November 19, 2016
The president-elect has been verbally sparring with Bezos for months. Now things could get a lot tougher for Amazon.
Trump gives a campaign speech© Provided by Guardian News Trump gives a campaign speech
Amazon will almost certainly enjoy its biggest ever day on Black Friday next week.
November 19, 2016
The president-elect has been verbally sparring with Bezos for months. Now things could get a lot tougher for Amazon.
Trump gives a campaign speech© Provided by Guardian News Trump gives a campaign speech
Amazon will almost certainly enjoy its biggest ever day on Black Friday next week.
The discount shopping event will help the American online retailer to continue its run of 22 years of unbroken and dramatic sales growth since it was founded in 1994 by Jeff Bezos. It is now valued at more than $375 billion, making it one of the biggest companies in the world.
However, despite the predicted spending spree on Black Friday, the rise of Amazon and Bezos now face arguably their biggest challenge yet: Donald Trump.
Throughout the U.S. presidential election campaign, Trump made disparaging comments about Amazon and Bezos, prompting a war of words that looks altogether more serious in the wake of the billionaire tycoon’s victory over Hillary Clinton.
The battle started last December with a series of seemingly unprompted tweets from Trump. “The Washington Post, which loses a fortune, is owned by Jeff Bezos for purposes of keeping taxes down at his no-profit company, Amazon,” Trump wrote. “If Amazon ever had to pay fair taxes, its stock would crash and it would crumble like a paper bag. The Washington Post scam is saving it!”
The Washington Post is owned through Bezos’s personal investment firm, rather than Amazon, and Trump did not provide any explanation for his allegation. Amazon’s tax policy is controversial and is already well-known around the world, including in Europe, where it agreed favorable tax arrangements with Luxembourg. Its profit margins are also notoriously thin. In 2015, Amazon recorded sales of $107 billion but net profits of just $596 million, a margin of barely 0.5%.
Bezos responded to Trump’s tweets in a light-hearted manner, threatening to send him to space with his Blue Origin rocket business. “Finally trashed by Donald Trump,” he said. “Will still reserve him a seat on the Blue Origin rocket #sendDonaldtospace.”
However, the battle took a more sinister turn for Amazon when Trump addressed a campaign rally in Texas two months later. “Believe me, if I become president, oh do they have problems, they are going to have such problems,” Trump said of Amazon and Bezos.
The Republican presidential candidate then told Fox News that Amazon is “getting away with murder tax-wise” and has a “huge antitrust problem because he’s [Bezos] controlling so much”.
Trump’s criticism of Bezos and Amazon appears to be at least partly connected to his frustration at the Washington Post conducting investigations into his business dealings and questioning his suitability to be president. At the Texas event where he criticized Amazon, Trump also referred to “purposely negative and horrible and false articles” about him.
Bezos eventually hit back, accusing Trump of comments that “aren’t appropriate” for a president and which “erodes our democracy around the edges”.
However, the Amazon boss was forced to change his tone when the result of the presidential election was confirmed. “Congratulations to Donald Trump,” he wrote on Twitter. “I for one give him my most open mind and wish him great success in his service to the country.”
Shares in Amazon dropped by almost 10% in the five days after Trump’s election, more than other technology companies such as Google and Apple.
It is unclear what action Trump could take against Amazon, with the president-elect not expanding upon his threats with specific policies.
Despite its size, Amazon still accounts for a relatively small proportion of the retail market, meaning Trump’s claims about a huge antitrust problem are dubious. Its global sales in 2015 of $107bn were dwarfed by Walmart’s $482bn. In the UK it accounts for roughly 1.8% of sales, although it is the market leader in physical entertainment, where it accounts for 20.4% of sales.
However, the new president could choose to examine Amazon’s control of its delivery drivers, its relationship with small businesses who sell products through its website, or Bezos’ ownership of the Washington Post.
Neil Saunders, a retail analyst at Conlumino, said: “The main threats have been over tax and antitrust. The antitrust point is something he could try and pursue, but it would not be in his power to pronounce Amazon guilty and it is very doubtful that any other government agency would do so.
“On the retail side there is no antitrust case to answer as Amazon does not exert dominant control over any one area of the market. On the point about Jeff Bezos’s ownership of the Washington Post, this isn’t an antitrust case as it is an entirely different business sector to the retail operation.
“The tax threats are largely hollow. Amazon does pay corporate tax, but its tax payments are limited because it is not the most profitable of companies. The same holds true for the Washington Post. Sales tax is not a matter for the federal government so Trump has no power over that area of taxation.”
However, Trump undoubtedly has the power to hurt Amazon. The company’s latest annual report, published before Trump’s victory, warns of the threat to its financial performance from “laws and policies of the US and other jurisdictions affecting trade, foreign investment, loans, and taxes”. If Trump pursues a protectionist trade policy with tariffs on imports and exports then Amazon’s business model – which relies on moving goods quickly from warehouses in one country to customers in another and selling them at a low price – will be under pressure.
Ultimately, becoming an enemy of the most powerful man in the world is unhelpful for the company. Reports claim that Amazon has hired a veteran Washington lobbyist, Seth Bloom, to represent it on antitrust matters.
“Having an occupant of the White House who is unfriendly towards your business is not a comfortable position,” Saunders added. “Inevitably it means Amazon will need to keep looking over its shoulder, which is an annoying distraction from the day-to-day business.”
Trump vs. Bezos
The war of words between Donald Trump and Jeff Bezos, the boss of Amazon, has been fought across social media and at campaign events in the runup to the presidential election. Here are the key tweets and comments:
Jeff Bezos
Email to employee who had raised concerns about Trump’s election: “We’re a company of builders whose diverse backgrounds, ideas, and points of view are critical to helping us invent on behalf of all our customer. But it’s not only that diversity and inclusion are good for our business. It’s more fundamental than that — it’s simply right. These are enduring values for us and nothing will change that.”
Speaking at conference in October about criticism from Trump: “He’s not just going after the media, but threatening retribution to people who scrutinize him. He’s also saying he may not give a graceful concession speech if he loses the election. That erodes our democracy around the edges. He’s also saying he might lock up his opponent. These aren’t appropriate behaviors.”
Congratulations to @realDonaldTrump. I for one give him my most open mind and wish him great success in his service to the country.
— Jeff Bezos (@JeffBezos) November 10, 2016">
Finally trashed by @realDonaldTrump. Will still reserve him a seat on the Blue Origin rocket. #sendDonaldtospacehttps://t.co/9OypFoxZk3
— Jeff Bezos (@JeffBezos) December 7, 2015">
Donald Trump
Interview to Fox News in May: “Amazon is getting away with murder tax-wise. He’s using the Washington Post for power so that the politicians in Washington don’t tax Amazon like they should be taxed. He thinks I’ll go after him for antitrust. Because he’s got a huge antitrust problem because he’s controlling so much, Amazon is controlling so much of what they are doing. The whole system is rigged, whether it’s Hillary [Clinton] or whether its Bezos.”
The @washingtonpost, which loses a fortune, is owned by @JeffBezos for purposes of keeping taxes down at his no profit company, @amazon.
— Donald J. Trump (@realDonaldTrump) December 7, 2015">
Campaign event in Texas in February: “I have respect for Jeff Bezos, but he uses the Washington Post to have political influence and I got to tell you, we have a different country than we used to have. He owns Amazon, he wants political influence so that Amazon will benefit from it. That’s not right. And believe me, if I become president, oh do they have problems, they are going to have such problems
If @amazon ever had to pay fair taxes, its stock would crash and it would crumble like a paper bag. The @washingtonpost scam is saving it!
— Donald J. Trump (@realDonaldTrump) December 7, 2015">
Courtesy: The Guardian
