As Jeff Bezos scours the United States looking for a place to plop a second Amazon headquarters, I started thinking of how deeply addicted we as Americans are to Amazon. It started with the seduction of big discounts, intoxicating convenience, and the opportunity to buy anything capitalism has to offer under one domain. Now, Amazon has become the gatekeeper of all that is sold online and the place we as consumers go when we want to do the least amount of shopping and still get the best (at least, we think it’s the best) deal on the planet. I started looking inward as to whether or not Amazon’s outright dominance of all things ecommerce is a good thing for us in the long term. I mean, there’s a reason they call shoppers who buy exclusively on Amazon “Amazombies,” right?
In full disclosure, we at Ambush Board Co. absolutely offer a large percentage of our catalog on Amazon, but is that the right thing to do? We experience successes and failures on Amazon just like every other retailer. I just wonder if this is healthy for us (and everyone else) in the long term.
Before we go any further, I feel compelled to illustrate how products actually get catalogued on Amazon. The most basic answer is: marketplace sellers (such as Ambush) list their products. Retailers pay a hefty per transaction commission to Amazon in exchange for visibility and sales on their site. Seems like a good deal, right? Well, in many senses, it is. The whole world has adopted ecommerce and an incredibly huge number of web shoppers are using Amazon as their sole source for online purchases. Amazon has hit such a critical mass that retailers are almost forced to sell on Amazon. Shoppers are abandoning specialty retail websites at such a rapid clip that, in order to keep their products moving, retailers have become chained to Amazon. For many, many specialty retailers, Amazon is their primary source or revenue.
So what? Revenue is revenue, right? Those specialty retailers should be happy that Amazon affords them the opportunity to sell on their site, some might say. Not so fast. Amazon actually pits its specialty retailers against themselves. The more units retailers move on Amazon, the more eyebrows they raise at corporate headquarters.
Ever wonder how Amazon selects which products it decides to sell and ship itself? Ever wonder what happens to the original sellers once Amazon takes control of the distribution of that product? Amazon uses the data it collects from its marketplace sellers to find popular items that are creating a buzz on their site. Amazon then moves in and corners the market on those items. And, it doesn’t do this through friendly competition; it does so by boxing out the original sellers that had success with the products in the first place. Amazon then creates an artificial environment where the only option to buy is from Amazon itself. So, when an up-and-coming skate shop in Middle America is having success selling its merchandise to the world via Amazon, those sales make a huge contribution to that shop’s overall success. If one of their products is profitable enough, Amazon will block said skate shop from making those sales and put a major squeeze on their business, regardless of the investment that business has made in that product or in its ability to sell the product. Whether or not the shop can survive the pinch is of no consequence to Amazon. They will do whatever it takes in the pursuit of bigness.
The manufacturers of your favorite brand are partially to blame. Amazon can only decide to gate retailers if they have the products to sell in the first place, and they can’t get the products unless the manufacturer sells it to them. I don’t blame manufacturers for being seduced by Amazon, either. The allure of one of the sexiest companies in the world offering untold sums of money to sell your products has got to be nearly impossible to turn down, especially given that most manufacturers don’t readily recognize that, once Amazon makes its pricing demands, there isn’t much actually there for the manufacturer once the product has been produced and shipped. For some manufacturers, though, an order from Amazon is the difference between barely surviving and extraordinary short term success. The manufacturers simply taking the cash now over long-term viability. But, that fleeting moment of short-sidedness can have grave consequences.
Amazon does not need to make money in the short term. They are so cash rich that they even set aside hundreds of millions of dollars just to harm to a company it sees as a threat (look up what it did to Diapers.com). Amazon simply considers taking losses on the sales of a specific product, brand, or category a small price to pay in the conquest of a market segment. They also view it as a small investment that they will see a massive return on once they have become the monopoly of their wettest dreams. They can discount deeper, and for a longer period of time, than everyone else. While the extreme markdowns sound good for the end user, they, along with Amazon’s gating tactics, will eventually push all specialty retailers away from Amazon. And, due to their total domination in all aspects of retail, the ruthless combo will drive specialty retailers out of business, as well. What will likely remain is a massive megalopoly where all skateboard, wakeboard, and snowboard merchandise is completely sold and shipped by Amazon and all board sales are totally devoid of any level of passion or tacit knowledge of the products or culture in general. This, in turn, commoditizes the very foundation from which we base our entire existence and vaporizes our sense of community.
Where does our industry go from there? Who will nurture it and help it grow? Will Amazon bring a demo to your town? Will Amazon sponsor the next rising am skateboarder? Will Amazon put on the next WSL event? Will Amazon film Travis Rice’s next project? I seriously doubt it.
I am cautiously optimistic that we will never get to that point. Amazon seems to have realized what a race to the bottom truly means for itself in the long run. It seems that they also recognize that they could very well be the kind of organization that 21st century anti-trust law is designed to protect us from. Plus…I’d like to think that it can only get so far using its current bully tactics (at least in our industry). Manufacturers are gaining the foresight to realize that, although it is beneficial for retailers to sell on Amazon, its increasingly unhealthy for them to sell to Amazon directly. And, authenticity, product knowledge, service, and a lifelong dedication to board sports are becoming more important to consumers than just price. If we as board sports retailers can show our customers that embracing retailers that embrace them is key to having a thriving culture to call our own (in addition to offering the the best price and service we can possibly), we will move into the digital shopping age where specialty retail is special again.
This is by no means meant to be a definitive treatise against the monolith. I just want to give people some food for thought. What do you think?