Square-Off: Is Amazon Good for Business?
Amazon is cool, right? Who wants to spend hours holiday shopping in a mall? For that matter, who wants to sift through a bunch of different websites when you can get everything you want from just one? Either way, who wants to pay more for the privilege of not buying through Amazon? Rhetorical questions all? Maybe. But before you get back to your gift list, here are some other questions to consider: Do you know anyone whose job or business got trampled by the raging online behemoth? What m ..
Amazon may be good for consumers, but it isn’t good for businesses. It’s clear that Amazon is steadily marching toward becoming a monopoly, and monopolies are bad for competition, bad for business, and against American capitalism.
Amazon is a driving force in retail and manufacturing as well as an e-commerce powerhouse (books, electronics, consumer products) that has squashed mom-and-pop stores across the country. Its e-commerce sales are expected to grow 32% in 2017, to $196.8 billion — or 43.5% of total U.S. e-commerce sales according to eMarketer.
That’s a huge leap from Amazon’s U.S. sales of $149 billion and 38% market share in 2016. Still, it was by far the biggest e-commerce company and represented close to 4% of all retail sales, online and offline. Overall e-commerce sales are expected to increase 15.8%, to $452.8 billion, by the end of 2017, while retail brick-and-mortar sales continue to flounder. Estimates predict that by 2020 more than half of all e-commerce will take place through Amazon.com.
All this, and yet some consumers still may not know Amazon’s reach has extended far beyond books and household items. Among the verticals it’s entered is industrial parts, competing directly with traditional distribution companies like Grainger and McMaster, and paper products, taking on Georgia Pacific among others.
The next step would be for Amazon to sell electronic components, putting pressure on industrial supply companies like Arrow Electronics. It’s not too difficult to imagine Amazon as the leading supplier of industrial goods, much like its present status in the consumer-goods arena.
The near also may see Amazon directly competing in the soap and toothpaste markets with Prime-branded products. Today Sears is in danger of going out of business; tomorrow it may be Johnson & Johnson.
There are, indeed, huge potential long-term implications for a majority of industries in the American economy.
Innovation and good business models are to be applauded and invested in. However, Amazon’s $550 billion market cap is, for example, already 40 times greater than Grainger’s $13 billion. After a certain point, no amount of innovation will allow the latter to compete. Amazon can undercut Grainger on all of the products they both sell and not flinch even if Amazon doesn’t make a profit on any of them. Amazon can continue to do this until Grainger goes out of business.
With Amazon already nearing control over half of all e-commerce sales in the United States, what’s to stop it from reaching, say, 75% before too long? At that level, could any other e-commerce platform compete at all? The company might, at that point, be a de facto monopoly.
That’s why allowing Amazon to get much bigger is a dangerous prospect. Also consider that decisions at Amazon are largely in the hands of one person, Jeff Bezos. That could be catastrophic, should he puts his personal interests above those of the United States.
Simply put, the Justice Department must break up Amazon in order to protect the U.S. economy. We can’t live in a country where there is only one grocer or one electronics supplier or one brand of toothpaste or shampoo.
Saagar Govil is CEO of Cemtrex, a diversified industrial and manufacturing company. It provides advanced custom engineered electronics design and manufacturing services, industrial contracting services for manufacturers, manufacturing logistics, environmental control and air filtration systems for industries and utilities, and emissions monitors for industrial processes.