Mandel Ngan/Pool via AP
Amazon CEO Jeff Bezos joined the leaders of Apple, Facebook, and Google on July 29 to testify before Congress on antitrust issues.
For Bezos, how Amazon competes with its third-party selling business comprised quite a bit of the questioning.
Bezos maintained that Amazon elevates small business owners like its third-party sellers. But some Amazon sellers don’t agree.
Amazon did not respond to a request for comment for this story.
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When Amazon CEO Jeff Bezos testified with three other tech leaders on July 29 on antitrust issues, many of those who make their livelihood on Amazon’s retail marketplace tuned in.
There are approximately 1.7 million third-party sellers on Amazon, according to Bezos, and more than 200,000 of them generated more than $100,000 in sales last year. They comprise 60% of product sales on Amazon — collectively beating the retailer at its own game.
Some of those merchants, along with those who oversee online seller communities or provide consulting work to sellers, told Business Insider they weren’t happy with how Bezos talked about sellers during the hearing.
Bezos stressed that Amazon’s retail dominance is partially thanks to these third-party sellers. He also referred in his opening remarks to everyday folks who have benefitted from Amazon’s marketplace, like Sherri Yukel, a mother and aristan who now employs 80 people to run her Amazon-based business.
He said these small business owners succeed thanks to Amazon’s focus on “supporting sellers and giving them the best tools we could invent.” That claim that Amazon is dedicated to supporting sellers is what rubbed some merchants the wrong way.
The animosity between Amazon and some of its sellers goes back years
Paul Rafelson — a tax law attorney and chairman of the Online Merchants Guild, a trade association — said sellers in his online communities were displeased when Bezos emphasized Amazon’s support of small businesses on its marketplace throughout the hearing. “People were sick to their stomach with his fake sincerity,” Rafleson said.
The animosity may seem unwarranted at first brush. But for years, merchants have pushed back on several challenges of selling on Amazon.
Some of the most contentious points include the lack of communication when Amazon suspends a seller account and Amazon re-producing what other brands and manufacturers are already selling. Both can cost a business dearly.
Scott Needham, an Amazon merchant with $50 million a year in sales and host of “The Smartest Amazon Seller” podcast, is one seller who has struggled with Amazon’s account suspension system. His company BuyBoxer has been suspended twice in recent years; one suspension in May slashed his sales by about 90% in just one day.
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In both instances, Amazon did not communicate with BuyBoxer on why it was suspended until several days after, costing the company tens of thousands of dollars in sales.
“There are certain things where I think, ‘How does a trillion dollar company not solve certain parts of this puzzle?'” Needham said. “There are many legitimate businesses on Amazon, just mom-and-pops, tens of thousands that rely on them. They just under-invest in keeping those sellers up and running.”
“There are all these stories of ways that Amazon has basically ruined seller’s lives,” Rafelson previously told Business Insider. “One strong suspension or misunderstanding can destroy a seller’s business.”
Lawmakers drilled down on how Amazon competes with its own merchants
Some merchants pay big money to ex-Amazon executives for the secret sauce in getting ahead on the massive marketplace — but sometimes Amazon itself beats the little guys out.
Sellers have stated for years that Amazon will sometimes duplicate items from their own catalog that perform well on the website. The retailer has access into the data on third-party sales, and some say they do not use that data in good faith. Jeff Peterson told The Wall Street Journal in 2012, for instance, that his $30 stuffed-animal pillows once sold gangbusters on Amazon — until Amazon started selling its own animal pillows for $12 apiece.
State Rep. Pramila Jayapal of Washington state, who represents parts of Seattle, was keen on asking Bezos how his employees use third-party sales data. “The issue that we’re concerned with here is very simple,” Jayapal said. “You have access to data that far exceeds the sellers on your platforms with whom you compete.”
Bezos did not provide a clear answer on how that data is used. “What I can tell you is we have a policy against using seller-specific data to aid our private-label business,” the CEO said. “But I can’t guarantee you that policy has never been violated.”
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Another way in which sellers must compete against Amazon is in the retailer’s search function. Getting on the first place or on the first row when a consumer searches, say, “iPhone case” is the target of many sellers. But, as The Wall Street Journal’s Dana Mattiloi reported last year, Amazon usually claims the first spot for its own line of products.
“I find it very troubling when you search for something, and the second row down will be brands from Amazon,” Needham said. “I know sellers who would kill for that spot.”
He added, “The fact that they give it to themselves — I do not know how (Bezos) can be up there in front of Congress and say that everything is equal.”
Some say there’s bigger fish to fry yet
While sellers were happy to see their long-emphasized problems reach the House Judiciary subcommittee, they say it’s unclear how lawmakers can do much more besides make Bezos sweat.
Amazon seller consultant James Thomson, who was previously a senior manager at the mega-retailer, said the issues raised in the hearing may cast Amazon as an unfair competitor — but not necessarily one that acted unlawfully.
After all, sellers consent to giving Amazon their sales data. It may leave a bad taste in someone’s mouth, but it’s not illegal.
“This is a situation where there are a lot of people who don’t like Amazon, or think Amazon is unfair, immoral, or not nice,” Thomson told Business Insider.
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Thomson added, “Is it fair? I’ll let someone else decide that, but fairness has nothing to do with it. Do we have laws that know how to properly address companies this big? At this point, I don’t think the laws have kept up adequately.”
That viewpoint is echoed by Jason Boyce, who sold on Amazon for nearly 17 years and now consults third-party merchants on how to succeed on the platform. Boyce said Amazon needs to be broken up, but the United States’ current laws don’t provide a path for that.
“I’m honestly both disgusted by the behavior of these big companies, while simultaneously understanding why they do the things they do to capture more market share and squash competition,” Boyce, the co-author of the forthcoming book “The Amazon Jungle,” told Business Insider. “It’s part of their DNA.”
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