5 Ways Amazon Hurts Small Businesses

Submitted by Anya Crittenton on November 17, 2021
Anirudh/Unsplash

Amazon—it’s one of the biggest corporations in the world, raking in tens of billions of dollars annually, even while earning the ire of the masses for its treatment of employees, effects on the planet, monopolistic practices, and more. 

Another pitfall of the giant conglomerate is how it dwarfs and harms small businesses. 

Below are five ways small businesses are suffering under the domination of Amazon: 

  1. Amazon Thrives, While Small Businesses Die 

At the height of the pandemic—most of 2020—Amazon thrived. People following stay-at-home orders used internet retail and delivery to supply their homes, from groceries to sourdough starter kits and Pelotons. Last year, Amazon stock was up 77% from 2019, all while small, local, and brick-and-mortar businesses were forced to close. 

According to Yelp’s 2020 Local Economic Impact Report, nearly 180,000 businesses closed in March, some only temporarily, while for others it was a permanent closure. 

As the year went on, more and more businesses began reopening—sometimes multiple times. Yet from March to August 2020, the number of permanent business closures jumped from 36,718 to nearly 100,000. 

All the while, Amazon continued and remains thriving. While it cannot be blamed for the economic impacts of people following health and safety guidelines, many small businesses have online stores yet were completely overshadowed by online retail giants. 

  1. Copycatting 

Last year, the House Judiciary antitrust subcommittee released a report claiming it had evidence of Amazon using data from third-party sellers to identify the most popular products, and then create its own versions and sell them. This is known as copycatting and in worst case scenarios, it can put a small business out of business when consumers flock to mass-produced, and often cheaper, versions of products. 

“We have heard so many heartbreaking stories of small businesses who sunk significant time and resources into building a business and selling on Amazon, only to have Amazon poach their best-selling items and drive them out of business," subcommittee chairman David Cicilline said. 

Amazon has repeatedly denied this practice, while third-party sellers and former Amazon employees offered testimonials to the contrary. 

The Wall Street Journal also published an extensive and in-depth investigative report into Amazon and found evidence of copycatting. 

“We have a policy against using seller-specific data to aid our private-label business," Amazon CEO Jeff Bezos said in Washington, before adding: “"I can't guarantee you that that policy has never been violated.” 

  1. Forced Reliance 

The close relationship between Amazon and third-party sellers, often small businesses, is what allows for the possibility of copycatting. So why don’t small businesses stop selling on Amazon? 

Amazon is a juggernaut, which can help small businesses potentially achieve more sales, exposure, and engagement. 

According to Amazon Vice President of Small Business Nicholas Denissen, this is the goal: “We want to see small businesses across the country thriving like never before. We are committed to helping them harness the power of online sales, reach new customers, and provide fantastic selection, value and convenience.” 

If small businesses want this potential growth, however, they are forced to rely on Amazon, undermining their agency as an independent business. It places small businesses in between a rock and a hard place, forcing them to choose between the massive consumer audience of Amazon and the risk of falling prey to a monopoly. And that risk is a real one. 

Last year, Amazon kicked a small business off its site and seized the inventory, but in November, the merchant won its legal battle, earning one of the biggest acknowledgements of Amazon’s mistreatment of small businesses. 

  1. Playing Monopoly 

In Lendio’s 2018 American Dream Survey, two-thirds of 2,000 surveyed small businesses said they view Amazon as a threat to their bottom line and a negative influence on growth. 

Small businesses responded in the survey that they had less concerns about money and brand growth and retention, and more concerns about going up against a monopolistic beast like Amazon. 

Earlier this year, the House Subcommittee on Antitrust, Commercial and Administrative Law found Amazon “has monopoly power over many small- and medium-sized businesses.” 

Voters and legislators alike have expressed support for breaking up Amazon in order to give back power and equity to small businesses. 

When Amazon retains 50-70% of the online marketplace, it then acts as a gatekeeper and autocrat of the online retail space, able to oppress—or even obliterate—small business competitors. 

  1. Fixed Pricing 

Amazon can use its monopolistic power and influence in numerous ways, from the aforementioned copycatting to fixing prices. 

In May 2021, attorney general of Washington, D.C., Karl Racine, filed a lawsuit against Amazon for this exact practice. 

The lawsuit alleges Amazon is engaging in monopoly practices by blocking small businesses as third-party vendors on the site from offering lower prices and better terms of service. 

According to the lawsuit, such practices “impose an artificially high price floor across the online retail marketplace and allow Amazon to build and maintain monopoly power in violation of the District of Columbia’s Antitrust Act.” 

The negative consequences of monopoly practices include suppressing consumer choice, healthy and fair market competition, and innovation. 

Demands for Amazon’s breakup, more regulations of giant conglomerates, and better treatment of employees is a win for everyone across the board. 

You can get started in divesting from Amazon right now by shopping directly with small businesses, including all of our Green Business Members

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