Amazon Antitrust: Who's Asking for Amazon to be Broken Up? Not Small Businesses.
In a time of economic upheaval, uncertainty around Covid, difficulties returning to full-time work, and a half dozen other uniquely 2021 issues, the United States Congress is really worried about…. Amazon Prime? Never mind that Prime shipping grocery items basically was America’s lifeline through 2020.
New proposed antitrust measures are being introduced and fast tracked through congress as of the end of June, seeking widespread changes to the way some of America’s biggest companies operate. Specifically in the crosshairs are Amazon, Google, and Facebook. These antitrust suits seek to, “Prohibit discrimination against rivals by dominant platforms -- such as Apple's App Store, the Google Play Store or all of Amazon's marketplace -- to prevent giants from giving their own products or services preference or ‘picking winners and losers online.’ stated Joan E. Solsman from CNET.
That sounds nice. The big question is, who is asking for this change? There have been numerous individuals noticing the disturbing trends on social media of censorship but have these been echoed on Amazon?
If so, these cries have not been from Amazon Sellers, the world’s largest ecosystem of small businesses.
It stands to reason that Amazon is materially different from the other businesses in question like Google and Facebook as they deal with physical products. Amazon is, at it’s core, a logistics based business. Facebook and Google are information based businesses. It can be easily seen how dangerous situations could arise when small groups control the dissemination of information. It seems far less straightforward to describe how Amazon is hurting American consumers through their… low prices, excellent customer service, and insanely fast delivery?
Congresswoman Pramila Jayapal, who co-authored one of the prominent bills in the case, stated that the law “requires dominant platforms including Amazon to divest lines of business -- such as Fulfillment by Amazon -- where the platform’s gatekeeper power allows it to favor its own services.”
Wait, we can’t have Prime Shipping anymore?!
For reference, Fulfillment by Amazon is a service offered to third party sellers to ship their inventory to the end consumer when it’s sold. Amazon will warehouse the inventory, box, and ship it upon sale. Amazon charges a very modest “FBA fee” which when added to the cost of shipping is almost always cheaper than any business can ship it (due to Amazon’s deeply discounted shipping rates). FBA is actually the opposite of “favoring Amazon’s own services”. FBA allows sellers to compete on the same playing field of fast delivery as any product sold by Amazon.
Additionally, we make more money on the transaction, Amazon makes a small cut, and the consumer gets it faster. Our business also doesn't need the staff to support another 10-15 full time employees to manage this shipping process (which would be quite difficult to find in this current labor market). As an Amazon Third Party Seller doing over 1,000,000 transactions per year, we absolutely, unequivocally do not want to discontinue FBA. The idea that this will somehow, “empower small businesses to take back what Amazon has stolen” is simply inaccurate.
From a startup perspective, this would put an enormous burden on businesses starting in garages, basements, and bedrooms. Imagine, you are starting a small “side hustle” where you have to personally ship each order. You work a 9-5 job, so your days are quite busy. If you have an order come in at 8:45 am on a Friday, you’ve already left for work and can’t ship it today. Thus, you get home at 6pm, must pack this (and potentially dozens) of other orders, and take your Saturday to trip it to the post office (which already has limited hours). Even on a weekday, you would be lucky to get the package to the post office when they open at 8am before you are due to show up for work at 9am. Imagine doing this daily with dozens if not hundreds of orders. Because the USPS is off on Sunday, the consumer across the country who ordered on Friday doesn’t get it until Wednesday, possibly Thursday, of the next week. You also paid a much higher shipping fee than you would have if Amazon was shipping this, costing you and the consumer. Don’t forget you have to store inventory in your home and figure out how you will receive pallet deliveries to your apartment or house. It creates a logistical nightmare. Because most startups don’t have the volume to outsource this to a third party logistics provider, they are stuck.
Instead, Amazon allows small businesses to aggregate their product into larger quantities and send to Amazon's FBA centers. The entire inventory for a month could be packaged and sent to Amazon over a Sunday afternoon for Amazon to fulfill. This is what almost all small businesses do as they start, allowing them to outsource fulfillment to the world’s largest fulfillment network without a contract or so much as a negotiation.
According to Adam Kovechich of Chamber of Progress, the bill would also ban dozens of popular features Amazon currently offers such as Prime Shipping and the buy box because, “The bills ban platforms from ‘choosing between similar companies that you host,’ thus ‘Amazon’s buy box could no longer recommend the merchant with the best price and customer service.’
Removing the buy box is a total backslide and would confuse customers. In fact, it would punish high quality sellers and reward those sellers who do not operate at a high level, leading to worse customer service. Amazon’s main value is helping you find the best products and “Choosing between similar companies” to provide popular search results. Would Amazon also not be allowed to show us “best sellers” or “Amazon’s Choice”?
Finally, “Amazon would effectively be banned from offering its customers its money-saving generic brands.” This is because the bill is intended to remove Amazon from selling their own goods, a hot button topic. Just last month, Jeff Bezos himself announced that 60% of all retail revenues come from third party sellers. Amazon has never publicly stated how much of their revenue comes from their “In house” products, but the number is likely to only be a few percentage points. Although this has been blown significantly out of proportion, this is generally a non issue to any third party seller. Amazon products that have launched and flopped (oh, you don’t remember OWN PWR Nutrition, Amazon’s now defunct line of supplements?) are a stark contrast to the idea that Amazon mercilessly comes in and destroys your whole business segment.
Quite simply, the 1.9 million small and medium businesses currently on Amazon are being overlooked with Congress believing they are “taking down the evil empire.” Amazon absolutely has the resources to adapt to any changes that Congress throws at them, with the third party sellers the most likely to end up negatively impacted. Amazon is the world’s largest single small business development incubator, which receives virtually zero press coverage. The more enjoyable narrative is that Amazon is bad and corporations are evil. Amazon has given us 10x the Library of Alexandria’s knowledge at our fingertips in two clicks; but they’re still bad! The idea that anything to hurt Amazon helps small business is a vast oversimplification.
Lastly, what’s the better solution that is going to emerge out of this? Will the government police Ecommerce, making it more “fair”? How would that even work?
Before you tell the American people they “need government intervention to level the playing field”, let’s maybe ask the workers at Amazon, the 1.9 million third party sellers, their families, and the people enjoying the benefits of Prime. The results may not be what Congress believes to be true.
Alexander V. Johnson, Mixt Solutions.
Mixt Solutions is an online sales company specializing in Amazon based consulting. They are a top 500 Amazon Seller worldwide doing over 1,000,000 transactions on Amazon per year. They partner with some of the biggest companies in the industry.