The COVID-19 pandemic changed the world in countless ways. Almost the entirety of the economy was affected. The biggest beneficiary of this was Amazon. The giant marketplace that seemingly sells everything was the first and only call for an enormous number of people during the various lockdowns, shutdowns, and stay-at-home orders. In 2020, Amazon made $386 billion in revenue, making it the third-largest company in the world (by revenue), behind Walmart and China’s Petrochemical Corporation. One hundred and forty-seven million people in the United States subscribe to Amazon Prime, and they saw a 37.6 increase in revenue in 2020. So, what does this mean for small businesses?
Amazon and Small Business
With 51.2% of U.S. digital retail business going to Amazon in 2020, what does this mean for small businesses? It is now easier than ever to start an e-commerce venture. Choosing a product and setting up a website or social media store are now all achievable on a smartphone. Using this ‘go it alone’ tactic may prove to be a success. Finding the right niche and appealing to the target demographic are all-important for an e-commerce business to succeed. In all likelihood, there is a chance of it being lost, or not receiving the traffic that you as the entrepreneur believe it deserves. This is where FBA (fulfilled by Amazon) comes in.
FBA is Amazon’s way of allowing small businesses to sell on their site, and therefore access their gigantic customer pool. What comes with the access to the Amazon marketplace is the trust in the brand. According to a 2019 study, 89% of buyers are more likely to buy from Amazon than any other e-commerce site. This is a huge advantage in and of itself, but there is more.
Businesses that use FBA have their stock storage and shipping taken care of by Amazon. The ease and reliability of all the logistics being fulfilled by Amazon can reduce a lot of stress and work for small business owners, in turn allowing them to take more orders and make more money. Amazon claims to have invested over $30 billion in tools and services to help small and medium businesses. New businesses with no reputation or customer base can rely on the convenience of the biggest online marketplace.
Assisting or Killing?
Jeff Bezos has repeatedly stressed that Amazon has a mutually beneficial relationship with small and medium businesses. In a 2021 survey of over 4000 Americans, 56% of those asked think “major technology companies should be regulated more than they are now while 68% believe these firms have too much power and influence in the economy.” The aforementioned merits of FBA come with a considerable downside. Businesses that use Amazon have their data monitored and used. By monitoring active sellers on their marketplace, which number around 1.5 million, Amazon can see what sells and what doesn’t. As a result of this research, Amazon has launched many private label products that undercut small businesses. They have also been accused of prioritizing their own products in searches ahead of other sellers’.
With this in mind, it is important to remember that small businesses, without Amazon, can be successful. Olympic Eyewear sells bulk designer sunglasses and are just one of many wholesalers from which a small business owner can source a popular product to sell on their own website or social media store. With the fees from FBA and the questionable usage of data, it could be argued that Amazon is hindering the growth of small businesses in favor of hoarding as much of the market as possible.