon was a blight on society, but it's not.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Kretzmann owns shares of Amazon. Jason Moser has no position in any of the stocks mentioned. Mac Greer owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends FedEx. The Motley Fool has a disclosure policy.

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