Debate: Is Amazon good for small business?
Amazon is a seedbed for new small businesses while providing unprecedented opportunities for entrepreneurs and vital convenience and pricing for consumers — a necessary hotrod engine for the U.S. economy. Or, Amazon is a monopoly that bullies its workers and illegally undercuts the businesses it hosts on its platform and, as a result, is an innovation killer and should be regulated by the U.S. government.
The provocative premise is intentional, according to the nonpartisan nonprofit which organizes what it calls substantive, informed, critical-thinking-yet-civil debates about the day’s leading issues. And few companies spend more time leading the news than the nation’s largest employer, online retailer and e-commerce cloud kingpin.
Defending the the idea that Amazon is good for small business were professor and American Enterprise Institute economist Mark Jamison, and former Amazon general manager and current third-party seller consultant and Kaspien CEO Kunal Chopra, who is based in Seattle.
Disputing the idea that Amazon is a net benefit for society, U.S. economy and small business was author and Financial Times tech journalist Rana Foroohar. She was joined by Stacy Mitchell, a historian, author and frequent Amazon critic who wrote one of the seminal research papers calling for the U.S. Congress to regulate the company.
Amazon is facing heightened regulatory scrutiny over its marketplace and the nearly two million third-party sellers that now make up more than half of its overall sales. The tech giant issued a Small Business Empowerment Report in October, noting that more than 200,000 new sellers began selling in its U.S. store last year, up 45% from 2019. U.S. selling partners averaged more than $200,000 in sales from Sept. 2020 to Aug. 2021, up from $170,000.
From the outset of the debate, Jameson asserted that Amazon obviously is not a monopoly — Etsy, eBay and Walmart are proof of that, he noted. Rather the company is doing exactly what a big capitalist company should be doing: Creating new markets where none existed.
Amazon’s size and market influence, he said, prompted both Target and Walmart to open their online retail platforms to third-party sellers, he pointed out. “Amazon has created opportunities for small businesses that did not exist before,” he said.
Foroohar said Amazon makes the same arguments that all wanna-be monopolists do: they are making things cheaper and easier so consumers should be content. But while Amazon’s prices are cheap, she allowed, the way it siphons and uses information from its sellers is not.
“The problem is that we have had for several years monopoly laws that look at only pricing as a measure of consumer success,” she said. “But when you look at the way in which Amazon does business, you are not talking about prices; you are talking about information bartered.”
Chopra said the examples of Amazon unfairly using seller information are few and far between. Amazon, he maintained, isn’t just good for small business, it’s great for small business. Amazon’s massive, global marketplace is accessible to all enrolled businesses — not just the large ones, he said.
“Seventy-four percent of U.S. customers begin their product search on Amazon,” he said. “Amazon has become a product research and brand-building tool more than it is just a shopping destination.”
“For the first time in history, a small store at the corner of the street or an entrepreneur from home can access a global audience and infrastructure that can support global scale.”
Mitchell countered that Amazon has cornered the online market. She said Chopra’s point about three of every four consumers starting their product searches with Amazon isn’t proof of a healthy business ecosystem— it’s proof of a single overly dominant player.
“In 15 of 23 major product categories, Amazon captures more than 70% of online transactions,” she said. “This means if you are a small business and you make or sell anything (online) … you have two options and both of them are bad.”
The first, she said, is to try to continue to sell exclusively on your own website which is like “hanging your shingle out on a dirt road” where no one travels. Or, she said, you can become a seller on Amazon. That means your company data now is in the hands of of a multinational giant prepared to compete with you on specific products, she added.
“If you sell on Amazon, you’ll be handing over the fate of your business, your livelihood, to your biggest, most aggressive enemy — an enemy that has every intention of eating your lunch,” Mitchell said.