retail news in context, analysis with attitude

The Washington Post has a story about how vendors selling on Amazon and former employees "familiar with Amazon’s internal strategy say the company is increasingly focused on boosting its profits on the backs of its sellers — often without any clear upside for customers.

"The services include charging sellers thousands of dollars to speak to account managers, as well as making it necessary to purchase ads to guarantee the top spot on a search page. Plus, Amazon is aggressively pushing its own brands – something that may be cheaper for consumers in the short run, but demonstrates its overall power over pricing and merchandise on the site. That gives it an advantage over rival products and sellers who rely on Amazon for their livelihood and have few alternatives if they want to thrive selling online."

This is no small matter: "Amazon has become a powerful marketplace alongside its role as an online retailer, with more than 2.5 million third-party sellers who have become global businesses on its platform." Amazon generated more than $42 billion in revenue from so-called "seller services" last year alone, the story says - a number that has doubled in just the last two years.

This, the Post (which, let's not forget, is owned by Amazon founder/CEO Jeff Bezos) writes, "has drawn the attention of regulators and lawmakers both in the U.S. and abroad, who are investigating Amazon and other large tech companies for potential violations of antitrust law and abusing dominant marketplace power. Traditionally, U.S. regulators have focused on consumer harm, but officials recently emphasized the need to look at the way several tech giants are using their market clout to lower quality, reduce innovation and diminish consumer privacy as officials consider regulating giants of the digital economy."
KC's View:
Let's be clear. If Amazon sacrifices its longtime and relentless focus on customers on the altar of short-term profits, it will be an enormous mistake. No question.

But … there are a lot of companies out there that, as they gain competitive power, hold their vendors feet to the fire in order to improve their bottom lines … and that use expanded private label penetration for the same end. This isn't new … Amazon is just better at it than most, since it knows far more about its customers than competitors, and so can be a lot more surgical in its moves.

Though, to be clear … I'm not sure that Amazon is best served by moves that are similar to those of traditional retail.

I do think that the problems being dealt with by marketplace vendors can be dealt with most effectively when companies work with some of the firms out there that have been built to help third parties navigate the Amazon system. As it happens, that's one of the things that MNB contributor Tom Furphy's companies - Ideoclick - does … which I would mention here even if Tom weren't a friend and MNB contributor.