The Un-Intended Consequences of an Audit of the USPS/Amazon Relationship

Last week President Trump ordered an audit of the USPS’s business model, which he believes is unsustainable. Vanity Fair had a solid take on this:

“After agitating for weeks over ways to make Amazon pay higher postage rates, Donald Trump has demanded a sweeping overhaul of the U.S. Postal Service’s business model. In an executive order Thursday, Trump called for the formation of an administration task force to be chaired by Treasury Secretary Steve Mnuchin, with a report outlining proposed changes delivered within 120 days. “Some factors, including the steep decline in First-Class Mail volume, coupled with legal mandates that compel the U.S.P.S. to incur substantial and inflexible costs, have resulted in a structural deficit,” Trump said. “The U.S.P.S. is on an unsustainable financial path and must be restructured to prevent a taxpayer-funded bailout.”

The article goes on to say that Trump is “off the hook” on this issue. Although not naming Amazon and Jeff Bezos directly, given his tweets on this subject, it is clear that this audit is aimed at trying to hurt Amazon and Bezos specifically with the result being to make it more expensive for Amazon to use the USPS as a part of their delivery service.

The Vanity Fair article goes on to say:

“The obsession isn’t shared by aides: despite Trump’s repeated claims, his advisers have said that the sheer volume of packages Amazon ships through the Postal Service has helped keep it afloat. Amazon and the Postal Service signed a five-year deal in 2013 to deliver packages on Sundays, and both entities have declared the arrangement a success.”

I see this audit as having two major consequences, one unintended. The first result could be to show that, as some of Trump’s aids pointed out, the Amazon deal has been the reason the USPS has lower losses and is part of the reason the USPS is still “afloat” as they have said. However, even with this conclusion, the Audit could recommend that Amazon pay even higher fees when the next contract is negotiated shortly.

If that does happen, it could lead to the unintended consequence of pushing Bezo’s and Amazon to create their dedicated fleet of planes and vans to free themselves from the USPS completely. There have been reports that Bezos and Amazon has been seriously looking at this option and should the USPS, under Trump’s orders, move to charge significantly higher fees for delivering Amazon’s packages, it could be the thing that forces Amazon to create their own delivery service, at least in the US, and move faster to make that happen.

I have been talking to sources at UPS and FedEx, and the prospect of Amazon acquiring their fleet of planes and delivery vehicles of their own keeps them up at night. If Amazon does this, imagine the impact it would have on them and the USPS. In the USPS case, it would cause them to have even deeper loses as well as having to eliminate thousands of people who were added to help with the Amazon contract.

While an audit of the USPS is a good business practice, the motive behind it is not. Trump and team better be ready for an outcome that may not be to their liking. In a business fight between Trump and Bezo’s, my money is on Jeff Bezo’s. One way or the other he has to do what is best for his company and shareholders and creating their fleet of planes and vans to help him own and control the entire supply chain may happen sooner than later thanks to this audit.

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Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.

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