Amazon. The Communist Backdoor Killing American Small Business - Part 4
Amazon is everywhere. ONE out of every TWO products sold online (in the US) is through Amazon. Bluntly, Amazon.com accounts for approximately 49% of all e-commerce purchases.
Every month, more than 197 million people visit Amazon – more than Russia's entire population.
Amazon has become a global powerhouse operating in more than 16 marketplaces worldwide. A growing number of lawmakers are concerned about Amazon's influence over small and medium businesses.
In the face of these allegations, Amazon portrays itself as beneficial for small and medium businesses.
On the other hand, small business owners tell a very different story. According to a 2021 survey, three-quarters of independent retailers consider Amazon's dominance a major threat to their survival. Only 11% of those who sell on its site describe their experience as successful.
These small businesses are caught in Amazon's monopoly gambit: the tech giant controls the online market, leaving them with no choice but to sell on its platform. However, doing so allows Amazon to exploit and undermine them – As a competitor.
The more we understand HOW Amazon functions, the better we can all grasp the gravity of Amazon's terms and policies.
Let’s get started.
How Amazon Operates
There are over 353 million products listed on Amazon’s marketplace. But not all of these are from Amazon. In any possible way, they can't manufacture and sell products on this scale.
The majority of the sales come from third-party sellers. In 2021, Third parties accounted for 55% of all the marketplace sales. And this number is only rising.
How Amazon Makes Life Miserable For Sellers
High Fees On Sellers
Amazon keeps a whopping 30% of each sale made by third-party sellers. Moreover, Amazon makes small business owners purchase additional services to even stand a chance against others – including shipping and advertising. These high fees make it very hard for SMBs to make any profit.
Blocking Sellers From Setting Profitable Prices
If Amazon’s pricing bots find out that a seller is offering a lower price elsewhere in the marketplace, the ever-evolving algorithm hammers the SMB.
The product is moved down in the search results, making it nearly invisible to the customers. As a result, sellers must give the lowest price on Amazon. Making Amazon the most profitable for customers – can’t say the same about the sellers though.
The FBA Trap
Amazon offers two options to fulfill your products:
- FBM (Fulfilled by the merchant) and
- FBA (Fulfilled by Amazon)
57% of third-party sellers use FBA exclusively, 34% use FBA and FBM, and only 9% use FBM only.
Amazon offers FBA service for a monthly fee of 40$. Any seller can list products for sale on the website. Besides, Amazon will take care of storing, packing, and shipping the goods.
Amazon is recognized as a trusted reseller around the globe. So, if anyone can get on Amazon, he gets the backing and trust of its huge number of users.
HOWEVER
FBA sounds too good to be true, it is. Amazon is not only filling their website with goods, they’re getting access to the most valuable component in business – The data.
Every business that signs up for FBA is a tool for Amazon to find out what’s selling and what’s not. They have access to every single figure and piece of data. And they shamelessly claim to have no access to such data.
Misusing Third-party Seller's Data
Every seller on amazon uses the Seller Portal to list and sell products. Amazon can see how many pieces of a product are being sold per month.
So when Amazon “sees” a product selling a certain number of units every month, the product gets “flagged” by the algorithm. Then amazon outright COPIES/STEALS/KNOCKS OFF and manufactures under a “new” brand name.
Amazon euphemizes this practice by calling this private labelling. As of now, Amazon owns 90 different private label brands.
Amazon has been STEALING ideas from small sellers on its platform for years by using data that they "claim" was not available to them.
Backing Chinese Sellers
Amazon actively allows unethical Chinese corporations to use dirty-illegal strategies and scams on Amazon. The tech giant turns a blind eye to their shady antics as the Chinese seem to help Amazon exert an almost categorical dominance over the e-commerce industry. More on that later on.
How Amazon Kills Small Businesses
Till now, we’ve only seen blatant stealing and extortion from the tech mogul. But now, let’s see how they destroy small and medium businesses.
Fake Negative Reviews
The Chinese wholesalers cross any line to remove their competitors from the picture. They hire freelancers to put up negative reviews on Amazon. One fake review can make a product go out of business, imagine what thousands could do.
Ella Keyes told Exbulletin that she had a thriving Amazon business selling post-pregnancy products. She claims to have received about 60 reviews, almost all of which were positive. She was earning around £3,000 per month.
Then something strange happened – she received a chain of one-star reviews. Ella suspects that some of these negative reviews are forgeries, and the stress began to take its toll on her. Sales nearly disappeared.
She gave up on the business after a few months.
Accusation Of Selling Fake Products
Another move the Chinese use is buying competitors' products in large volumes and returning them, claiming the products were fake.
Amazon doesn’t check the authenticity of these claims. It just bans those products without any proper inquiry. This way, the Chinese sellers damage the third-party sellers' inventory performance – leading SMBs out of business.
And there is no point in complaining to Amazon. You'll simply get pushed over by the unhelpful phone ‘support’ or the mail bots.
Suspension Of Accounts
Amazon inexplicably shuts down hundreds of sellers' accounts from time to time to hijack customers. The sellers get locked out of their accounts and lose access to important business information. These actions are often abrupt and can be devastating, costing sellers huge losses in merchandise and receivables.
The recovery process of suspended accounts is exhausting and bears little chance of success. It can take weeks or even months before Amazon even responds. You will have to go through mail bots, caress replies from the incompetent and unhelpful freelancers from India – only to get your appeal discarded. And Amazon's standard contract bars sellers from pursuing legal actions.
Closing Thoughts
Having your company on Amazon gives your products the ultimate exposure. However, it’s not only about exposure. It all boils down to trust.
Amazon is preferred by 89 percent of buyers over any other e-commerce site. This is due to their familiarity with Amazon. They have faith in them because they understand how things work and have previously ordered from them.
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