Amazon responds to Trump criticism with stunning results but we do need to have a debate over its increasing power

The President has hit out at Jeff Bezos' company over tax and the impact on other retailers and the US Postal Service. His motivations are suspect

James Moore
Chief Business Commentator
Friday 27 April 2018 12:46 BST
Who's laughing now? Amazon boss Jeff Bezos, who has produced stunning results in face of Trump criticism
Who's laughing now? Amazon boss Jeff Bezos, who has produced stunning results in face of Trump criticism (Reuters)

“Living well is the best revenge,” the great REM once sang.

Amazon’s Jeff Bezos seems to have taken the members of the sadly no longer active alternative rock band at their word in the wake of his feud with Donald Trump.

His e-commerce giant smashed Wall Street’s expectations for the first quarter of this year, with sales jumping 43 per cent. The cherry on top of the cake for investors was that Amazon, which has typically spent money faster than it makes it, also doubled profits when analysts had expected a fall.

The resultant surge in its shares added $12bn (£9.3bn) Mr Bezos’ personal fortunate, taking it to a staggering $134bn. The Amazon CEO could probably buy a Trump tower or two just with just spare the change in his bulging back pocket.

One thing that he has bought with that change, however, is the Washington Post, a newspaper that has nettled the famously thin skinned president on multiple occasions.

In recent months there have been multiple tweets aimed at Amazon from Mr Trump’s ever active Twitter account. They’ve questioned the company’s impact on the US Postal Service, the amount of tax it pays, the potential harm it causes to other retailers.

There has been much talk that he fancies going after the business, which had served as a drag upon its shares.

It’s deliciously entertaining to imagine Mr Trump frothing with rage over Mr Bezos’ consistently excellent newspaper, while going green with envy over his results.

But while you might question his motivations, he might have a point with at least some of his criticisms. The question “how big is too big” does need to be asked and with increasing urgency.

This is a business that has appalling power. It’s a shop, a marketplace, a web services outfit, a media business and more besides.

Profits have been a rarity because of the way Mr Bezos has invested in new business areas, and territories.

But that looks set to change. Bloomberg, for example, noted that its gross margin, which encompasses revenue minus basic costs, has been growing handily.

The company is moving into higher margin businesses, such as the aforementioned web services. It’s becoming more efficient. It’s deriving more revenues from the third party companies that sell on its site and pushing through a hefty price rise for Prime subscribers.

The latter two show pricing power in action.

What Mr Trump failed to mention are, of course, the continuing questions the company faces over the way some of its employees are treated.

The GMB stepped in to cover that off, accusing it of “treating workers like robots”, pointing to conditions at its fulfilment centres, which have repeatedly created controversy.

So yes, we do need to have a debate about this monster, and while Mr Trump’s unhappiness with it may come from the wrong place, if that’s what we end up with it mightn’t be such a bad thing.

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