Maybe Trump should be attacking Walmart, not Amazon
If President Trump really cares about small businesses threatened by giant retailers, the proper target isn’t Amazon (AMZN). It’s Walmart (WMT).
Trump, of course, has been on a tirade against Amazon, essentially complaining about 3 things: 1. It doesn’t pay the US Postal Service enough for package delivery; 2. It doesn’t collect sales tax on third-party products sold on its site; 3. It hurts small businesses.
Trump’s Treasury Secretary, Steven Mnuchin, joined in the fight on April 6, telling CNBC that Amazon has “absolutely dominated the retail business; they’ve put tons of retailers out of business. The president is focused on Amazon and the economic issues that are impacting retailers all around the country.”
The true titan of retail
But Walmart, not Amazon, is the true titan of retail, and it’s also a scarier small-business bogeyman. Walmart’s 2017 revenue was $486 billion. Amazon’s was just $178 billion. That makes Walmart 2.7 times larger than Amazon. Walmart employs 2.3 million people, 1.5 million of them in the United States. Amazon employs 566,000 (and doesn’t break out US numbers). Walmart isn’t growing as fast as Amazon, which is the biggest retailer online, but Walmart still has a much bigger footprint in the US economy.
Walmart probably hurts small businesses more than Amazon does, as well. The Walmart effect is well-known, by now. When a Walmart opens up, nearby retailers go bust by the dozens, because they can’t match Walmart’s scale or low prices. To preserve local businesses, some communities won’t even let Walmart open stores.
Amazon’s effect on small businesses is more mixed. It certainly does pressure local shops on both price and convenience, because it lets shoppers buy thousands of everyday items without even leaving home. But many small businesses sell through Amazon, reaching a nationwide or even global market they’d never find on their own.
Walmart also uses the US Postal Service to deliver packages, and if it doesn’t get rates similar to what Amazon pays, then somebody at Walmart screwed up. Yet Trump hasn’t complained about Walmart (or any other retailer) using the Postal Service as its “delivery boy.” Only Amazon.
Third-party tax collection affects both retailers. Amazon collects sales taxes in two states, Washington and Pennsylvania, that have passed laws requiring it to do so. Walmart’s “marketplace” program allows third-party vendors to sell on its web site, similar to Amazon, and collects taxes if the vendor wants it to. But Walmarts leaves it up to the vendor to decide. This is basically a situation where state laws need to catch up with technology, which they probably will. More states are likely to pass laws requiring shoppers to pay sales tax on online purchases, just as they do in stores. That will settle it.
Trump might use his position as president to call for better state laws, or even a federal one, solving the tax-gap problem regarding online retailers. But he’s not. Instead, he’s claiming that Amazon is harming small businesses by not collecting sales tax on their behalf. Um, what?
Presumably, he means that small businesses selling on Amazon (Group 1) have an advantage over small businesses not selling on Amazon (Group 2), because the first group sells without a sales tax, while the second group does charge a sales tax. So a product ordered on Amazon from a Group 1 seller would effectively be cheaper than the identical product bought in a store from a Group 2 seller, with the entire difference being the amount of the sales tax. But if it were really this simple, then Group 2 would level the playing field by joining Group 1 and selling on Amazon! Trump dismissed.
In reality, Trump’s criticism of Amazon has nothing to do with its business practices. What really irks Trump is its CEO, Jeff Bezos, who also owns the Washington Post, which dings Trump repeatedly in its journalism. Walmart’s CEO, Doug McMillon, doesn’t own any news organizations critical of Trump, and the small amount of money he’s donated to politicians in recent years has all gone to Republicans. Walmart is probably safe from Trump, even if it shouldn’t be.
Editor’s note: This story has been corrected to reflect the fact that Walmart lets third-party vendors sell products on its web site, similar to the way Amazon does.
Confidential tip line: rickjnewman@yahoo.com. Encrypted communication available.
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Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman
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