Can We Say Damage Control? Amazon Talks Up Its Role in the Success of Independent Businesses.

Published on December 29, 2011
by Tricia Duryee

Amazon is not all about squashing the little guy, or at least that’s what it wants you to believe this holiday season.

Take Reiss Innovations, for example.

Six years ago, owner Ken Reiss was selling five to 10 mouse pads a year through Amazon. Flash forward to 2011, Reiss increased the number of products he sells by 50 percent compared to last year and expanded into Canada.

In many ways, Amazon is a giant built on the backs of millions of individuals.

Or at least that’s the message the Amazon wants you to hear this morning.

Along with a laundry list of holiday announcements, it said its third-party sellers reported record growth this Christmas season. This year, nearly 40 percent of products purchased by Amazon customers were sold by more than two million independent sellers of all sizes.

But it’s hard to read the story of Reiss Innovations and others in the press release and not think “damage control.”

Earlier this month, Amazon faced a flurry of criticism after launching a promotion that would give consumers $5 off if they compared prices using Amazon’s mobile phone application in the store.

The one-day promotion served as a way for Amazon to increase usage of its Price Check application, while also collecting intelligence on prices in the stores. Consumers received the discount if they bought the item using their phone.

Small and large retailers, which worried that their stores would only become showrooms, called the move anti-competitive. Meanwhile, consumers pledged to buy locally and created Facebook pages in opposition and petitions asking Amazon to end the one-day promotion. In addition, eBay offered consumers $10 to walk back into the stores.

In this morning’s press release, Amazon also mentioned Scharf Industries, an office and electronics provider, that reported a sales increase of more than 500 percent this holiday season compared to last year.

Other third-party successes Amazon pointed to:

  • Sellers sold enough cameras for every fan at the next 10 Super Bowls.
  • Sellers sold enough toys to give one to every resident of Chicago.

It did not mention third-party sellers in last year’s press release, but it did mention how many times its Price Check application was used — a fact that was surreptitiously left out of this year.

To be sure, Amazon’s services give these retailers access to millions of consumers they may not ordinarily reach. But these retailers pay dearly for the opportunity.

Prices vary widely based on the services being provided and the product being sold, but as an example, a $10 book would glean a proceed of $6.42. Meanwhile, a $200 camera would garner $182.37. In these scenarios, Amazon is also offering fulfillment services, which means it will store, pack and ship orders from its warehouses as soon as an item is purchased online. That results in an additional fee, of course.

If Amazon’s promotion did motivate people to shop locally instead of buying online, it’s really not obvious.

ComScore reports that online shopping this holiday season was up 15 percent compared to a year ago and Wall Street analysts are expecting Amazon’s fourth-quarter revenues to be up at least 38 percent year over year.

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