Trump has ordered a review of the US Postal Service's prices - and it could force Amazon to raise Prime membership fees
- Amazon could be forced to raise the price of Prime membership if President Donald Trump successfully raises the amount of money the company pays to the United States Postal Service, according to analysts at Credit Suisse.
- Another scenario would have Amazon absorbing the hit to its bottom line.
- Trump has ordered a review of USPS pricing practices, and it's not yet clear what the outcome of that will be.
Prime membership could get more expensive if Amazon is forced to pay more to the United States Postal Service.
President Donald Trump has repeatedly called out Amazon in recent days, claiming that the retailer must pay more to the USPS per package sent with the service.
Credit Suisse analysts wrote in a note to investors that if Trump gets his way and the USPS hikes its rates, Amazon may be forced to pass on that increased cost to consumers.
Based on the bank's estimate of 104 million Prime subscribers, it estimates that a $20 hike in annual Prime subscription fees would offset most, if not all, of the increased costs paid to the USPS. It's likely that Amazon would then accelerate and prioritize its own delivery services that do not rely on the USPS, like Seller Flex and Prime Now.
The other scenario that could play out is that Amazon would absorb any increased cost from the USPS. Credit Suisse estimates that this could amount to a $1 billion to $1.8 billion hit to the company's bottom line.
Which scenario will play out is anyone's guess at this point, as two important variables - how much the USPS hike will be and how many packages the service currently delivers for Amazon - are not known.
Either scenario could affect Amazon's ability to deliver the service customers expect while also keeping Wall Street happy - a dance it has been doing successfully for years. Credit Suisse says this dependency on the USPS is a worrisome silver bullet that could do damage to the company's ability to delight the customer.
Trump on Thursday ordered the creation of a task force to look into the USPS' financials.
"The USPS is on an unsustainable financial path and must be restructured to prevent a taxpayer-funded bailout," the order, signed by Trump, reads.
Former Postmaster General Patrick Donahoe, however, said the Amazon deal with the Postal Service is profitable for the USPS, and by law, deals with individual companies must be.
However, the USPS is still likely undercharging businesses - not just Amazon - to ship packages.