The Underreported Report from Congress — Part Two — One Honest Indie
Hi, shall I? Well, I’m going to continue with more of this, and it’s extremely interesting reading. I have to tell you. “Amazon.com — Market Power.” That’s the section I’m reading from now. Just excerpts.
“Amazon has significant and durable market power in the US online retail market.” Well, I think we knew that, but it goes into findings here.
“The company’s actual share of US e-commerce is unknown outside of Amazon because it does not report the gross merchandise volume of third-party sales made on its marketplace. A frequently cited analysis by market research company eMarketer estimates that Amazon’s share in this market is 38.7%. Emarketer’s estimate, however, is likely understated because its definition of e-commerce is overly broad. For example, under eMarketer’s approach to e-commerce, the Auto and Parts category includes online sales of cars.” Hmm.
“In contrast, marketing analytics company Jumpshot estimates that Amazon captures an average of 74% of digital transactions across a wide range of product categories. The Jumpshot analysis may overstate Amazon’s share because it calculates market share as a percentage of transactions made on well-known market participants’ websites, like Amazon, Walmart and Target, but excludes small online retailers. Based on the information Subcommittee staff gathered during its investigation, estimates that place Amazon’s share of US e-commerce at about 50% or higher are more credible than lower estimates of 30–40%.”
Let’s see what else. Amazon, the platform has “well over 50% of online sales. The platform also has significant market power over the entire book industry,” [Italics mine.]-hmm-”including sales, distribution, and publishing.” Thank you for pointing that out, Subcommittee. “In the US market, Amazon accounts for over half of all print book sales and over 80% of ebook sales.
“Amazon, the platform has “well over 50% of online sales. The platform also has significant market power over the entire book industry, including sales, distribution, and publishing.” [Italics mine.]
“Amazon is the dominant online marketplace. It reportedly controls about 65% to 70% of all US online marketplace sales. The platform’s market power is at its height in its dealings with third-party sellers, as well as many of its suppliers, which Amazon refers to as vendors. Increasingly, Amazon is also gaining market power in certain business-to-business (B2B) online markets through Amazon Business, its B2B marketplace.
“In response to the Committee’s requests for information, Amazon claims that ‘estimates of total retail share are the most appropriate and relevant method of estimating’ Amazon’s market share. This approach is inconsistent with evidence gathered by the Subcommittee staff, conventional antitrust analysis of relevant product markets, and common sense. In a recent investigation, for example, the FTC concluded that a ‘relevant market may be divided by channel of sale, resulting in separate markets for brick-and-mortar sales and online sales.’ Illustrating the extent of Amazon’s overly broad approach to identifying the relevant market and its top competitors, in response to the Committee’s request for “A list of the company’s top 10 competitors,” Amazon identified 1,700 companies, including Eero, (E-E-R-O) (a company Amazon owns), a discount surgical supply distributor, and a beef jerky company.”
<Affirmative> (I guess the AI transcriber just nodded. 🙂 )
“Amazon also included single-category companies in response to the Committee’s request for a list of Amazon’s top ten competitors. Yet documents produced by Amazon suggest that even in its early days it did not view such retailers as direct competitors. For instance, a recap of an Amazon marketing presentation identified one of its key points as: ‘No direct competitors, closest competitors would be what you refer to as category driven, i.e., Best Buy, Barnes and Noble, etc.’”
Oh yes. “Amazon functions as a gatekeeper.” Don’t you love that word? “Gatekeeper for e-commerce.” A gatekeeper for e-commerce itself. Whoa! “Amazon is the most-visited website in the world for e-commerce and shopping. In a submission to the Committee, an e-commerce market participant said that ‘many of the 64% of American households that have Prime memberships are effectively locked into Amazon for their online shopping.’ Meanwhile, recent market analysis suggests that over 60% of all online product searches in the US begins on Amazon.com.” That’s part of the problem then, isn’t it?
“Amazon functions as a gatekeeper for e-commerce. … Meanwhile, recent market analysis suggests that over 60% of all online product searches in the US begins on Amazon.com.”
Let’s see. “At the Subcommittee’s hearing on innovation and entrepreneurship, Stacy Mitchell, the Co-Director of the Institute for Local Self-Reliance described one independent retailer’s attempt to survive in e-commerce independent of Amazon:
“As its customers moved online, so too did the company. Gazelle Sports built a robust e-commerce site. With scores of enthusiastic reviews on Google and Yelp, the site came right up in online searches, yielding a brisk stream of customers and sales.
“But in 2014, sales began to decline. The problem was that many people in Michigan and across the country were no longer starting their online shopping on a search engine, where they might find Gazelle Sports. Instead they were going straight to Amazon. By 2016, the share of online shoppers bypassing search engines and beginning their product search on Amazon had grown to 55 percent. With sales flagging and staff reductions underway, the owner of Gazelle Sports … made what seemed like a necessary decision: Gazelle Sports would join Amazon Marketplace, becoming a third-party seller on the digital giant’s platform. “If the customer is on Amazon, as a small business, you have to say, ‘That is where I have to go,’ he explained. “Otherwise, we are going to close our doors.”
“Interviews with sellers, as well as documents that Subcommittee staff reviewed, make clear that Amazon has monopoly power over most third-party sellers and many of its suppliers.”
Yes, indeed. Oh, “David Barnett, the CEO and founder of Popsockets, a former third-party seller and current Amazon supplier, testified about Amazon’s coercive tactics at one of the Subcommittee’s hearings.” I’m reading this word-for-word. Words like coercive. Anyway,
“I suspect that Amazon is accustomed to behaving this way because most brands cannot afford to leave Amazon. They evidently have no choice, but to endure tactics that would be rejected out of hand in any ordinary relationship whereby the two parties enter into the relationship by preference rather than necessity.”
You know, it is very hard to read this without shouting, screaming, or crying. I don’t know what. Or laughing at the absurdity of it all. And then this one I love/hate.
“Sellers feel forced to be on Amazon because that is where the buyers are.” They’re not the only, there are all sorts of sellers out there. And some of us write books.
“At the subcommittee’s sixth hearing, Representative Lucy McBath (Democrat from Georgia) noted that the evidence the subcommittee collected is at odds with how Amazon describes its relationship with third-party sellers. She asked Mr. Bezos:
“You referred to third party sellers today as ‘Amazon’s partners,’ (quote-unquote) and that your success depends on their success.” (I can see her making the finger quotes. <Laugh>) But over the past year, we’ve heard a completely different story. As part of this investigation, we’ve interviewed many small businesses and they used the words like ‘bullying,’ ‘fear,’ and ‘panic’ to describe their relationship with Amazon. … You said that sellers have many other attractive options to reach customers, but that’s not at all what we found in our investigation. … If Amazon didn’t have monopoly power over these sellers, do you think they would choose to stay in a relationship that is characterized by bullying, fear and panic?
“If Amazon didn’t have monopoly power over these sellers, do you think they would choose to stay in a relationship that is characterized by bullying, fear and panic?”
That is a very good question. “Mr. Bezos responded that ‘there are a lot of options’ for sellers, and that ‘[t]here are more and more every day.’ Wow. What a total non-response. <Laugh> Thank you for that irrelevant bit of double-talk/Newspeak/bullshit.
“This claim is inconsistent with the Subcommittee’s investigative record. In a submission to the Committee, the Online Merchants Guild, a trade association for small and medium-sized online sellers, said that its members who try to diversify sales across multiple platforms often report they are unable to generate many sales outside of Amazon.
“An important limit on the seller’s ability to switch from selling on Amazon to selling on its own site or a competing platform is that Amazon generally forbids sellers from contacting their customers. The packaging, and even the order confirmation email for third-party sales feature the Amazon brand prominently and do not reference the seller. A typical Amazon customer is unaware of the source of the sale. According to the Online Merchants Guild, ‘Many Amazon sellers use websites such as Shopify to try and establish their own e-commerce presence, but without the ability to market to their supposed core customer base, their Amazon customers, it’s pretty futile.’”
Well, there is so much more, there is so much more. Maybe I’ll just reprint it below, whatever, wherever I put this blog post up, because this is astonishing. And that is just the section on market power, I believe it was. What does it say? I don’t remember. Market power! I’m not completely braindead. Good.
Wait’ll I get to the part about merger activity. It reads like the Bible, except it’s not begat. They didn’t begat anything. They acquired. On such and such a date, Amazon acquired this company and then they acquired these two companies who compete with each other and Amazon, and then there’s another company there. And then there was, and then there was a newspaper they bought. I read that newspaper.
Anyway. You see? It doesn’t matter. I can’t get away from them. Yeah. Right. So yeah, I’ll talk to you later. See ya.
“You are Number Six.” “I am not a number. I am a free man.” <Laugh>
Extra bits:
“Once Prime members pay the upfront annual membership fee, they are likely to concentrate their online purchases with Amazon. According to a recent survey, Prime members spend an average of $1,400 annually on Amazon, versus $600 for non-members. As one market participant observed, ‘Prime members will continue to use Amazon and not switch to competing platforms, despite higher prices and lower-quality items on Amazon compared to other marketplaces, and despite recent increases in the price of a Prime membership.’”
“Amazon’s market power is durable and unlikely to erode in the foreseeable future. There are several factors that make successful entry or expansion by a challenger to Amazon unlikely. Barriers to entry include: (1) network effects, which make it difficult for another marketplace to achieve a comparable number of buyers and sellers; (2) switching costs associated with consumers shopping outside of the Amazon ecosystem; and (3) the steep costs of building a logistics network comparable in size and scope to Amazon’s massive international footprint in fulfillment and delivery. Amazon’s internal documents recognize that entry into online commerce ‘require[s] significant incremental investments in brand development, inventory, and marketing/customer acquisition.’”
PS: Here’s a video I wish I’d made. 🙂 Sheer genius!
Be seeing you! 🙂 “ Ah ha ha … ever get the feeling you’ve been cheated? “
Originally published at https://debbimackblogs.com on August 23, 2022.
