Dangers of using Amazon E-commerce platform

Many people choose to sell their products via the Amazon platform, because Amazon’s success in e-commerce is undeniable.

Beware, the EU anti-trust action alleges, Amazon has been using its Sellers’ data in order to select new products and services to sell via Amazon’s own Retail Business.

As Margrethe Vestager, EU’s Competition Chief, rightly states, “Amazon is data driven. It’s a highly automated company, where business decisions are based on algorithmic tools. Our investigation shows that very granular, real-time business data relating to third party sellers’ listings and transactions on the Amazon platform systematically feed into the algorithm of Amazon’s retail business. It is based on these algorithms that Amazon decides what new products to launch, the price of each individual offer, the management of inventories, and the choice of the best supplier for a product.” (Click here to read more details)

In essence, Amazon spots successful products and then directly competes with the Seller of the product, which means if you are an Amazon Seller, you cannot win!

If your product is not successful, of course your venture fails. If your product is successful, EU competition alleges, Amazon will come to eat your lunch and eventually you will lose out to Amazon direct sales. Sooner or later, your business will suffer and you will fail.

This does not apply uniquely to Amazon, as any Shared e-Commerce platform has the same opportunity to become a predatory competitor.

What makes a Shared e-Commerce Platforms so perilous for Sellers:

Data Visibility

Amazon, and other shared platforms, have a wealth of data. The data that is related directly to a Seller is made available to the Seller.

Amazon (and other Shared platforms) have more data on the Seller’s business than even the Seller does, because they have visibility of the entire sector that the Seller is operating within. Shared platforms can see how other Sellers that compete in the same sector behave, their pricing, and performance.

Additionally, Shared Platforms have visibility of the entire “Customer Journey” on their platform, including the keywords they used to find a product, the other Sellers they visit, other products they view, and finally the conversion to a sale. This is invaluable information for any commercial business.

Business Performance

All Shared Platforms including Amazon, have the visibility of their respective Sellers’ performance on pricing and sales volume, but they also have visibility of the Sellers’ KPI (Key Performance Indicators) such as Conversion Rate, Price Elasticity, Delivery Performance, Returns, Complaints, etc.

Real-Time Data

Shared Platforms like Amazon have access to the above data in real-time, which means they can aggregate the data, and react in real time to changes to pricing, demand, etc. This ability to respond to the market in real time, means Sellers cannot outsmart them by taking defensive action. Any move is spotted in real time, and is responded to accordingly.

Self-Preference

Any Shared Platform like Amazon, can manipulate product search results, so that own directly sold products perform better against the Sellers’ products.

The U.S. House Judiciary Committee report argues Amazon wields monopoly power over SMEs via its dominance of online retail — which in turn enables it to “self-preference and disadvantage competitors in ways that undermine free and fair competition”.

Summary

Whilst using Shared Platforms such as Amazon sounds like a great idea, offers low cost, and easy means of getting into online sales, Sellers must consider the risk they are facing when sharing a platform.

Stand alone e-Commerce platforms are better able to protect your business and data, but of course they cost more and take longer to become effective outlets.