Amazon’s near-total e-commerce dominance is now the subject of regulatory scrutiny, and a new investigation from The Wall Street Journal provides an excellent and exhaustive look at how far the tech giant has been willing to go to make its “everything store” live up to the name.
The story, “How Amazon Wins: By Steamrolling Rivals and Partners,” delves into Amazon’s various strategies for dealing with competitors and managing the Amazon Marketplace, its platform for third-party sellers that’s responsible for more than half of all its retail sales. Amazon Marketplace is now central to claims the company abuses its market power to squash rivals by cloning their inventory or features and using seller data to inform its own line of white-label products. Last month, the European Union antitrust authority accused Amazon of unfairly competing with its own third-party sellers in Germany and France.
The WSJ story is a well-reported and accessibly explained highlight reel of Amazon’s more damning offenses, from its recent cloning of Silicon Valley darling Allbirds’ signature running shoe to the age-old and cutthroat tactics it deployed to dethrone Diapers.com owner Quidsi.
The latter situation is a particularly telling story: Amazon slashed diaper prices to that point that it was losing as much as $7 on every box of diapers it sold, after which it reportedly approached one of Quidsi’s executives about a sale. The company sold itself to Amazon in 2010 for $500 million, and Amazon later shut down Diapers.com, signaling its complete domination of the online diaper-selling business.
There’s a number of other anecdotes in the story about how Amazon would allegedly target sellers large and small that specialized in one or two popular items on the platform by labeling the competition as counterfeit. After demanding the seller provide info on their manufacturers to authenticate their account, Amazon would partner with those manufacturers to sell its own competing products.
Amazon’s e-commerce dominance and treatment of online sellers has attracted antitrust scrutiny
There are also anecdotes of companies fighting back and even winning, from Wayfair to West Elm-owner Williams Sonoma to Amazon’s fast-growing and most worrisome rival Shopify. In Shopify, a company that specializes in helping both online and offline merchants set up proper e-commerce operations, Amazon has apparently met its match, thanks in part to Shopify’s massive growth during the coronavirus pandemic.
Shopify had aggregate sales of more than $5 billion on Black Friday, beating out Amazon Marketplace. That’s largely because of Shopify’s generously low fees for third-party sellers. Amazon has now reportedly created an internal team, as it has done to go after others, dedicated to replicating Shopify’s success, the WSJ reports.
More than anything, the WSJ story, which anyone interested in Amazon’s rise and how it wields its market position should go read, is a helpful reminder that companies don’t become as big, powerful, and unprecedentedly wealthy as Amazon by accident or due to sheer momentum alone.
Oftentimes, key decisions from executives along the way help shape strategies that put other rival firms out of business or force those rivals to sell or face decline. In the case of Amazon Marketplace, those strategies may make the small businesses that rely on online platforms so dependent on one company’s services that they’re prevented from fleeing to a competitor.