Exposing the Dark Side of Amazon
Summary
TLDRThe video script discusses the monopolistic practices of Amazon, as explored in the documentary 'Amazon Market, Power Monopoly.' It features interviews with sellers who claim that Amazon's policies force them to keep prices low, with the threat of losing visibility on the platform if they sell at lower prices elsewhere. The documentary highlights the 'buy box' feature, which is crucial for sales but can be removed by Amazon if a seller's prices are not competitive. Molson Hart, a CEO of an educational toy company, shares his experience of being forced to raise prices due to increased fulfillment fees by Amazon, affecting his profitability and illustrating the platform's control over pricing. The conversation also touches on the challenges of selling on Amazon, the financial breakdown for sellers, and the dominance of Chinese sellers on the platform. The script concludes with a mention of a new service called Public Square, which aims to provide an alternative marketplace for small businesses.
Takeaways
- 😀 Amazon's marketplace dominance affects sellers' pricing strategies significantly, with strict policies that influence pricing across other platforms.
- 🤔 Sellers like Marco Schck feel pressured by Amazon to maintain low prices, and risk losing visibility ('Buy Box') if their products are found cheaper elsewhere.
- 📉 The documentary 'Amazon: Market Power Monopoly' explores how Amazon's policies create challenging conditions for sellers, leading to reduced profitability.
- 🚫 Molson Hart discusses the direct impact of Amazon's fee increases on his business, forcing him to raise prices, which affects pricing on other platforms as well.
- 🕵️♂️ Amazon employs algorithms to monitor prices across the internet, penalizing sellers on their platform if lower prices are found elsewhere.
- 🏷️ Despite removing certain contractual obligations, Amazon continues to enforce its pricing policies through technological means, maintaining control over sellers.
- 🔍 The fear of retaliation and contractual constraints deter sellers from publicly criticizing Amazon, contributing to a lack of transparency about its marketplace practices.
- 💰 Amazon's fee structure is highly profitable for the company but leaves sellers with a small fraction of the sale price after deducting various fees.
- 📊 Over 50% of top sellers on Amazon are non-American, with a significant portion being Chinese, indicating a shift in who profits most from Amazon's platform.
- 🤐 Molson Hart uses a pseudonym to discuss his experiences and challenges with Amazon openly, highlighting the personal risks sellers face when criticizing the platform.
Q & A
What is the documentary 'Amazon Market' focused on?
-The documentary 'Amazon Market' is focused on examining Amazon's business practices and how they impact the people who try to make a living by selling their products on the Amazon platform.
How does Amazon enforce its pricing policies on sellers?
-Amazon enforces its pricing policies by monitoring the prices of products on and off Amazon through an algorithm and potentially through user reports. If a seller is found to be selling their products cheaper on another platform, Amazon can punish them by making their products hard to find by removing their 'buy box'.
What is the 'buy box' on Amazon?
-The 'buy box' on Amazon is the area on the product page where customers click to add the item to their shopping cart. It is a crucial feature as without it, customers tend to leave and purchase the item elsewhere.
How does Amazon's fee structure impact sellers?
-Amazon's fee structure significantly impacts sellers by taking a substantial portion of the retail price. This includes a commission fee, fulfillment fees, and additional costs for advertising, storage, and shipping, which can reduce the seller's profit margins.
What challenges do sellers face when selling on Amazon?
-Sellers face challenges such as Amazon's pricing policies, high fees that reduce profit margins, the risk of losing the buy box if they sell cheaper elsewhere, and the pressure to keep prices low to remain competitive on the platform.
Why do some sellers find it difficult to speak out against Amazon?
-Sellers may find it difficult to speak out against Amazon due to fear of retaliation, such as losing the buy box or being de-listed, as well as contractual obligations that prevent them from making public statements about Amazon without permission.
What is the impact of Amazon's policies on the broader economy?
-Amazon's policies may contribute to a shift in the economy, with Chinese manufacturers and sellers gaining a significant advantage due to lower costs, proximity to production, and less susceptibility to lawsuits. This could lead to a decline in the U.S. wholesale distribution and product design industry.
How does Amazon's dominance affect the pricing on other platforms?
-Amazon's dominance in the online marketplace can influence pricing across the board. Sellers are often forced to keep their prices high on other platforms to avoid losing sales on Amazon, which can lead to higher prices for consumers.
What is Public Square and how does it differ from Amazon?
-Public Square is a new service designed as an alternative to Amazon, catering to small businesses looking to sell handcrafted goods, guns, ammo, fresh food, and household essentials. It aims to provide a marketplace that supports small businesses and offers a different approach to commerce, distinct from Amazon's model.
What are the benefits for sellers to diversify their sales channels away from Amazon?
-Diversifying sales channels away from Amazon can help sellers reduce their dependence on a single platform, mitigate risks associated with Amazon's policies, and potentially reach a wider customer base through various marketplaces.
How do Chinese sellers benefit from selling on Amazon?
-Chinese sellers benefit from selling on Amazon due to their proximity to manufacturing, ability to iterate on products quickly, lower costs, and reduced exposure to U.S. taxes and legal liabilities.
Outlines
🛒 Amazon's Business Practices and Seller Challenges
The first paragraph discusses the ease of buying products on Amazon and introduces a documentary called 'Amazon Market Monopoly.' The documentary explores Amazon's business practices and their impact on sellers, particularly how Amazon controls pricing and uses the 'buy box' feature to enforce low prices. It features a German businessman who sells children's beds on Amazon and explains how losing the buy box can significantly reduce sales. The summary also touches on the story of Molson Hart, CEO of an educational toy company, who has to increase prices due to Amazon's fee increases, highlighting the challenges of operating within Amazon's marketplace.
📊 Amazon's Control Over Pricing and Market Share
The second paragraph delves into Amazon's alleged control over the online e-commerce market, which is estimated to be around 50%. Molson Hart, who is heavily dependent on Amazon for his sales, explains how Amazon's pricing policies affect his business and the necessity to maintain higher prices on other platforms to avoid losing sales on Amazon. The paragraph also mentions a new service called Public Square, which aims to provide an alternative platform for small businesses. It discusses the methods Amazon might use to monitor prices across the internet and the challenges faced by sellers when speaking out against Amazon due to contractual restrictions and the fear of retaliation.
🚨 The Impact of Amazon's Policies on Sellers
The third paragraph continues the discussion on Amazon's power and how it influences sellers' profitability. It outlines the financial breakdown for a seller's product, revealing that after Amazon's fees, the seller is left with a small profit margin. The speaker, presumably Molson Hart, describes his experience as a witness in lawsuits against Amazon and the difficulties in speaking out against the company due to potential repercussions. The paragraph also raises the question of whether Amazon's dominance constitutes a monopoly and the impact of their policies on consumer prices.
🌐 International Competition and Amazon's Market Dynamics
The fourth paragraph examines the international aspect of selling on Amazon, particularly the success of Chinese sellers on the platform. It discusses the structural advantages that Chinese sellers have, such as proximity to manufacturing, lower costs, and reduced legal risks. The paragraph also highlights the shift in the global economy, where Chinese manufacturers are now selling directly to consumers in the U.S., bypassing traditional American distribution channels. This has led to a competitive landscape where U.S. sellers struggle to compete with Chinese sellers on price and speed of innovation.
🤔 Future Prospects and Personal Insights from a Seller
The final paragraph touches on the future of selling on Amazon and the personal story of the interviewee, Molson Hart. Despite the challenges, Hart expresses his intention to continue selling on Amazon while also trying to reduce his business's dependence on the platform. He shares his experience of trying to build a successful business amidst Amazon's competitive marketplace and the satisfaction he derives from creating educational toys. The paragraph concludes with a light-hearted note about Hart's name and a broader reflection on the importance of free speech and the role of media in covering significant issues.
Mindmap
Keywords
💡Amazon Market Power Monopoly
💡Buy Box
💡Price Control
💡Fulfillment Fees
💡Monopoly
💡Public Square
💡Algorithmic Pricing
💡Non-Disclosure Agreement
💡Chinese Sellers
💡Vertical Integration
💡Profit Margin
Highlights
Amazon's business practices and policies are examined in the documentary 'Amazon Market, Power Monopoly', which reveals the struggles of sellers on the platform.
Sellers on Amazon are pressured to keep prices low to prevent customers from buying the same product on other sites like eBay.
Amazon can punish sellers who sell cheaper on other sites by removing their 'buy box', making their products hard to find.
The 'buy box' is the purchase area on a product page; without it, customers tend to leave and buy elsewhere.
Amazon's control over pricing can lead to a loss of 95-99% of sales if a seller loses the buy box.
Amazon's fee increases force sellers like Molson Hart to raise prices, affecting profitability and market competitiveness.
Sellers are forced to maintain higher prices on other platforms to keep the buy box on Amazon, which is not a free market tactic.
Amazon's market share and pricing policies can influence the broader online commerce market, potentially resembling a monopoly.
Amazon's algorithm monitors prices on and off the platform to ensure sellers don't offer lower prices elsewhere.
Sellers face challenges in speaking out against Amazon due to contractual obligations and fear of retaliation.
Amazon's dominance in the media space, including owning platforms like Prime Video, can affect how it is portrayed in documentaries.
Amazon's fulfillment fees and commissions significantly reduce seller profits, with some keeping as little as $3-$4 from a $17 product sale.
Despite the challenges, some sellers, particularly those from China, still manage to thrive and get rich selling on Amazon.
Chinese sellers have structural advantages on Amazon, including lower costs, faster product iteration, and reduced legal risks.
The shift of manufacturing to China has led to a vertical integration that threatens the U.S. wholesale distribution and product design industry.
Molson Hart, a seller and interviewee, has had to reduce dependence on Amazon by diversifying sales channels.
Hart's experience as a witness in lawsuits against Amazon has been time-consuming and expensive, highlighting the power dynamics.
The interview concludes with a discussion on the importance of free speech and the challenges of reporting on powerful entities like Amazon.
Transcripts
buying products on amazon.com is a
little bit like masturbation not
everybody admits to it but honestly you
suspect it's pretty common it's just so
easy but what exactly does amazon.com do
how did Jeff Bezos get so rich the
details are unknown to most people even
frequent users of the site well new
documentary takes a closer look at what
Amazon does at its business practices
and what those practices do to the
people who try to make a living selling
their products on the site the
documentary is called Amazon Market
power Monopoly so the filmmakers
interview Amazon sellers who say they
are barely keeping their heads above
water because of the company's policies
and those policies tell them exactly how
much they can charge for their own
products so take a look at this clip
from the movie it shows a German
businessman who makes and sells
children's beds and does nearly all of
his business on
amazon.com he says the company puts
pressure on him to keep his prices low
as low as possible to keep customers
from buying that same product on another
site such as eBay if Amazon finds out
that he's selling his products cheaper
on another site like eBay they will
punish him by making his products very
hard to find on Amazon and they do this
by taking away what is called his buy
box the buy box is the area you click on
the product page to make a purchase if
there's no buy box customers tend to
leave and buy it somewhere else that
sounds confusing watch the man
demonstrate exactly how this is done his
most important important online shop
window at Amazon the so-called buy box
the framed box around the shopping cart
field so this whole box here that's just
called the buy box and you can see the
add to cart button here and if I click
on it now then I have this in the
shopping cart and I can buy the
item but Marco shck can also lose the
buy box for his beds for example if his
prices are not competitive
that means for me with buy box I can
sell without buy box 95 to 99% of the
sales are
gone who gets the buy box is decided by
Amazon alone Marco shock shows
us
so I'm going to change the price to
€349 and we will see that in about 15
minutes the buy box here is
gone and indeed after 15 minutes the buy
box has disappeared for customers it now
seems as if the item is not available at
the
moment in other words Amazon decides
what you charge for your products and if
you don't obey they will shut you down
but in the most passive aggressive
Corporate Way they just remove your buy
box it's fascinating there's a lot like
that in this film it goes on to follow
the business of a man called Molson Hart
he's a CEO of an educational toy company
that does most of its business on Amazon
the film crew was there when Hart
learned that Amazon would once again
raise its fees on him so in order to
turn a profit he was forced to Jack his
prices watch we
are probably going to have to raise
prices why what's going on so uh what
they what Amazon did is they uh
increased all the Fulfillment fees by
about
5% so
um if you look over here uh we got an
email uh shipping brain FL is going to
be 5% more
expensive now the Texan has to
recalculate in order to keep our profits
at the same level we're going to have to
raise the price by you know 50 cents so
maybe we're going to go to
$77.99 um up from $6.99 and the problem
if he increases on Amazon he must also
increase the prices of his products on
eBay Walmart and even in his own web
store although they are not affected by
the fee increase if he doesn't do that
experience shows that he loses the buy
box on
Amazon oh so it's not really a free
market tactic if they're forcing you to
raise your prices on other platforms
it's a monopoly tactic and there's a
difference that's not the free market
you just saw that's how monopolies
operate Molson Hart knows that very well
he's lived it he's the man you just saw
in that clip and he joins us now molsen
Hart thanks for joining us the clip we
just played is a fair representation of
your life as an Amazon Seller
yeah that's absolutely a fair
representation of our life as an Amazon
Seller um if your products are cheaper
off Amazon than they are on Amazon then
you lose all your sales on Amazon which
is a big problem for us because 90% of
our sales come from
Amazon so what you're saying I think is
that Amazon sets the price Market wide
not just on its own site but on other
sites so that's is is that correct
in a way that's true right so if you
look at the statistics and a lot of
people have a different St statistics
out there that Amazon controls roughly
50% of the whole online e-commerce
Market depending on how you calculate it
and for us since 90% of our sales come
from Amazon and since Amazon is more
expensive to sell on than other
platforms like eBay Walmart or even our
own website Amazon in a way kind of does
set the price because if we price our
products lower off of Amazon
because those um those off Amazon
platforms are cheaper than Amazon we
lose 90% of our sales on Amazon so we
have to constantly keep our prices up
off Amazon and we can't we can't lower
our prices on Amazon to the costs off
Amazon because then we'll end up losing
money because Amazon is more expensive
to sell on than it is to sell on off
Amazon it's fascinating thanks for
watching the episode with molsen Hart
and giv gives you a sense of what Amazon
is really like worse than you thought so
if you don't want to use Amazon and up
till now you haven't had much of a
choice cuz it's effectively a monopoly
well now you don't have to because
there's an option a new service made for
you it's called Public Square and
they're building a brand new way of
conducting Commerce selling and buying
that goes back to America's Roots so far
they have over 75,000 small businesses
from this country offering their product
and services so if you're a small
business owner hoping to sell
handcrafted Goods guns ammo fresh food
household essentials whatever Public
Square is perfect for you it's a great
place to do that to sell what you make
it's also a great place to buy what
other people make and it's easy you can
add your business in less than 10
minutes for free and sell your products
Nationwide to learn more go to Public
Square Tucker they're a sponsor of this
program and we're happy to have them
proud in fact so if I can just ask a
stupid question how does Amazon know
what you're doing off
Amazon yeah that's a great question so I
think they do it two different ways the
primary way they do it is basically by
using an algorithm that just like
scrapes the entire internet looking at
prices on Walmart looking at prices on
eBay and in in the video that you showed
in the documentary that's how uh Amazon
was able to shut down that person's
product so fast within 15 minutes so the
algorithm is kind of like monitor during
the whole internet to see if prices are
higher or lower on and off Amazon and it
it might also be possible for there used
to be like a button on pages on Amazon
where consumers could report like a
better price elsewhere so there might be
like a a human component as well but
it's mainly just an algorithm where
they're watching prices on and off
Amazon but they know when you've been
sleeping they know when you're awake I
mean this it's like they're part of the
surveillance data I mean there you
wouldn't imagine because you're selling
on Amazon that Amazon would be watching
your behavior in other places
right yeah to my mind it's totally
unnecessary and there's there's no need
for this policy um they used to
contractually enforce this so there used
to be a line in the contract that seller
signed with Amazon that would say that
you would not sell your products for
Less off Amazon and then there was like
kind of like a regulatory Kur fuffle in
Europe um and they ended up removing
that from their contracts but then they
maintained the policy um algorithmically
and um in 2019 I I wrote an article
about it and I can kind of explain why
it's so hard to get these kind of
narratives about Amazon but I wrote an
article about it and that article ended
up getting wrapped up into some into
like an FDC lawsuit the state of
California versus Amazon and that's why
we're talking about it
today what just back up a sentence if
you would what do you mean it's so hard
to get that story
out so like as I said right % of our
sales come from Amazon and um no one in
their right mind uh like wants to bite
the hand that feeds them right so the
people who know most about Amazon are
the sellers who are selling on Amazon
like like my company right and so we're
when people speak up you're you taking
you're taking some risk I I try to be
fair regardless of whether or not I'm
being critical of their policies I think
they're a good company with great people
with some some bad policies right so
don't want to bite the hand that feeds
you and then the second thing is my
company you know all companies that sell
on Amazon they signed a contract that
says that you know you're not going to
make public statements about Amazon
you're not going to speak to the pess to
the Press without um Express written
permission from Amazon right so those
are two reasons for the people who know
most about Amazon to not speak about
Amazon and then you also have to
remember that Amazon is like really big
in the documentary media space because
Amazon has its own Netflix right they
have Prime video they have their own
Hulu so if you're if you want to a
documentary about Amazon you have to
like think carefully about you know
what's that going to do to your career
going forward I'm not saying Amazon does
this but you know you may not be able to
sell a film or documentary to Amazon in
the future and so you know those are the
reasons why it's kind of hard to get
this information out there how long do
you think before they get their own
defense
department uh defense department like
the Department of Defense or like lawers
I mean you're you're descri you're
describing a company that's lot and of
course we all sort of know this on some
level but that's a lot more powerful and
a lot more willing to flex its power
than maybe some of us imagined just 10
years ago well okay so like I I I am a
witness in I don't know if I'm
technically a witness but I've been
pulled into those two lawsuits the FTC
in a bunch of States versus Amazon and
then the state of California versus
Amazon and like generally speaking I can
say this about my interaction because
I'm Bound by uh confidentiality in terms
of what I can say with the lawsuits yeah
um like it is an attorney's job to
discredit someone
who uh doesn't help the the attorney's
case right and um that is that's pretty
much what I have been well that is what
is often experienced in lawsuits of this
kind and you know I went through 16
hours of
depositions um eight hours from the
state of California eight hours from
Amazon I spent like you know 20 or 30
hours collecting documents and it's been
a very painful timec consuming and
expensive experience for me Amazon does
a lot of things but I don't know I mean
they got the drones but I don't I don't
think they're selling weapons uh quite
yet right I well I didn't think they'd
have a movie studio and be able to
control coverage of their own company a
few years ago so you know you never know
where these things are going molsen Hart
um but I just wonder since you obviously
you've thought about this in in larger
terms cuz you've been in involved or
witness to these lawsuits mhm I mean
isn't this aren't we approaching the
definition of a of a monopoly so
business is something that controls its
Silo you know where it operates a
monopoly is a business that controls an
entire market and kind of what you're
describing is a company that just that
controls
online Commerce the
pricing uh Amazon with its weight and
the the way that they keep on jaming
fees down sellers throats and this isn't
just about me as someone who sells on
Amazon complaining about Amazon's fees
like these fees end up becoming higher
prices for you if you shop on Amazon
right um they uh I don't want to say
that they control pricing on the entire
American internet or the countries where
they operate but you know they're pretty
you know they they have a lot of weight
when it comes to where prices are in
terms of whether or not they're a
monopoly um you know that's not for me
to decide that's for the courts to
decide and like I said before I
sincerely not just saying it because I
don't want to get smacked by Amazon I
mean I don't and but they are a good
company and they have they have great
people but they do have some bad
policies and I think the best outcome
would be for them to you know stop with
the bad policies and I wrote an open
letter to Jeff Bezos on Twitter it got
some play I think he read it because
he's responded to me on Twitter before
or X I should say um and you know I
think it' just be better if they ended
the bad policies rather than you know
potentially being broken up or something
like that but again that's not really
for me to decide well they're not going
to I mean he owns the Washington Post
which is the main news source in the
capital city so I don't think they're
going to be broken up anytime soon and I
I suspect the post would editorialize
against that if it came down to it um so
let let me just a ask you since it's
your business since you're in this
business who makes money selling an
Amazon uh
Amazon yeah um so
like uh for us right so we have a one of
our best sellers is brain flakes I got
my prop it's $17 okay right on Amazon
right now and um after all the fees are
paid we get seven out of the
$17 okay so it's $70 on Amazon after the
fees are paid we receive seven with that
$7 we have to pay rent Insurance um all
employees and then we also have to pay
for the cost of the product wait wait
wait oh wait so the the $10 you're
subtracting from the 177 does not
include your manufacturing costs
or correct yeah so you start at 17 10 of
those dollars and I can run through the
fees would you mind well because that's
that's a crazy number yeah let's do it
yeah yeah do you want me to break down
how yes I mean wait hold on I'm just I'm
I'm a little bit surprised I mean I
thought they took a vig of some kind and
they should it's they're selling your
product for you that's great M but the
fact that they would take the majority
of the retail price is stunning to
me well it's it's more than the majority
and you have to remember that we are not
selling to Amazon we are selling on
Amazon so all the risk is with us if the
product doesn't sell Amazon has no risk
they can actually just continue to
charge us fees not only that they'll
charge us like extra double fees for
having too much inventory at Amazon so
yeah at the risk of embarrassing myself
on your show I will attempt to do some
math and I'll tell you how we go from
$177 down seven all the way down our
profit yeah let's do it all right so $17