Amazon and Its Resellers: Nonconsensual Relations
Published in L'Echo
(Belgium) on 23 December 2020
by Charles Cuvelliez, Jean-Jacques Quisquater (link to original)
Congress does not hesitate to refer to a climate of fear in describing Amazon's relations with its resellers, citing multiple abuses of its dominant position by the e-commerce giant. Europe is now getting cracking on this matter.
Last November, the European Commission opened official proceedings against Amazon for infringement of antitrust regulations. It looked as if the EU Commission had read a damning 449-page report by Congress on Amazon's abuse of its dominant market position.
To be sure, there are facts in the congressional report that were already known. For one thing, that Amazon forbids resellers on its platform from directly contacting clients, which restricts resellers’ competitiveness. And when goods are delivered, they are wrapped in Amazon's distinctive packaging with its logo, even though Amazon had nothing to do with their production or sale.
A Kind of Commercial ‘Cancel Culture’
Amazon Prime members spend the most: $1,400 each per year compared to $600 for nonmembers. Amazon offers Prime members free delivery in 24 hours on 10 million products, compared to a minimum 48-hour delivery on barely 200,000 products for Walmart.
Amazon is also greedy. Jeff Bezos' enterprise has acquired more than 100 companies in the last 20 years, either because they were serious competitors or operated in similar markets. It regards these acquisitions as a means of gaining more data on buying behavior, something that is, among other things, one of the EU Commission's grievances.
But above all, Amazon mistreats its resellers. One such company, PopSockets, claims that after it reached an agreement with Amazon on minimum sale prices, Amazon proceeded to sell PopSockets products at prices that were lower, and moreover, exacted compensation for loss of market share. PopSockets thus decided to cease all involvement with Amazon, which in retaliation, prohibited all its other resellers from offering PopSockets products.
Another Amazon practice that the congressional report points out is the company's application of pressure on publishers with its elimination of the "buy" and "pre-order" options for e-books. Temporarily delisting some products, currently a frequent Amazon practice, is another problem for resellers, who demand to know what is going on when they cannot order what they want.
In addition, Amazon does not return unsold items, and charges storage costs.
Nice Jeff, Mean Jeff
When service deteriorates, Amazon offers the services of specialists to fix problems created by Amazon algorithms. There are also the distinctive "Jeff Letters" or "Jeff Bombs," which are personal communications from Bezos himself pleading with disgruntled customers not to litigate.
Besides all of the above, Amazon uses sales data from its resellers to copy products that sell well. The congressional report notes in particular that when it cannot copy a product, Amazon pressures the manufacturer to refrain from selling it so that Amazon can take over sales. Amazon’s defense is that its data are anonymous and aggregate; it alone is capable of analyzing all the data from its resellers, which it needs for logistics purposes.
As for fake goods, Amazon applies a double standard. Sometimes an item is just one of many on the market, meaning Amazon is not responsible for the copy, and other times a reseller takes responsibility. Additionally, Amazon assumes a role in the fight against fake goods as a marketing ploy. In this respect, Apple has been a notable expense; Amazon accepted returns of fake Apple products in contravention of a wholesaling agreement with Apple that the latter recently refused to accept.
What is certain, however, is that Amazon has data at its disposal that are considerably more precise than data from a bricks and mortar store, which only sees the random comings and goings of anonymous customers. And while it is true that it offers some tools and data to its resellers, more damningly, it only shares more of its data to those who pay, and much of this is perfectly useless, inaccurate or outdated.
A Forced Marriage
We could go into greater length about Amazon's relations with its resellers. For example, the Fulfillment by Amazon program offers resellers a combined deal on storage, packaging and delivery. Simply speaking, Amazon mainly focuses on the benefits of such programs for its Prime members, who spend double what ordinary customers do. But a warning to resellers who think of participating in Fulfillment by Amazon: Your names will not appear in the "buy box." Now let's look at Amazon Sponsored Products and Sponsored Brands tools, which promises to put a reseller near the top of the list of certain key word search results. Worth noting is the fact that 44% of shoppers do not look past the first two pages of results.
Ultimately, Amazon seems to have become the embodiment of the "can't realize any profit" tactic. So what's it all about? These are products sold on the open market, but which are also cumbersome and heavy, among other things. But to use a current phrase, no problem! Amazon pleasantly welcomes its new resellers, but once they are integrated into its platform it raise its prices to compensate for logistical expenses. For instance, Amazon rents 10,000 trucks and 50 airplanes. (There will be 70 in 2021.) In 2022, it will surpass UPS Inc. and FedEx, having already surpassed the U.S. Postal Service.
In its conclusion, the congressional report speaks of a climate of fear in Amazon's commercial dealings. What is certain is that they are neither marriages of love, nor of convenience.
Last November, the European Commission opened official proceedings against Amazon for infringement of antitrust regulations. It looked as if the EU Commission had read a damning 449-page report by Congress on Amazon's abuse of its dominant market position.
To be sure, there are facts in the congressional report that were already known. For one thing, that Amazon forbids resellers on its platform from directly contacting clients, which restricts resellers’ competitiveness. And when goods are delivered, they are wrapped in Amazon's distinctive packaging with its logo, even though Amazon had nothing to do with their production or sale.
A Kind of Commercial ‘Cancel Culture’
Amazon Prime members spend the most: $1,400 each per year compared to $600 for nonmembers. Amazon offers Prime members free delivery in 24 hours on 10 million products, compared to a minimum 48-hour delivery on barely 200,000 products for Walmart.
Amazon is also greedy. Jeff Bezos' enterprise has acquired more than 100 companies in the last 20 years, either because they were serious competitors or operated in similar markets. It regards these acquisitions as a means of gaining more data on buying behavior, something that is, among other things, one of the EU Commission's grievances.
But above all, Amazon mistreats its resellers. One such company, PopSockets, claims that after it reached an agreement with Amazon on minimum sale prices, Amazon proceeded to sell PopSockets products at prices that were lower, and moreover, exacted compensation for loss of market share. PopSockets thus decided to cease all involvement with Amazon, which in retaliation, prohibited all its other resellers from offering PopSockets products.
Another Amazon practice that the congressional report points out is the company's application of pressure on publishers with its elimination of the "buy" and "pre-order" options for e-books. Temporarily delisting some products, currently a frequent Amazon practice, is another problem for resellers, who demand to know what is going on when they cannot order what they want.
In addition, Amazon does not return unsold items, and charges storage costs.
Nice Jeff, Mean Jeff
When service deteriorates, Amazon offers the services of specialists to fix problems created by Amazon algorithms. There are also the distinctive "Jeff Letters" or "Jeff Bombs," which are personal communications from Bezos himself pleading with disgruntled customers not to litigate.
Besides all of the above, Amazon uses sales data from its resellers to copy products that sell well. The congressional report notes in particular that when it cannot copy a product, Amazon pressures the manufacturer to refrain from selling it so that Amazon can take over sales. Amazon’s defense is that its data are anonymous and aggregate; it alone is capable of analyzing all the data from its resellers, which it needs for logistics purposes.
As for fake goods, Amazon applies a double standard. Sometimes an item is just one of many on the market, meaning Amazon is not responsible for the copy, and other times a reseller takes responsibility. Additionally, Amazon assumes a role in the fight against fake goods as a marketing ploy. In this respect, Apple has been a notable expense; Amazon accepted returns of fake Apple products in contravention of a wholesaling agreement with Apple that the latter recently refused to accept.
What is certain, however, is that Amazon has data at its disposal that are considerably more precise than data from a bricks and mortar store, which only sees the random comings and goings of anonymous customers. And while it is true that it offers some tools and data to its resellers, more damningly, it only shares more of its data to those who pay, and much of this is perfectly useless, inaccurate or outdated.
A Forced Marriage
We could go into greater length about Amazon's relations with its resellers. For example, the Fulfillment by Amazon program offers resellers a combined deal on storage, packaging and delivery. Simply speaking, Amazon mainly focuses on the benefits of such programs for its Prime members, who spend double what ordinary customers do. But a warning to resellers who think of participating in Fulfillment by Amazon: Your names will not appear in the "buy box." Now let's look at Amazon Sponsored Products and Sponsored Brands tools, which promises to put a reseller near the top of the list of certain key word search results. Worth noting is the fact that 44% of shoppers do not look past the first two pages of results.
Ultimately, Amazon seems to have become the embodiment of the "can't realize any profit" tactic. So what's it all about? These are products sold on the open market, but which are also cumbersome and heavy, among other things. But to use a current phrase, no problem! Amazon pleasantly welcomes its new resellers, but once they are integrated into its platform it raise its prices to compensate for logistical expenses. For instance, Amazon rents 10,000 trucks and 50 airplanes. (There will be 70 in 2021.) In 2022, it will surpass UPS Inc. and FedEx, having already surpassed the U.S. Postal Service.
In its conclusion, the congressional report speaks of a climate of fear in Amazon's commercial dealings. What is certain is that they are neither marriages of love, nor of convenience.
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