The ecomm world is changing rapidly in the COVID era, as retail behemoths and independent retailers alike mobilize to capture the billions in retail business moving online, over $60 billion in new ecomm sales in Q2 alone, according to DigitalCommerce360. That $60+ billion in new ecomm sales more than offset a big decline in offline sales, a massive shift that had ecomm accounting for over 20% of all retail sales for the first time in the period.
A lot of the new ecomm activity surrounds third-party sellers, an area that eBay pioneered but in which Amazon is increasingly dominant, and where Walmart is moving to gain share. That’s because even though ecommerce of all kinds is growing rapidly, what’s growing fastest is sales by third-party sellers on big retail platforms. Amazon, for example, revealed that sales by third-party sellers on its platforms grew even faster than sales of product it owns in a blow-out Q2.
On the other hand, with what appear to be more Machiavellian motives, Amazon is changing its shipping performance requirements for third-party sellers beginning in February, requiring them to offer weekend deliveries and to meet new one- and two-day delivery promises. The changes are going to be hard for third-party sellers to meet unless they begin having their orders Fulfilled by Amazon, with their inventory stored in Amazon warehouses and shipped by Amazon, all at a fee, of course.
All of that growth requires space, and Amazon is now in discussions with Simon Property Group, the largest mall operator in America, about leasing vacant department stores as fulfillment centers, according to the Wall Street Journal, perhaps the perfect metaphor for the broad trends impacting retail.
Not everyone thinks all this concentration of retail through big retailing platforms is a good idea. In a remarkable joint letter from associations representing three levels of the publishing industry, the Association of American Publishers, the Authors Guild, and retailer organization the American Booksellers Association, to Congressional Representative David Cicilline, Chairman of the House Antitrust Subcommittee, the united group of associations warns of Amazon’s market dominance.
Books were where Amazon started, where its impact has been most profound, and where it’s best known. And to this group, Amazon represents significant danger to the free flow of ideas. "[T]he competitive framework of the publishing industry has been fundamentally altered in recent years—and remains at serious risk of further diminishment—because of the concentrated power and influence of one company in particular: Amazon," the group wrote. Noting that Amazon’s share of the book business is likely 50% overall, and up to 70 to 80% for some industry suppliers, the company has another overwhelming advantage, the group argues, the data from across its platform that it can deploy to maximize sales, with COVID only enhancing the company’s advantages. "The ongoing COVID-19 crisis is exacerbating the problem: it continues to threaten the financial well-being of authors, publishers, and booksellers, some of whom will not survive the year," the group wrote. "Amazon, by contrast, with its ever-extensive operation and data network, has grown only more dominant, enjoying its largest-ever quarterly profits during April, May and June… Amazon no longer competes on a level playing field when it comes to book distribution, but, rather, owns and manipulates the playing field, leveraging practices from across its platform that appear to be well outside of fair and transparent competition."
The letter asks for the following remedies:
- Prohibit Amazon from leveraging data from the operation of its online platform to compete with and disadvantage the suppliers doing business there.
- Prohibit Amazon from tying distribution services to the purchase of advertising services.
- Prohibit Amazon from imposing MFNs [Most Favored Nation] and other parity provisions.
- Prohibit Amazon from using loss-leader pricing to harm competition.
While it doesn’t seem likely that Congress will take up such a weighty item only months before a Presidential election, the letter is a sign that resistance to Amazon’s market power is unified throughout the business where Amazon got its start, and is focusing on Amazon’s increasing dominance in the COVID era.
