What Do Amazon’s Antitrust Charges Mean for Merchants?

Amazon is frequently cited as the biggest winner of the Covid-19 pandemic. As the world uncomfortably adjusted to a “new normal,” a few industries and companies became mainstays. E-commerce was inevitably one of them, and Amazon, which sells virtually every item under the sun, had its best year on record. The retail giant collected more in profit during the first three quarters of 2020 than it did in the full year of 2019, even before the festive season began.

However, despite a record sales year, there has been plenty of evidence that Amazon is struggling on several fronts, in some cases, even before the Covid-19 pandemic began. The firm has always had a shaky track record on worker’s rights. For instance, there are multiple allegations that delivery drivers earn under the minimum wage and are under significant time pressure, causing them to engage in dangerous or unhealthy activities.

Even at the peak of the pandemic, as the firm relied on its employees to fulfil record order numbers, Amazon continued to fall into trouble for working conditions. A French court ruled that the company had failed to protect warehouse workers from the virus with unsafe conditions, and the firm was forced to halt its operations in France entirely or face a fine of €1m ($1.1m) per day.

But that was far from the end of Amazon’s woes in 2020. In November, antitrust regulators in the European Union brought charges against the firm for violating competition law. The authorities allege that Amazon collects nonpublic data from its own merchants, which it uses to compete against them directly.

In the US, Congress and the Federal Trade Commission are also investigating Amazon’s approach to third-party sellers.

What Does This Mean for Merchants?

For sellers depending on Amazon’s marketplace to make a living, it’s not good news. As one of the world’s biggest tech firms, Amazon writes its own algorithms, and like all such algorithms operated by tech giants, they’re something of a black box. However, the allegations seem to indicate that Amazon is using its algorithms to parse the products being sold by third-party merchants on its marketplace and ensures that its own products get pushed to the top of the list when a shopper searches for the item on Amazon’s site.

Amazon also has privileged access to all information from merchants on its network, including order volumes and product sales performance. Such information would give the company unprecedented insights into which products it should list itself as a first-party seller and how it could undercut its own merchants.

In this way, merchants could be losing out on significant revenues as shoppers invariably buy the cheapest items that appear close to the top of the list shown on their screen.

Inevitably, Amazon has denied the antitrust allegations. However, if the charges are upheld, the world’s biggest marketplace may find itself facing an exodus of merchants as they flock elsewhere in the hope of a fairer deal.

Where To Next?

Even though it’s the world leader in e-commerce, Amazon isn’t the only marketplace where a seller can set up shop.

Two of Amazon’s most significant global competitors are eBay and Etsy. Both offer attractive alternatives for sellers, although each also has its pros and cons.

Thanks to an early integration with PayPal, eBay sellers can benefit from the ease of payments along with seller protection. However, platform fees can be very high.

For sellers of vintage, handmade, or craftsy goods, Etsy is a clear alternative to Amazon. It offers lower fees and has a ready-made audience of buyers looking for something a bit more special. However, sellers are up against stiff competition.

The dominance of the market by eBay, Aliexpress and Amazon makes it very difficult for new or local marketplaces to become visible for a customer. Providing low prices, a wide range of goods and customer service which operates 24 hours a day is not an easy task. However, the success of the UK-based OnBuy is a great example of how the emergence of new marketplaces brings healthy competition and diversity to the market.

After becoming the UK’s most trusted marketplace as rated by 23,000 OnBuyers on Trustpilot, OnBuy is now in the midst of a global expansion program into over 140 countries by year-end 2023. It offers over 30 million products to its 8 million buyers. It has low selling fees and supports sellers in growing their businesses, rather than competing against them through selling its own products.

OnBuy has partnered with PayPal to process payments, so it’s the only UK marketplace to offer immediate payment on item dispatch, instead of making you wait for your funds. The company has also benefitted from the e-commerce boom in 2020, having had a successful year which resulted in it achieving over 600% growth for 3 consecutive years and 800% year-on-year sales growth so far in January 2021.

The existence and emergence of competition is good news for buyers and sellers alike. Markets thrive amid a competitive environment, while consolidation into one big player simply leads to stagnation and a lack of choice. Providing that rival platforms exist, sellers can choose the most profitable and friendly venue for them, and Amazon has to work to raise its game for the benefit of all its stakeholders.