Half of U.S households subscribe to Amazon Prime, 55 percent of online searches start on Amazon.com, and nearly one out of every $2 spent online goes to Amazon, according to the nonprofit Institute for Local Self-Reliance.
CLEVELAND, Ohio -- Amazon.com's explosive growth and unprecedented dominance among American retailers is threatening small businesses and choking competition, warns the nonprofit Institute for Local Self-Reliance, in a just-released report.
Beyond the ubiquitous packages with the smiling arrows, Amazon.com is steadily expanding beyond e-commerce, playing an increasingly larger role in our daily transactions, and "extending its tentacles across our economy," said ILSR, a national nonprofit research organization that supports strong local economies.
Half of U.S households subscribe to Amazon Prime, 55 percent of online searches start on Amazon.com, and nearly one out of every $2 spent online goes to Amazon, said Olivia LaVechhia, a research associate with ILSR.
"Amazon sells more books, toys, and by next year, apparel and consumer electronics than any retailer online or off, and is investing heavily in its grocery business. Its market power now rivals or exceeds that of Walmart, and it stands only to grow," she said. "Within five years, one-fifth of the U.S.'s $3.6 trillion retail market will have shifted online, and Amazon is on track to capture two-thirds of that share."
ILSR's report, entitled "Amazon's Stranglehold: How the Company's Tightening Grip is Stifling Competition, Eroding Jobs, and Threatening Communities," available at http://ilsr.org/amazon-stranglehold, says Amazon is reshaping the U.S. economy in ways that hurt small businesses, reduce jobs and wages, limit the choices and products available to consumers, and harm the economies of local communities.
Amazon, which began as an online bookstore in 1995, has become much more than just a retailer and now poses an especially powerful threat to competition, ILSR says. The company is increasingly manufacturing its own goods, is growing its packaging, shipping and delivery capacity, and now controls much of the infrastructure and technology that other retailers need to reach their audience.
Amazon now controls the dominant platform for online digital commerce, leaving competing retailers with little choice but to become third-party sellers on its platform. That enables it not only to set the terms by which its competitors and suppliers sell online, but it deliberately prices its own inventory below cost to undercut and choke off upstarts, said Stacy Mitchell, co-director of ILSR and co-author of the study.
The study found that Amazon:
-- has received at least $613 million in public subsidies for its warehouses and fulfillment centers since 2005,
-- has eliminated 149,000 more retail jobs than it has created in its warehouses,
-- pays its warehouse workers 15 percent less than other warehouse workers in those markets,
-- and relies increasingly on subcontracted, on-demand workers, especially for its shipping and package delivery, where it competes directly with nearly 1 million unionized, middle-income workers at UPS and the U.S. Postal Service.
"Amazon's power to manipulate what products we encounter is especially concerning in the book industry, where it now commands more than half of sales, and where it can stifle the exchange of ideas simply by removing a book from its search and recommendation algorithms, as it did two years ago in its dispute with the publisher Hachette," Mitchell said.
Kate Schlademan, owner of The Learned Owl Book Shop in Hudson, said "Amazon's business practices have been questionable for years and the concerns raised in this study are a continued topic of discussion at various bookselling trade shows and conferences that I attend.
"With a new Amazon fulfillment center being built in Twinsburg, the threat is even more real and about to move in right next door," she said. The American Booksellers Association published its own report on Amazon called, "Amazon and Empty Storefronts," at http://www.civiceconomics.com/empty-storefronts.html, that she said offers "a sobering view of what Amazon is doing to our country as a whole and state by state by avoiding $704 million in sales taxes and accounting for a net loss of 222,000 retail jobs in 2015."
Although Learned Owl enjoys a supportive community and customer base, "one of the most frustrating things I face is the belief that you can always find it cheaper on Amazon," she said.
"I hope that people will take some time to look at both of these studies and assess the real effect Amazon is having on our communities, and hopefully they will realize that getting something for a few cents less really isn't worth the 11,150 jobs lost in Ohio last year."
Michael Ziegenhagen, owner of Playmatters Toys stores in Pepper Pike and Solon, who closed his store at Shaker Square this March, said: "Amazon is a serious threat to the brick and mortar stores that make our communities lively and provide for much of our out-and-about fun and recreation."
"With less than 2 percent GDP growth, our national economy is a zero-sum game," he said. "We gasp at $3.3 billion in online sales on Cyber Monday -- but all of that business came at the expense of brick-and-mortar retail. Each time a consumer chooses to purchase online on Amazon instead of from a brick-and-mortar retailer, it diminishes the viability of the local business."
"Malls, lifestyle centers and independently-owned local businesses pay significant property taxes as well as payroll taxes, commercial activity taxes, and sales taxes that support our schools, roads, police, fire, and libraries," Ziegenhagen said.
"We seem to be driven by convenience and instant gratification through the electronic devices we carry around with us," he said. "Less mindfulness of the harm that Amazon shopping is doing to our local retail landscape."
Ziegenhagen said he doesn't understand why customers who eschew plastic bags for environmental reasons don't worry about the carbon footprint associated with the corrugated boxes, excess packaging, delivery trucks, fuel, and exhaust required to get that purchase to their doorstep.
"How fun will our communities be when the likes of Beachwood Place, Legacy Village, and Crocker Park are shuttered and become the modern-day equivalents of Randall Park Mall? How fun will it be to take your out-of-town guest out for a day in Cleveland when there are no longer the likes of The Learned Owl, Peter's Store for Men, Banyan Tree, and Playmatters?
"These are businesses that add to our lives through creativity, curated selection, and fabulous service," he added. "Our friends and customers who loved Playmatters at Shaker Square for 21 years are missing having a neighborhood toy store to visit this Christmas."