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How Amazon Profits From a World Crisis

How Amazon Profits From a World Crisis

Most of the news coverage Amazon has received in recent weeks has focused on unhappiness among its warehouse workers, delays in shipping, and its frantic efforts to hire more people to keep up with consumer demand. It’s almost enough to make you feel sorry for Jeff Bezos. But don’t.

The most important of those stories is the feverish hiring. Amazon is experiencing huge demand and it’s taking advantage of the crisis to tighten its grip on the retail sector. It will come out of all this stronger than ever. While the rest of the stock market is getting crushed, Amazon’s share price is up 50% since the beginning of the lockdown last month.

Amazon’s moves have been several and complicated, but here’s a fairly clear one. Pleading a need to get health and safety supplies to desperate buyers, Amazon deemed all of its third-party sellers (who account for more than half the sales on the platform) “non-essential” and restricted their warehouse access and eligibility for Amazon Prime expedited shipping. At the same time, it deemed Amazon-branded products (earbuds, speakers, tablets) “essential,” delivering them in one or two days.

That message you read at the top of Amazon’s home page about giving priority to items that its customers need most?

“Alexa,” with free one-day delivery, “spell bullshit…”

Here’s another example. Rather than cope with the increased demand on its system by giving preference to seller-fulfilled products and listings, Amazon has hidden listings by retailers who promise to deliver the same products as Amazon at earlier dates. This screws not only the third-party seller but consumers.

And one more. By downgrading the service available to non-Prime members in the midst of a crisis, Amazon is pushing shoppers into buying the $119/yr membership, never mind that even Prime members aren’t getting much out of Prime shopping promises at the moment.

Write Shaoul Sussman, a legal fellow at the Institute for Local Self-Reliance:

In the last two weeks, it became apparent that Amazon is seizing the moment by leveraging its position as intermediary between quarantined consumers and distressed merchants to bolster its grip over the retail sector. Enforcement agencies and lawmakers should step up and scrutinize Amazon’s activities at this critical moment. If they fail to do so, Amazon’s power over our economy would dwarf the power it possessed prior to this pandemic.

Over on the book side of Amazon’s business, the company has “deprioritized” delivery of paperbacks and hardcovers on the grounds that they are non-essential (compared, say, to Amazon’s earbuds). It is meanwhile pushing like crazy its proprietary Audible book and Kindle ebook services, which have near-monopolistic grips on the audio and ebook markets, respectively. We searched twenty non-fiction bestsellers including Michelle Obama, David McCullough, and Erik Larson on Amazon.com and all of them came up with either Kindle or Audible as the default offer.

None of us know the financial details of Amazon’s bookselling operations but it’s a safe bet that its Kindle and Audible platforms are not only proprietary but more profitable than its sales of physical books, which are usually heavily discounted and delivered free at considerable expense to Amazon.

This does not strike us as ethical behavior. It looks more like crisis-profiteering. So, yes, enforcement agencies and lawmakers should step up and scrutinize Amazon’s activities at this critical moment.

PS: Amazon is now claiming that the deprioritizing of third-party fulfillment was an unintentional error. According to the Wall Street Journal, Amazon will lighten up on third-party sellers next week, although it’s not clear to what extent).

 

 

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