retail news in context, analysis with attitude

From the Los Angeles Times, a story about how a new coalition of small business organizations called Small Business Rising "is urging policymakers to break up Amazon," calling for antitrust regulators to separate Amazon's own retail business from its third-party marketplace.

Small Business Rising is said to represent "grocers, hardware stores, pharmacies and bookstores" via its alliance with trade associations such as the National Grocers Association (NGA), the American Booksellers Association, and the Alliance for Pharmacy Compounding.

The Times writes that "convened in part by the Institute for Local Self-Reliance, a small-business advocacy group and a longtime critic of Amazon’s market power, the coalition is likely to ramp up the pressure on the world’s largest web retailer, which has thrived during the COVID-19 pandemic as homebound shoppers stormed online."

The story goes on:  "Policymakers around the world have scrutinized Amazon’s practice of competing with the independent sellers who now account for most sales on its web store. Critics say Amazon treats sellers as disposable and beholden to its fees and other demands. The company also has been accused of using seller data to inform the design of its own products.

"Amazon’s conduct and seller critiques featured prominently in a congressional antitrust committee report last year that found the company wielded monopoly power over small merchants."

In a statement, Amazon has responded that its critics "are pushing misguided interventions in the free market that would kill off independent retailers and punish consumers by forcing small businesses out of popular online stores, raising prices and reducing consumer choice and convenience.  Amazon and third-party sellers complement each other, and sellers having the opportunity to sell right alongside a retailer’s products is the very competition that most benefits consumers and has made the marketplace model so successful for third-party sellers."

KC's View:

I've made the point here before that I'm not a lawyer, nor am I an antitrust expert.

But while I completely understand the motivation behind this effort, and agree that there are ways in which Amazon makes it very tough on small businesses for which it provides a platform, I wrestle with the idea that this all makes it necessary to break up Amazon's two retail entities.

I would guess that many of the businesses signing on to this effort - especially in the grocery sector - carry private label/own brand items that are similar to national brands that they sell.  They have the choice to price the private label products above or below the national brands, to give them better or lesser promotion, and higher visibility or lower visibility on store shelves.  They make the determination of which private label items to carry based often on sales data for national brands.

In fact, if I go into the local grocery store, I have to do all the analysis myself - looking up and down the shelves to compare and contrast such items.  Amazon does it for me - telling me if other sellers offer an item at a lower price, though noting that they may not provide free shipping under Prime.

I'd also guess that for every third party merchant that has found it difficult to do business on Amazon's marketplace  - and, by the way, they don't have to do business via Amazon - there are several that actually have discovered new markets, customers and opportunities because they're now able to scale.  They've understood that Amazon puts them in the middle of a competitive mosh pit, but it also serves as a magnet for shoppers that didn't even know they existed.

In so many ways, Amazon has disrupted traditional retailing by doing what legacy companies always have done, except doing it faster, more effectively, and with greater customer-centricity.  In the process, it has become bigger and even better at what it does - and hardly a monopoly.

I get that this is hard.  I get that small retailers are at an enormous disadvantage … but in many ways,  by depending on legacies rather than innovations for their raison d'être, they've put themselves in this position.