If Trump Declares War On Amazon, Consumers Will Be Among The Casualties
02 Apr 2018
First there were the Robber Barrons — John Jacob Astor, Andrew Carnegie, JP Morgan, John D. Rockefeller, Cornelius Vanderbilt and more — whom President Theodore Roosevelt took on, busting their trusts. Now another activist president, Donald Trump, wants to add Jeff Bezos to that list.
Times have changed, and societal problems are different, but what hasn’t changed is the righteous indignation presidents feel against their foes. Back in TR’s day — apparently no one who knew him called him “Teddy” — Roosevelt took an axe to monopoly trusts for anti-competitive actions that drove up prices.
President Trump’s stance against Bezos and Amazon is not so clear cut since no one can argue that Amazon has inflated prices — quite the opposite. And while Bezos has been a fierce competitor, with many people laying the blame for the reported “retail apocalypse” at Amazon’s door, the businesses it may have killed died a natural death from free-market capitalism. In business, it’s survival of the fittest, and Amazon has the best-developed retail muscles in the market today.
Axios reports that, taking a cue from Roosevelt’s playbook, Trump is looking at anti-monopoly laws and regulations as a way to take Bezos’ Amazon down. However, success on the antitrust front doesn’t look likely, as Amazon’s recent acquisition of Whole Foods was unopposed by the Trump administration.
Based upon the president’s recent statements and tweets, here are the fronts on which his potential war on Amazon is likely to be fought.
Sales taxes: moot point
E-commerce retailers have long had an advantage over brick-and-mortar retailers in not having to charge state sales taxes, unless the e-commerce retailer has a physical presence in that state. This is an adjustment to tax law that is long overdue. However, Amazon is now collecting sales taxes across the board, so it really won’t feel a hit here (although other e-commerce retailers will have to make their customers pay the bill if tax law changes are enacted).
Of course, with Trump being so proud of the income tax cut recently passed, it is unclear if he will have the stomach to enact a new tax that will negatively impact consumers. Congress has talked for years about removing this tax advantage for e-commerce players, but that hasn’t resulted in any changes yet.
I suspect that there will continue to be a lot of bluster around this topic but that no real action will be taken anytime soon.
Postal Service: Can it survive without Amazon?
The problems with the Postal Service are legend, including its failure to make ends meet. But it still delivers the mail to households and businesses across the country, even as letter volume declines. The Postal Service’s growth opportunity is package delivery. “For the Postal Service, growth in packages is most welcome, especially as it continues to lose letter mail volumes,” the Inspector General’s blog states.
Consumers have benefited mightily in innovations in mail delivery, such as Priority and Two-Day delivery, that have resulted from the growth in e-commerce in general and Amazon in particular. The Postal Service can’t afford to lose Amazon as a client, and American consumers will be worse off if the Postal Service doesn’t have the added revenue that it provides.
Jobs: non-issue in the short term
In a near full-employment economy, it is hard to argue that Amazon is stealing jobs from Americans. Yes, many retail jobs have been lost to the massive store closures we’ve seen over the last few years, yet the retail industry remains the nation’s largest private-sector employer, with 29 million retail jobs, according to the National Retail Federation. Further, it supports employment in many other industries to feed retailers’ needs, amounting to a total of some 42 million jobs.
While statistics give little comfort to people who lose jobs in retail, they provide encouragement and hope for the unemployed to find new work. And with Amazon being first and foremost a technology company, employees gain new skills that can translate into higher-paying and more fulfilling careers than for those standing behind cash registers. As for jobs, Amazon plans to add 100,000 more full-time jobs over the next 18 months.
In the long term, however, Amazon may make more significant impacts on employment because of its investment in automation. This will undoubtedly hurt the jobs market in the future. But that is likely to be a battle for another president down the road, not our current one.
Small business: It’s complicated
Axios reports that Trump’s wealthy retail and real-estate buddies have been pushing him to do something about Amazon. But given his set point, it is hard to imagine that he is being strongly influenced by outsiders. Rather, Trump’s animosity toward Bezos and Amazon probably has its roots in his other major business holding, The Washington Post.
As much as Amazon has hurt established businesses, its Amazon Marketplace also offers them access to its customers and enables e-commerce for many brick-and-mortar retailers. Ultimately, it is hard to lay blame on retail’s woes solely at Amazon’s door. Rather, these retailers failed to see the opportunities and respond accordingly as fast or effectively as Amazon did.
Collateral Damage in Trump’s war on Amazon: consumers
If the Trump administration takes action against Amazon, the consumers will be the ones who suffer most, as in any war.
Yes, many competing companies have pulled their hair out over Amazon’s disruption of their businesses. At the same time, Amazon has gained tremendous loyalty and support from consumers who have benefited greatly from Amazon’s convenience, incredible selection and attractive prices.
Trump most likely won’t take on Amazon. As the most divisive president in my memory — and having come of age in the ’60s, I know about political contentiousness — Trump can’t afford to antagonize his base, who I am sure depend on Amazon just as much as those who oppose him.
Ultimately, Amazon has been good for consumers, even in as much as it has disrupted the established order. It’s made retail better by giving consumers new options and forcing competitive retailers to up their game.
Retail in America is more vibrant and exciting than it ever has been, thanks to Amazon’s disruption. Many retailers have responded ineffectively and with a lack of creativity, and so have died. Others have taken on the challenge of Amazon and are better for it. Amazon has been prime mover to make retail great again.
Trump may win some battles; Amazon will win the war
Many pundits see Trump’s recent attacks on Amazon as mere distraction, his own version of fake news, but he is unpredictable and famously counterpunches when he feels an offense, as he does with Bezos and Amazon.
If Trump makes an actual “federal case” out of Amazon’s dominance in retail, it will be more distraction from bigger problems that his administration should address. In observing the two generals at the center of this potential trade war, I think that Amazon will be the ultimate winner.
As successful as these two men have been in their own spheres, Trump has succeeded in a traditional business – real estate development – doing things the established way, only better. Bezos is an innovator, challenging the established order, creating a new internet retail economy and bringing about a huge transformation in an industry ready for change. That’s why I think Bezos will be ready to take on anything that Trump throws at him, and find opportunities in the unintended consequences resulting from a potential Trump war.