Tuesday, July 16, 2019

Amazon Quietly Exploits Everyone And Everything

The Backlash Is Rapidly Growing
When doing a "Bing search" of Target today Amazon dominated the page that came up on the screen. It was only when you scrolled down to the bottom of the page that you found Target's sales specials. Walmart, on the other hand defended itself much better. This is an example of the "power of the web" and proof it helps to control a big chunk of it which allows companies to sneak in and slip their messages into places uninvited. Much like the robocalls that interrupt our day despite being on the no-call list. Still, with so many people ties to the internet, these pop-up messages are stamping an influence on how we live. Having noted this, Amazon.com, Inc.’s Web Services (AWS) unit has been the engine behind the company’s spectacular recent performance, AWS generated operating income of $7.2 billion last year, up 68% year-over-year and accounting for 59% of Amazon’s total operating income.

Amazon's decision to invest in, expand, and develop its own cloud because of its huge computer and data needs has taken the company down a path few of us expected. Amazon's power in computing has greatly multiplied the ways it can exert pressure and exploit us. We should never underestimate how having total control of its own "cloud" has given Amazon power that few companies have ever held. Amazon's on-demand cloud computing platforms provide individuals, companies, and governments, on a metered pay-as-you-go basis. By entering into super low-cost agreements that no other cloud company wants to compete with Amazon has been able to rapidly expand and weasel into companies simply to log up growth. 

According to an article on Bloomberg, Amazon has also negotiated an unknown rate discount with American Electric Power in Ohio. This has happened in other places also and shifts the cost to other customers without them even knowing. Much in the same way it has worked out an agreement with the United States Parcel Service to deliver its packages at a lower rate and with better terms than competitors get Amazon uses these tactics to move forward. Generally, the company doesn't get caught or it spins and buries the bad press but allegation of unethical conduct do occasionally get out. Sadly, because of the ties Amazon has within government it usually results in talk of a crackdown or investigation without the follow-through.

A while back Bloomberg reported that Amazon is set to purge many of its small suppliers over the next few months. This could shatter the relationship between Amazon and many of its long-time vendors. This comes on the heels of reports that Amazon was "crushing" its merchants by undercutting the vendors by introducing in house versions of their own. Purging vendors is aimed at cutting costs and focusing wholesale purchasing on large brands like Procter & Gamble, Sony, and Lego. Amazon claims this is about ensuring it has adequate supplies of "must-have" merchandise that will help it compete with companies like Target and Walmart.  

This could leave a lot of companies scrambling to replace lost business since Amazon tends not to give much lead time when it makes such changes. This marks one of the large shifts in Amazon strategy since it opened the site up to independent sellers nearly twenty years ago. Now, many smaller retailers that have relied on Amazon for a steady stream of orders will have to win sales one shopper at a time on the platform's marketplace. Amazon normally secures inventory in two ways: it buys items directly from wholesale vendors and resells them or by allowing independent merchants to post their own products on the site.

Amazon has been in full speed ahead mode to expand product selection without spending more to oversee it. The initiative includes automating tasks that were previously done by human employees, like forecasting demand and negotiating prices. It also involves pushing more Amazon suppliers to sell goods on their own so that Amazon doesn’t have to pay people to do it for them. For Amazon, it means holding less inventory and reducing the risk that it gets stuck with it. this translates into collecting a commission on each sale a vendor makes while charging them fees to store, pack and deliver their goods. This is a sweet deal for Amazon.

Senator Warren Has Spoken Against Amazon
Senator Elizabeth Warren states, “Amazon crushes small companies by copying the goods they sell on the Amazon Marketplace and then selling its own branded version,” One vendor, Jason Boyce, has been wary of regulation as small business owner but despite this, he was willing to consider proposed regulations by Senator Elizabeth Warren that would prevent Amazon from competing against its merchants. Boyce said: “If you’re going to have a marketplace, you shouldn’t be able to piggyback off the hard work and labor of your sellers to beat them.” Among its offerings, Amazon has started selling bocce ball sets that cost $15 less than Boyce’s and giving them ideal page space to win the shopper looking for the lowest price.

Many vendors are increasingly dependent on for their livelihood on Amazon. This allows the company to make whatever impromptu changes it wants with no consequences. because of this Amazon merchants are increasingly finding they are on the wrong end of a lopsided deal with the company. Amazon share has "almost tripled to more than 40 percent in the past few years," according to merchants quoted by Bloomberg.this is significantly higher than peers like eBay, who take just 6 cents per dollar. This near-monopolistic dominance of the $600 billion online retail market that's growing at triple the pace of retail spending has put Amazon in a position where they can continue to increase control over vendors.

Until now merchants have gravitated toward Amazon despite these higher rates and even as the company has raised how much it takes from each sale. Still, it is logical to think that at some point the backlash that is quietly building will make itself heard. Its message being, enough is enough. The most disturbing part of all this is that after sucking all it can out of both vendors and consumers Amazon is rushing to replace its workers with robots. This leaves the question, is their anyone or anything that Amazon doesn't exploit?
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Footnote; This is the second part of a three-part series. Part one explored how Amazon is a destructive force that is bad for society. Part three will delve into the Jeff Bezos "empire" and why antitrust laws and other ideas should be looked into to halt its advance.

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