Kevin Libin: Amazon’s making people really, really happy. Obviously it must be stopped -

Kevin Libin: Amazon’s making people really, really happy. Obviously it must be stopped

Credit: financialpost.com

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Last Tuesday was an annual event that’s becoming known as a catastrophe for those who fear commerce. Amazon calls it Prime Day. Shoppers know it as an opportunity to score deals, which this year included US$55 off a Brother inkjet printer and US$28 off a Crock Pot. They’re oblivious to the insidious ways these bargains are victimizing them. Some people see Amazon as a retailer offering an ever-expanding ocean of products, at great prices, ordered easily and delivered conveniently, as effortlessly now as making a wish aloud to the company’s Echo in-home voice-recognition device. Little do they know how bad all that customer service, convenience and affordability are for them.

“Prime Day isn’t so much a holiday as it is Exhibit A in a grand scheme for control of the economy,” wrote muckraking business journalist David Dayen in The Nation last week. Amazon’s sales tactics, he argued, are behind “soaring inequality” and why “the economy is stuck in the mud.” Successful businesses that save time and make goods more affordable for households and businesses are just toxic to an economy, dontcha know.

To those who see a business growing and grow suspicious, all the amazing things that have made Amazon so popular are what make it unscrupulous. The “Prime” subscription model, offering free, fast shipping for an annual flat fee, looks to Dayen like a trap, “keeping users stuck inside the Amazon box,” impelling them to buy more things to extract ever greater value from the flat fee. Before Amazon, no one worried about that strategy when it went by names like season’s passes, loyalty rewards, or bulk discounts.

Such Amazon animosity isn’t entirely new. The company became a target of the business-bashing brigade the minute it emerged as a rival to the last retailer that grew incredibly huge by making people really happy, Walmart, which was loudly maligned for the same things Amazon is today: exploiting workers, duping customers, killing off local businesses and generally ruining America. This time, the kvetching had largely been forced to the fringes since Amazon was and remains phenomenally popular with the buying public, even among those snooty opinion leaders who have little affection for Walmart and might not even be caught dead in one.

But the Amazon offensive has suddenly found its momentum now that the e-commerce site is taking over Whole Foods. Amazon has been delivering non-perishable groceries for years, and Whole Foods holds a paltry 2.5 per cent of the U.S. grocery market, but by joining forces, Amazon is somehow dangerously “unstoppable,” a “monopoly” rising. In Washington, Democratic congressman David Cicilline sent a letter Thursday to the chairman of the House Judiciary Committee asking for hearings on Amazon’s US$13.7-billion Whole Foods acquisition. Cicilline claimed that the deal “raises important questions concerning competition policy, such as … if the antitrust laws are working effectively to ensure economic opportunity, choice and low prices for American families.” But Cicilline also represents Rhode Island, which is the home state of pharmacy giant CVS Health, a company that no doubt immediately recognized the threat to existing drug retailers of Amazon inheriting a bricks-and-mortar footprint of Whole Foods’ 400-plus stores across the U.S.

Before that, it was Democrat Ro Khanna calling on the Justice Department and the Federal Trade Commission to review the deal, insisting the takeover would “hurt local grocery stores” because Amazon can “engage in low-cost pricing and it is also going to put pressure on wages.” Khanna might not just be fighting for more expensive groceries, though: He represents Silicon Valley, home to all those tech-giant rivals to Seattle-based Amazon.

Of course there’s nothing stopping other retailers taking on Amazon in delivering the e-commerce comforts Americans are flocking to, but surprisingly few have proved much good at it. Amazon sold six times the volume of products online in the U.S. as Walmart, Target, Best Buy, Nordstrom, Home Depot, Macy’s, Kohl’s, and Costco combined. Online groceries, meanwhile, comprise a lousy one per cent of the U.S. market. Maybe that’s because the online grocery business is unworkable. Maybe it’s a profit-killing quagmire that CEO and founder Jeff Bezos will come to regret trying. Maybe Amazon will stumble. After all, Walmart was once regarded as unstoppable, too, before Amazon transformed from an online bookseller into its fiercest rival. The home-delivery market was once owned by Sears, may it rest in peace.

Maybe Amazon is the first of these supposedly unstoppable retailers that will finally prove immune to disruption, but there are plenty of comers out there who envision otherwise. Alibaba, Instacart and even Uber all have eyes on the “fast-moving consumer goods” market, including groceries. Walmart isn’t lying down for Amazon’s disruption either, spending billions on its comeback strategy. Bezos has said he knows Amazon “will be disrupted one day.”

With all the vigorous and vibrant players elbowing each other around in e-commerce and bricks-and-mortar retail, it requires prodigious tunnel vision to judge the scene uncompetitive. But with willpower, it can be done. In Report on Business magazine, columnist Eric Reguly warns that Amazon is helping create “corporate fascism,” alongside Facebook, Netflix and Google. He’s already calling in the trust-busters. These “monsters” will need to be “cut down to size” eventually, he’s sure. “So why wait?”

Trusts in the past were busted on the basis that they were abusing market power to hurt customers. But Amazon spoils its shoppers. It boasts a long record of topping customer-satisfaction reviews from the U.S. to Europe. Last week, the CBC reported on how Iqaluit residents rely on Amazon Prime to get groceries cheaper than buying with government subsidies at local stores — they can get soap delivered by Canada Post at a third the price, and diapers at half. “Amazon Prime has done more toward elevating the standard of living of my family than any territorial or federal program. Full stop. Period,” commented one local school principal. Go tell those folks they’re being victimized by Amazon and should pay more for their groceries.

 

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