I have just one topic this week, because it's kind of a beast of a topic:
Amazon's response to the US Congress' anti-trust inquiry
(Click to see the actual PDF Amazon submitted)
So, a bit of background on this first: the anti-trust case focuses on the dominant position of Amazon in the eCommerce space in the United States, where it takes approximately 50% of all online retail sales. The debate is whether Amazon uses its platform and information dominance to compete directly against the companies who list products on their website, who are also Amazon customers.
The EU is investigating the same issue.
Amazon says it is simply doing what any other major retailer is doing: "Private label products are a common retail practice, frequently recognized by economists and shoppers alike to offer great value to customers because of their strong value proposition and low price, as evidenced by the popularity of these products in many retailers’ stores."
Although that is a perfectly reasonable sounding statement, consider the tweet below for contrast. Has Amazon taken this approach to the extreme?
Some interesting facts and figures from the report:
- There are a huge amount of third party sellers active on Amazon. As of September 29, 2019, there were approximately 384,000 active "individual" seller accounts in the U.S. and approximately 514,000 active "professional" seller accounts in the U.S. (There are a lot more globally)
- Amazon has 158,000 (!) private brand products across 45 brands in the Amazon store, in addition to the private brand products sold by Amazon Fresh. Recode says it is more than 70, by the way. The vast majority of these brands have completely separate names and cannot easily be recognised as being a part of Amazon.
- Amazon (controversially!) says it does not include the following factors for product ranking:
- Whether a merchant is enrolled in Fulfilment By Amazon (FBA)
- Whether a merchant has purchased ads on Amazon
- Whether a product is private label sold by Amazon itself
What it fails to mention within this paragraph is that (1) FBA products typically get a preference to own the "Buy Box", which drives the majority of sales, which drives ranking, (2) paid ads show up above organic search results and consumers don't bother to scroll down much, and (3) private label products are displayed within search result areas that are not accessible to any other vendors.
- In fact, Amazon goes further and states: "There is no advertising space reserved for Amazon’s private brand products"
Errrm...?! I'm pretty sure I've seen some huge banners going across the page full of Amazon Basics and other Amazon private label brands previously. Miraculously, I can't seem to find them now...
Of course, most platforms and marketplaces would favour their own products if it could. In fact, many large companies do exactly the same thing. But is Amazon too big and too powerful to be allowed to compete on its own platform?
With more and more sellers joining the platform, it becomes ever easier for Amazon to pick off the high-performance categories, copy the best products within that category, and then push their products to areas of the platform no-one else can compete on, other than Amazon.
Jeff Bezos seems to argue the opposite though. In his annual letter to shareholders in April 2019 he said: "Third-party sales have grown from 3% of the total to 58%. To put it bluntly: Third-party sellers are kicking our first party butt. Badly."
But I'm sure Jeff absolutely loves to have his butt kicked this way. Amazon makes a huge amount of money from these third party sellers, and that turnover is mostly risk-free for Amazon.
You can't help but wonder, was Bezos already planning for an information war when he made this statement? Did he need something "on the record" to prove his innocence?
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