Breaking Prime: How the FTC Could Harm Millions of Small Sellers
Selling on Amazon has proven to be a game changer for small businesses, providing them access to a global audience and the opportunity to thrive in the e-commerce industry. Close to 90% of Amazon Prime members say they like what they’re getting, and this satisfaction translates to increased visibility and sales for small sellers, giving them extensive reach to a global audience of online shoppers.
Despite these advantages, the Federal Trade Commission (FTC) seems determined to break up Amazon and risk harming hundreds of thousands of small businesses that use the Amazon store to find customers and make money. According to press reports, Amazon’s logistics business, Fulfillment by Amazon (known as FBA), is under intense scrutiny from the FTC. This comprehensive service, which includes warehousing, shipping, tracking, and customer returns, is offered at a lower cost compared to self-fulfillment. As a result, it empowers hundreds of thousands of small retailers to effectively compete with large online and brick-and-mortar retailers and national brands. This competition is evident in areas such as competitive pricing, speedy shipping, and helpful customer service.
As we explained during last year’s debate over Congressional efforts to break up the retailer, the logistics business offers benefits to sellers that can’t find a competitive price elsewhere. The FTC’s belief that small businesses cannot secure the “Featured Offer” spot in the Amazon store is simply incorrect. Small sellers have proven successful in winning this coveted spot within the Amazon store every day.
Moreover, nearly 60% of sales on Amazon come from independent sellers, most of which are small and medium-sized businesses. Amazon’s investments in its logistics network have fueled that growth, reducing barriers to entry and providing them with access to new markets so these businesses can reach millions of customers, build their brands, and grow their businesses. Compared to other large retailers who prioritize their own retail offerings ahead of those from other merchants, Amazon has done the opposite – staking its success on the success of small and medium-sized sellers it supports. If the FTC succeeds in breaking up Amazon, it could have severe consequences for small businesses.
A Case in Point: Real-Life Impacts
Meet Alexander Fedorowicz, the owner of QRxLabs in Miami, Florida, an online skin care products business that sells on Amazon and uses FBA. “FBA helps my business reduce fulfillment and warehousing costs,” said Alex. The potential disintegration of FBA with Prime could spell disaster for Alex and countless other small businesses like his. If Amazon can no longer integrate FBA with Prime, small sellers will face significant challenges. Fulfillment and shipping costs would increase, affecting their bottom lines making it harder for them to grow and succeed.
Then there’s Joel Roodman, the managing partner at Logic Products, an all-natural personal care products company based in Fairfield, Iowa. Joel and his wife, Jill, sell their products on Amazon and Walmart and use FBA to reach Prime customers and ship to them nationwide. “Being from a pretty rural area, we don’t have a lot of options when it comes to finding customers and shipping to them quickly,” says Joel. “Prime and FBA make everything so easy for us, especially regarding packing, labeling, and delivery. How can we survive if one of our most important tools no longer works as intended or doesn’t work at all?”
In today’s digital economy – one of almost instant gratification – rapid shipping has become a critical customer expectation. By disregarding the tangible advantages that the existing e-commerce ecosystem offers to small businesses, the FTC could potentially cause serious harm to small sellers.
