Big Opportunities for Small Businesses on Amazon
Proponents of antitrust action in the technology sector like to frame the debate as a battle of big versus little, but the realities of e-commerce life on Amazon expose the flaw in that thinking. One of the biggest tech companies in the world has invested much of its innovative energy into building an ecosystem that empowers entrepreneurial success.
Small and medium-sized businesses generate 58 percent of sales on Amazon these days, according to the company’s second annual Small Business Impact Report. CEO Jeff Bezos also noted in his last annual letter to shareholders that third-party sales grew from a respectable $100 million in 1999 to a whopping $160 billion in 2018.
When small businesses are generating that kind of revenue, it isn’t surprising that Amazon caters to them. Amazon created dozens of digital tools in 2019 alone to help entrepreneurs boost sales, including features that manage product pricing and inventory.
Those efforts continue Amazon’s pattern of incorporating small businesses into its platform. Amazon Storefronts opened in 2018, creating a central location for nearly 20,000 small and medium-sized businesses. Amazon Handmade has been showcasing the work of entrepreneurial craft makers since 2015. And Amazon Marketplace and Amazon Logistics underpin the company’s commitment to small businesses.
The marketplace offers an array of benefits to third-party sellers, chief among them being access to Amazon’s worldwide customer base. Mom-and-pop shops whose products appeal to people beyond their own neighborhoods gain an opportunity for global growth.
Marketplace participants are eligible for prime promotional slots on Amazon. This includes “lightning deals” that run for a limited time and the “buy box” at the top right section of a page for a product sold by multiple merchants. They also can buy sponsored advertisements to drive traffic to their listings.
Some sellers opt to pack and ship their own products to consumers, a process known as Fulfillment by Merchant. But Fulfillment by Amazon, available since 2006, is a popular feature of the marketplace.
Merchants who go that route ship their inventory to Amazon fulfillment centers, and Amazon handles the shipping and customer service, including any returns. This lowers costs for sellers and increases credibility with consumers. Some products also become eligible for expedited delivery through Amazon Prime, which increases their appeal.
Amazon Logistics comes into play on the delivery end of transactions. This service not only closes the purchasing loop with consumers but also creates opportunities for entrepreneurs to start their own businesses as delivery service partners.
For as little as $10,000, these partners can start their own small businesses as part of the shipping service that Amazon debuted in 2015. Amazon provides the experts for training, the technology for running operations, and built-in demand for deliveries.
The bottom line is that doing business on Amazon and with Amazon is great for small businesses. Congress needs to take those relationships into account before targeting Amazon and similar companies with antitrust action. If lawmakers break up Big Tech, they will leave behind a host of entrepreneurs as collateral damage.
