There is no debating that the huge retail behemoth of Amazon has become so ubiquitous that it can feel as though they will crush all other forms of retail until there are no other retailers left. They have a great model that has taken them from selling nothing but books in the early 90’s to selling nearly everything, and eventually they will have same-day delivery of nearly everything, everywhere in the US. And, they will eventually gain a larger dominance in other parts of the globe. The company is both feared and admired for its business model that is so highly effective.
So, does that mean Amazon is a monopoly or at risk of becoming one? There is a time in the near future that I predict it will be facing an anti-trust suit in the US. President Trump, during his campaign – on more than one occasion – lobbed a shot at Amazon and CEO Jeff Bezos, accusing the company of becoming a monopoly and stating that Bezos was afraid Trump would encourage anti-trust charges against Amazon. Trump did not state otherwise. Furthermore, there is a growing chorus of sympathizers to the idea that Amazon should be either broken up or restricted. A simple Google search on the question of “Amazon becoming a monopoly” yields articles with strong arguments on both sides. And once a significant debate develops, it’s only a matter of time before the issue gets pushed further into the open. Additionally, with a President sympathetic to the anti-trust argument, Amazon could have some trouble.
As someone who spent a lifetime growing up in retail and in the kinds of businesses Amazon is accused of destroying, I’d like to address my thoughts on whether Amazon can be accused of monopolizing retail in the US, and whether the Amazon model is predatory toward small businesses.
I’ve been the owner of a small retail establishment, and I have witnessed the rise of sales through Amazon and dealt with the competition. One thing that marks successful open markets is innovation and change. Most typically, that innovation and change favors consumers, and if businesses do not make changes to take advantage of those new innovations as much as possible, they can and will die. Internet retailing may be new, relatively speaking, but changes in retail certainly are not.
Sears used to enjoy great domination in the sector with its catalog sales to the point that it could offer most goods, right down to even houses (yes, they shipped houses at one point), at prices below small businesses and local retailers. So, how come Sears is gone and small local retailers remain? Because small retailers adapted and provided better service. They even found ways to decrease prices. In many cases, if a price is even a little higher, consumers will shop at a local retailer for a variety of services that a catalog retailer just could not provide. Then came the internet that dispensed with costly catalogs and made goods available far more cheaply to the entire world with a few clicks of a button. That’s just how things change and evolve in successful economies, and consumers have benefitted from better prices and better services. Sears didn’t catch up until it was too late, and Amazon created a better model, while at the same time, small businesses are still functioning.
While it is true that local retailers are still struggling against the new model of doing business, things are still developing and changing. There are still many services that a local retailer can provide that a large company like Amazon cannot. There are still ways that a local business can outprice Amazon, and there are still clever ways that Amazon can be out marketed by a local business. While I can’t specify each and every one of those methods, smaller retailers inevitably discover them as they always have.
It’s important to consider the case of Amazon, because it highlights what is supposed to happen in a mostly fair and open market. No, the marketplace is still not completely fair and open, and it still has many regulations and tax policies that favor large businesses. But, it is still open enough that innovations can and do take place. It’s important to consider this case because it demonstrates attitudes toward free markets that are damaging to people. If we do something to restrict Amazon, then we do something to restrict ourselves. We make things suck just a little bit more. We hamper innovation and incentives to give us better things and better services. While people may think that restricting Amazon will help small businesses survive, what would actually happen is that small businesses would not be incentivized to innovate to create better ideas for us all.
I sincerely hope that an anti-trust suit does not develop against Amazon or any other successful company operating under mostly fair rules and regulations. If I still had my retail store, I’d be up for the challenge of taking them on in my own way. Rather than fear monopolies, it’s much healthier for an economy to avoid the temptation of trying to regulate them away. It’s only regulation that creates monopolies. Opening markets allows and incentivizes innovation that keeps monopolies from forming. If one examines historical monopolies, they usually have come about by some sort of well-intentioned regulation, and they were only destroyed by innovation that eliminated their advantages. Those innovations have always been to the benefit of consumers and to business and economies overall.
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