Amazon's All-Seeing Eye
Enrique Dans, Contributor
Aug 12, 2019
A report by Bloomberg reveals how Amazon, in its eternal quest to offer its customers the cheapest prices, has been surveilling rivals like Walmart since 2017 and warning companies whose goods are on sale on the US retailerís site at lower prices, sometimes making their products harder to find on Amazon. Given Amazonís clout, what normally happens is that when notified, most sellers decide to increase the price of their products on other sites.
Amazon may not be telling sellers what prices they should set, but its behavior clearly indicates what they need to do to avoid any unpleasantness, which fits most definitions of monopolistic behavior or predatory practices. Its warning make it pretty clear that itís keeping an all-seeing eye on the market and what happens to companies who donít play ball:
††† "One or more of your offers is currently ineligible for being a featured offer on the product detail page because those items are priced higher on Amazon than at other retailers."
Amazon says itís simply advising sellers on how to improve their results on its platform, but its suggestions, possibly accompanied by recommendations on the use of advertising within Amazon, could be interpreted as a way to generate an advantage over the competition. In practice, the behavior of the online giant is not so much that of monopoly but that of monopsony or buyerís monopoly, whereby a single player substantially controls the market as the main buyer of goods and services offered by many potential sellers, and is thus a less-than-perfect source of competition. Monopsonies can reduce diversity and innovation among suppliers in the same way a monopoly does because suppliers cannot afford not to sell to a dominant buyer, while the increasingly lower prices demanded by the giant squeeze other companies down the chain.
Walmart, which due to its off-line volume and its efforts and acquisitions online, is increasingly seen as an easier and less-populated alternative to Amazon and is enjoying strong growth as a result, such tactics could prove a setback, given that it would allow Amazon to effectively interfere with its suppliersí strategies and take de facto control their prices.
Amazon, which currently has a 49% market share in e-retail in the United States and 5% of total retail spending, has used strategies from the offline world:
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