Amazon, the Crappy Monopolist
A few days ago, the Washington Post published my review of Fulfillment, Alex MacGillis’s cleverly-titled new book about Amazon. Like many people, I’m sure, my views of Amazon have changed a lot over the past two decades.
In the early days, the company seemed to be doing something that was, if not revolutionary, at least really, really useful. Everyone knows that Jeff Bezos chose books as the initial category because an online catalog backed by a big warehouse could offer orders of magnitude more books than any brick-and-mortar shop, which was extremely helpful to people who like books. The customer review system made Amazon a good place to find valuable advice about products. And so on. Yes, Bezos was always out to make money, but it seemed he was helping consumers in the process.
Now, though, we know that there are many ways that Amazon is harming our society: imposing onerous working conditions, fighting unionization, crushing small businesses, invading privacy, and so on. Yet one theme of my review is that most people are still happy to take the bargain—the selection, the low prices, and the free two-day shipping.
But I don’t think Amazon is keeping up its end. As I wrote (edited here for concision):
Amazon is not making the world a better place in general. It could be using its enormous stock of talent and capital to create safer workplaces. But, … “a [2019] study of twenty-three Amazon warehouses found that serious injuries were reported at a rate more than double the national average for the warehousing industry.” … “Internal records show that its injury rate has increased every single year between 2016 and 2019.” Amazon also could be making package delivery safer, yet its drivers get less training than UPS drivers … Amazon could be using its market power to help ensure product quality, yet sales of counterfeit masks and fraudulent products flourished on its site in the early months of the coronavirus pandemic.
Not only that, Amazon isn’t even using its magic to improve the consumer experience. For many product categories, buying something requires scrolling through dozens of similar, poorly written listings, many offering the same product. When I worked at Ariba twenty years ago, this was known as the “content problem”: when many different sellers offer overlapping goods in the same marketplace, it’s difficult to clean up all the data so that buyers can see which products are actually the same and compare relevant information about them. Despite all its geniuses, Amazon hasn’t solved this problem.
Amazingly, this is even true of books. If you search for The Serpent’s Shadow by Rick Riordan (from a series my son is reading), you see this:
All three items are the same thing: the one on the left links to five different formats of the original 2012–13 edition, the one in the center links to one of those formats, and the one on the right links to two of them. The same edition shows up two more times further down the page. But nowhere on the entire page of results can you find this:
This is the 2018 edition, which is still in print, so you can get a paperback for $8 with Amazon Prime. (I found it by searching for the series name—Kane Chronicles—and then clicking on a link that had the 2012 cover.) I ended up buying the book on Alibris.
Once upon a time, if you searched for something like “computer speakers” or “pencil sharpener,”the ones at the top of page were likely to be the best, at least for the median customer. Now that we know that Amazon manipulates the results for its own purposes, there’s little informational value in the order of search results. Instead, you have to wade through the product pages themselves.
On those product pages, the customer reviews were once a good way to determine which product would best meet your needs. Not so much anymore. Five-star review systems worked fine in the naive early days of the Internet when people really wrote what they thought. Today, however, product pages have become just another form of social media, littered by paid, fake, and incoherent reviews. The result is that a product’s review score depend more on a company’s digital marketing prowess than on the product itself.
Well, then, why do so many people buy so many things from Amazon? The answer is that it’s cheap and fast. But the main reasons it’s so cheap and fast aren’t that Amazon is particularly innovative—not anymore, at least.
At this point in its evolution, Amazon is just an old-fashioned monopolist.
For many product categories (books, electronic accessories, etc.), sellers have to sell on Amazon to survive. Amazon gets to set the rules, extracting virtually all the surplus and sharing some of it with consumers in the form of low prices. For products it sells on its own account, Amazon can use its volume to demand lower prices than anyone else. The company is so big that it can invest more in technology than anyone else, enabling it to automate whatever can be automated and efficiently monitor the humans necessary to do the rest. When Amazon builds a warehouse in a depressed area, it is one of the few companies that are hiring, enabling it to dictate the terms of employment. As the dominant force in online retail, it can demand the lowest rates from UPS and the US Postal Service; at the same time, it competes with them by copying the Uber model of seeking out cheap labor and insisting that it is not responsible for said labor. And, as MacGillis documents at length in his book, Amazon is an expert at squeezing tax breaks out of state and local governments.
This is why products on Amazon are so cheap and why they get to you so quickly. There are many things Amazon did well to get to where it is today. Now, however, it’s just harvesting network effects and using its market power to squeeze workers, sellers, and taxpayers—so Jeff Bezos can explore outer space. At at time when our country is facing multiple daunting challenges—fascism, racial injustice, economic inequality, and climate change, to name a few—Bezos said, “The only way that I can see to deploy this much financial resource is by converting my Amazon winnings into space travel. That is basically it” [quoted in Fulfillment, p. 215].
So, if you need something fast and you need it cheap, don’t let me talk you out of buying it on Amazon. Most people can’t afford the luxury of paying more to make themselves feel better. But don’t be deluded into thinking that Amazon is somehow making life better for anyone. Like US Steel, Standard Oil, AT&T, and IBM, it’s another really big company that makes tons of money by being really big and powerful.
