December 29, 2017 / 1:19 PM / 8 months ago

Trump wants Postal Service to charge 'much more' for Amazon shipments

SEATTLE/WASHINGTON (Reuters) - President Donald Trump called on the U.S. Postal Service on Friday to charge “much more” to ship packages for Amazon (AMZN.O), picking another fight with an online retail giant he has criticized in the past.

“Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer? Should be charging MUCH MORE!” Trump wrote on Twitter.

The president’s tweet drew fresh attention to the fragile finances of the Postal Service at a time when tens of millions of parcels have just been shipped all over the country for the holiday season.

The U.S. Postal Service, which runs at a big loss, is an independent agency within the federal government and does not receive tax dollars for operating expenses, according to its website.

Package delivery has become an increasingly important part of its business as the Internet has led to a sharp decline in the amount of first-class letters.

The president does not determine postal rates. They are set by the Postal Regulatory Commission, an independent government agency with commissioners selected by the president from both political parties. That panel raised prices on packages by almost 2 percent in November.

Amazon was founded by Jeff Bezos, who remains the chief executive officer of the retail company and is the richest person in the world, according to Bloomberg News. Bezos also owns The Washington Post, a newspaper Trump has repeatedly railed against in his criticisms of the news media.

In tweets over the past year, Trump has said the “Amazon Washington Post” fabricated stories. He has said Amazon does not pay sales tax, which is not true, and so hurts other retailers, part of a pattern by the former businessman and reality television host of periodically turning his ire on big American companies since he took office in January.

Daniel Ives, a research analyst at GBH Insights, said Trump’s comment could be taken as a warning to the retail giant. However, he said he was not concerned for Amazon.

“We do not see any price hikes in the future. However, that is a risk that Amazon is clearly aware of and (it) is building out its distribution (system) aggressively,” he said.

Amazon has shown interest in the past in shifting into its own delivery service, including testing drones for deliveries. In 2015, the company spent $11.5 billion on shipping, 46 percent of its total operating expenses that year.

Amazon shares were down 0.86 percent to $1,175.90 by early afternoon. Overall, U.S. stock prices were down slightly on Friday.

FILE PHOTO: A combination photo shows Amazon CEO Jeff Bezos (L) in New York and U.S. President Donald Trump at the White House in Washington, DC, U.S. on December 14, 2016 and on December 20, 2017 respectively. REUTERS/Shannon Stapleton (L) Jonathan Ernst (R)/Files

MILLIONS OF PARCELS

Satish Jindel, president of ShipMatrix Inc, which analyzes shipping data, disputed the idea that the Postal Service charges less than United Parcel Service Inc (UPS.N) and FedEx Corp (FDX.N), the other biggest players in the parcel delivery business in the United States.

Many customers get lower rates from UPS and FedEx than they would get from the post office for comparable services, he said.

The Postal Service delivers about 62 percent of Amazon packages, for about 3.5 to 4 million a day during the current peak year-end holiday shipping season, Jindel said. The Seattle-based company and the post office have an agreement in which mail carriers take Amazon packages on the last leg of their journeys, from post offices to customers’ doorsteps.

Amazon’s No. 2 carrier is UPS, at 21 percent, and FedEx is third, with 8 percent or so, according to Jindel.

Trump’s comment tapped into a debate over whether Postal Service pricing has kept pace with the rise of e-commerce, which has flooded the mail with small packages.Private companies like UPS have long claimed the current system unfairly undercuts their business.

Steve Gaut, a spokesman for UPS, noted that the company values its “productive relationship” with the postal service, but that it has filed with the Postal Regulatory Commission its concerns about the postal service’s methods for covering costs.

Representatives for Amazon, the White House, the U.S. Postal Service and FedEx declined comment or were not immediately available for comment on Trump’s tweet.

According to its annual report, the Postal Service lost $2.74 billion this year, and its deficit has ballooned to $61.86 billion.

While the Postal Service’s revenue for first class mail, marketing mail and periodicals is flat or declining, revenue from package delivery is up 44 percent since 2014 to $19.5 billion in the fiscal year ended Sept. 30, 2017.

But it also lost about $2 billion in revenue when a temporary surcharge expired in April 2016.

According to a Government Accountability Office report in February, the service is facing growing personnel expenses, particularly $73.4 billion in unfunded pension and benefits liabilities. The Postal Service has not announced any plans to cut costs.

By law, the Postal Service has to set prices for package delivery to cover the costs attributable to that service. But the postal service allocates only 5.5 percent of its total costs to its business of shipping packages even though that line of business is 28 percent of its total revenue.

Additional reporting by Laharee Chatterjee in Bengaluru, India; Writing by Patricia Zengerle; Editing by Damon Darlin, Frances Kerry and David Gregorio

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