Resist the temptation to subordinate to Amazon
Automotive aftermarket companies seeking dominance over Amazon can benefit themselves by wrapping their strategies around The New York Times’ expose about the site’s e-commerce practices.
An exhaustive investigative report throughout December 2019 by the Times document how sellers and tech companies that paid Amazon to showcase their products on their platform have lost their shirts to the same paymaster.
Online shopper gratification starts with simplicity and ease, which often leads to Prime Membership. Nowadays where 24 to 48-hour delivery is normal, writes NYT, shoppers begin their journey first on Amazon over all other venues.
That’s why big brands to small upstarts crave access to the e-tailer’s 150 million shoppers. By storing their wares inside Amazon’s warehouses close to the last mile, their package handlers promise speed. For convenience, software companies can grow off Amazon’s cloud service, Amazon Web Services (AWS), where they rent storage space to retrieve and analyze data. Corporations like General Electric and Netflix are spared from buying a costlier system that they would otherwise run on their own.
More than 100 NYT interviews shared by past and present Amazon employees, sellers, tech firms, suppliers and competitors reveal something unsettling. At an increasing pace, they allege that Amazon is metastasizing into a direct competitor. Two notable tactics leveraged by the site raise doubts whether “selling on Amazon is worth the hassle.” As for calming fears, an AWS expert told NYT, “nobody knows who is going to get killed next.”First consider the unrealistic demands placed on companies that use the Everything Store. When a long-time seller and suitcase brand Tumi contracted a middleman to promote their bags on the same e-commerce site, Amazon ordered Tumi to either fire the middleman or leave. Tumi wanted more autonomy over inventory and sales data because of the freedom in other online markets.
VitaCup, an energy drink, felt unfairly punished by Amazon over lowering prices on website Zuilly, whose no-frills marketplace offsets discounts with slow shipments. When Amazon detected that the drinks sold at 30 percent less, VitaCup discovered that Amazon pulled the “add to cart” and “buy now” icons, which diverted customers to other brands. Sales slumped. As a result of these arbitrary penalties, other sellers told NYT that when those buttons go, revenues fall as much as 75 percent. When one merchant contacted their account manager for help, they too were handtied. In most cases, to avoid facing decline by the wrath of Amazon, writes NYT, a company will raise prices on the other sites.Last summer VitaCup, which pays nearly $240,000 a year for advertising, absorbed another blow. When their CEO entered one of their profitable beverages in the search bar, he instead found one of Amazon’s own kind.
People feel pressure to buy ads even though the original vision stemmed from star ratings ranked by buyer satisfaction. When Amazon began promoting advertisements, they hedged. With or without ads, a company can successfully grow their lines based on its own merits.
Tactic two involves strip-mining by Amazon Web Services. According to the Times, several tech companies complained that AWS stripped their most popular software innovations from their open -source platform for personal gain. AWS claims 150 services as their own product.
In 2015, Elastic awoke to a new rival. Amazon wove the free software tool designed by Elastic into their AWS search and analytics cloud business. At the announcement of their product launch, Amazon renamed the paid service, Elasticsearch, which became a cash generator within 12 months. By 2018, AWS posted $25 billion in revenue equal to Starbucks.
To defend their financial livelihood, Elastic introduced more creations to attract customers while placing constraints on Amazon-like sites to little avail. “Amazon duplicated many of those features anyway, and provided them free,” wrote NYT. Accounts that share their open-source technology must prove that the likes of Amazon had abused their power by strip-mining a creation that was not theirs.Last year Elastic’s lawsuit landed in a California Federal court. Elastic awaits a verdict over whether Amazon violated their trademark to siphon customers away or whether Amazon operated within the legal parameters of the free and sharable options that open-source permits.
All along Amazon says that they play by the rules observes NYT. Merely a competitor, they account for nearly 50 percent of ecommerce retail sales in the U.S., but nearly five percent of all sales. Regarding their relationships with their membership, “rules are necessary,” they assert to cultivate the experience that shoppers want. From 2017 to 2018, roughly 200,000 merchants netted over $100,000, a 40 percent increase. Amazon views their role as the reason for everyone’s success. If their sellers and AWS customers were failing, the site would cease to exist.These alleged abuses bear serious consequences for the automotive aftermarket. Given such murkiness, tech firms must be adept at preventing Amazon from wielding their power to strip-mine future innovations that isn’t theirs to promote as an AWS product. And sellers on Amazon’s store must be vigilant when they are about to be squeezed.
Many fear that publicly calling out the platform for monopolistic behavior may provoke retribution. Sadly instead, these firms would prefer to endure Amazon’s shifting restrictions to hold open the gates to online revenue streams.
Anti-trust action feels most befitting. Evidential hurdles must be cleared to compel Amazon to unbundle its services. Staying intact benefits society asserts Amazon; above all their unfettered shoppers.
To prove damages, the injured must quantify how much more money was siphoned by Amazon that would have otherwise been earned on their own. Likewise, someone must show why their innovations faltered because of AWS’s heavy handiness.
As federal regulators comb for illegal breaches, collective grievance makes an efficient shield for individual companies to avoid being targeted by the Bezos Empire. Nudging Amazon to compete on an equal footing will require a concerted undertaking by companies banding together.
Doing nothing will give Amazon the green light to build upon their feudal dynasty. A highly concentrated online market could indirectly harm the customer overtime with the subtle consequence of less choices and shrinking innovations to the marketplace.
Until the Feds force Amazon to disassemble its business units to give way to competition, any automotive aftermarket firm on Amazon faces an economic dilemma of what truly defines an open marketplace.
The facts presented in this column were compiled by The New York Times
