Pluralistic: How monopoly enshittified Amazon/28 Nov 2022 – Pluralistic: Daily links from Cory Doctorow

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How monopoly enshittified Amazon (permalink)

In Bezos's original plan, the company called "Amazon" was called "Relentless," due to its ambition to be "Earth's most customer-centric company." Today, Amazon is an enshittified endless scroll of paid results, where winning depends on ad budgets, not quality.

Writing in Jeff Bezos's newspaper The Washington Post, veteran tech reporter Geoffrey Fowler reports on the state of his boss's "relentless" commitment to customer service. The state is grim.

https://www.washingtonpost.com/technology/interactive/2022/amazon-shopping-ads/

Search Amazon for "cat beds" and the entire first screen is ads. One of them is an ad for a dog carrier, which Amazon itself manufactures and sells, competing with the other sellers who bought that placement.

Scroll down one screen and you get some "organic" results – that is, results that represent Amazon's best guess at the best products for your query. Scroll once more and yup, another entire screen of ads, these ones labeled "Highly rated." One more scroll, and another screenful of ads, one for a dog product.

Keep scrolling, you'll keep seeing ads, including ads you've already scrolled past. "On these first five screens, more than 50 percent of the space was dedicated to ads and Amazon touting its own products." Amazon is a cesspit of ads: twice as many as Target, four times as many as Walmart.

How did we get here? We always knew that Amazon didn't care about its suppliers, but being an Amazon customer has historically been a great deal – lots of selection, low prices, and a generous returns policy. How could "Earth's most customer-centric" company become such a bad place to shop?

The answer is in Amazon's $31b "ad" business. Amazon touts this widely, and analysts repeat it without any critical interrogation, proclaiming that Amazon is catching up with the Googbook ad-tech duopoly. But nearly all of that "ad" business isn't ads at all – it's payola.

https://pluralistic.net/2022/02/27/not-an-ad/#shakedowns

Amazon charges its sellers billions of dollars a year through a gladiatorial combat where they compete to outspend each other to see who'll get to the top of the search results. May the most margin-immolating, deep-pocketed spender win!

Why would sellers be willing to light billions of dollars on fire to get to the top of the Amazon search results?

Prime.

Most of us have Amazon Prime. Seriously – 82% of American households! Prime users only shop on Amazon. Seriously. More than 90% of Prime members start their search on Amazon, and if they find what they're looking for, they stop there, too.

If you are a seller, you have to be on Amazon, otherwise no one will find your stuff and that means they won't buy it. This is called a monopsony, the obscure inverse of monopoly, where a buyer has power over sellers.

But monopoly and monopsony are closely related phenomena. Monopsonies use control over buyers – the fact that we all have Prime – to exert control over sellers. This lets them force unfavorable terms onto sellers, like deeper discounts. In theory, this is good for use consumers, because prices go down. In practice, though…

Back in June 2021, DC Attorney General Karl Racine filed an antitrust suit against Amazon, because the company had used its monopoly over customers to force such unfavorable terms on sellers that prices were being driven up everywhere, not just on Amazon:

https://pluralistic.net/2021/06/01/you-are-here/#prime-facie

Here's how that works: one of the unfavorable terms Amazon forces on sellers is "most favored nation" status (MFN), which means that Amazon sellers have to offer their lowest price on Amazon – they can't sell more cheaply anywhere else.

Then Amazon hits sellers with fees. Lots of fees:

Fees to be listed on Prime (without which, your search result is buried at the bottom of an endless scroll):

Fees for Amazon warehouse fulfillment (without which, your search result is buried at the bottom of an endless scroll)

And finally, there's payola – the "ads" you have to buy to outcompete the other people who are buying ads to outcompete you.

All told, these fees add up to 45% of the price you pay Amazon – sometimes more. Companies just don't have 45% margins, because they exist in competitive markets. If I'm selling a bottle of detergent at a 45% markup, my rival will sell it at 40%, and then I have to drop to 35%, and so on.

But everyone has to sell on Amazon, and Amazon takes their 45% cut, which means that all these sellers have to raise prices. And, thanks to MFN, the sellers then have...