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The decline of Amazon is closely tied not just to its size but to how it has chosen to grow. Amazon is now less of a store than a mall, or maybe a sprawling bazaar. Last year, nearly 60 percent of units sold on Amazon came from third-party sellers rather than from Amazon itself. Want to set up a booth? There’s a nominal monthly fee to reserve the space. From there, though, the charges add up quickly, according to a report from the ecommerce-intelligence firm Marketplace Pulse.
Amazon takes a cut of every transaction, typically about 15 percent. For front-and-center placement, you’d better pay for one of those sponsored slots. According to the FTC, advertised products are 46 times more likely to get clicks. Call it another 15 percent of revenue. Oh, and if you want to qualify for Prime—and if you want any shot of making a sale, you do want to qualify for Prime—you’ll need to use Amazon to fulfill your orders. That’s another 20 to 35 percent off the top. All of a sudden, half of your revenue is in Amazon’s coffers.
Amazon itself has reported that all of those fees amount to a big business; the revenue generated from them has tripled since 2017, totaling $117.7 billion last year alone. But although it’s been great for Amazon, it hasn’t been great for consumers. When sellers are nickeled-and-dimed, not a lot of savings are left to pass on to you.
Amazon denies that it squeezes its third-party sellers at the expense of shoppers. “The FTC’s allegation that we somehow force sellers to use our optional services is simply not true,” David Zapolsky, Amazon’s general counsel, wrote in a lengthy response to the charges. “Sellers have choices, and many succeed in our store using other logistics services or choosing not to advertise with us.”
That is technically true, but in a world where so much of online retail runs through Amazon, choice is an illusion. Dare to offer a cheaper product elsewhere online, and Amazon might bury your listing on its platform. A heavily redacted portion of the FTC suit claims that the company “deploys a sophisticated surveillance network of web crawlers that constantly monitor the internet” for such sellers. (In his response, Zapolsky says that the FTC “has it backwards” and that the company doesn’t “highlight or promote offers that are not competitively priced.”)
Of course this is where Amazon wound up. The company spent years sacrificing profit for scale, until it had so many customers that sellers couldn’t ignore it. Now that it extracts billions each month from those sellers, it can afford to ignore those customers—or at least prioritize them less. Amazon gets paid by all of its vendors, no matter which products go in our cart.
Shoppers are not privy to any of these machinations while browsing Amazon. We can’t know which third-party sellers have been banished to the shadow realm, or how tightly their margins are squeezed. Even knowing this might not get us far, considering how entrenched Amazon is now in American life. On Monday, I went ahead and bought the Linfairy Kids Child Purple Dye Wig Halloween Costume Cosplay Wave Wig, for $19.88 plus tax. My daughter liked the curls. It’ll be here by Thursday, which is no small relief. After all, it was my only option.