AS I SEE IT: The online retailer and distributor can be your friend, but also your competitor, says TERRY MURDEN
Amazon’s publicity machine has been in full flow telling us how it helped 200,000 small UK businesses, including 12,000 in Scotland, to develop their digital skills throughout the pandemic. Eight in ten credit the Amazon Small Business Accelerator with helping improve their business performance during the lockdown. Sounds pretty impressive. However, not everyone is convinced that Amazon is good for small firms.
First the good news. Among those who benefited from Amazon’s input was Ayrshire-based Nudies Snacks which saw sales fall off a cliff with the closure of offices and other workplaces. After switching its selling to Amazon Marketplace, run in partnership with business support network Enterprise Nation, it has seen its revenue begin to grow again. Tracey Hogarth, who owns Nudies, said “Amazon Marketplace has been a blessing and has allowed us to continue selling throughout the pandemic, and put our products in front of a huge audience.”
The online retailer’s global machine runs a variety of marketing programmes, one of which is Fulfilled by Amazon (FBA), aimed at small businesses. In exchange for a monthly fee companies can list their goods on the website, providing potentially worldwide exposure. In addition, Amazon will take care of storing, packing and shipping.
So what is there not to like?
As the advertising management website Adzooma pointed out earlier this year, Amazon needs your products to fill its website, but also benefits from them. If your product does well on Amazon, there’s a danger that it will launch its own version.
A report in the New Yorker in October 2019 noted that an aluminium curved laptop stand by San Francisco company Rain Design became an unexpected best-seller. Until Amazon released an identical design for half the price and Rain Design’s sales fell. In 2016, Williams-Sonoma had started selling a low-backed mid-century-modern chair called the Orb. A year later, Amazon released an almost identical chair, which it also called the Orb.
Amazon told the magazine that many other retailers produce their own versions of best-selling items, that such goods make up only one per cent of Amazon’s sales, and that Rain Design’s stands continue to sell well, despite competition from Amazon’s stand—which, it insists, isn’t a replica. It added that, despite claims to the contrary, it does not use “data about individual sellers to decide which products to launch.”
However, in November last year, following an inquiry launched in July 2019, the European Commission charged Amazon with abusing its dominant position in online retail to gain an unfair advantage over competitors. It said Amazon had used data on third-party sellers that use its marketplace to boost sales of its own-label goods.
It said the tech giant accesses sensitive data from small and medium-sized companies that use its platform, such as sales figures, page visits or shipping information. It then uses this to help with sales of its own-label products, or in choosing suppliers, said the commission.
Amazon rejected the charges, saying no firm “cared more” for small businesses and that more than 150,000 European businesses sell through its online marketplace.
This “caring” image won’t hold much water with small firms who have been unable to compete with a firm that can sweep through any sector it likes and whose customers seem ever-willing to fall into its clutches. After branching out into grocery and gadget shops, it is now said to be planning several large bricks-and-mortar retail sites in the US – effectively department stores stocking its private-label goods.
Beyond that its next target is likely to be pharmacy, in particular online pharmacy. A new report says it is only a matter of time before Amazon launches Amazon Pharmacy. A study by Simon-Kucher & Partners reveals that among UK customers that are already Amazon Prime users 47% would choose the company’s pharmacy platform for drug purchase. That’s not welcome news for small high street businesses, or for other online pharmacies such as Glasgow-based Phlo.
Amazon is clearly a phenomenon in retailing that has helped many thousands of companies survive, let alone thrive. But those businesses need to be aware that if they hook up with a partner promising the earth there may be downside risks that may come with it. After all, Amazon is also a jungle where dangers lurk.
Terry Murden held senior positions at The Sunday Times, The Scotsman, Scotland on Sunday and The Northern Echo and is now editor of Daily Business