The federal government sued Amazon this week saying it’s abusing its monopoly power. One key allegation is Amazon puts the squeeze on sellers.
STEVE INSKEEP, HOST:
The heart of a federal antitrust lawsuit is an allegation that Amazon squeezes sellers, online shops that offer everything from dog treats to camping gear. So what is it like to be one of those sellers? Amazon is among NPR’s financial supporters, and we cover it like any other company. So NPR’s Dara Kerr has the seller’s story.
DARA KERR, BYLINE: When Douglas Mrdeza first opened his Amazon shop selling hair products from Michigan in 2014, he had no idea it would go gangbusters.
DOUGLAS MRDEZA: The first product that I ever listed on Amazon was a hair pomade. The brand was Suavecito. And I was running a barber shop out of East Lansing, ordered a bit too much.
KERR: It flew off Amazon’s virtual store shelf, so Mrdeza ordered more Suavecito.
MRDEZA: I did the calculation, bought what I would have sold in a month, sent it in, and it sold out in, like, a day.
KERR: Within a couple years, Mrdeza had built a beauty product empire. He’d hired 45 employees and opened four warehouses. He used the tools Amazon had to offer, like its warehousing and delivery network. But around 2018, things took a turn.
MRDEZA: There was just a lot of moving pieces.
KERR: First, Amazon started letting sellers pay for placement at the top of the page, so Mrdeza says his listings got buried. Then Amazon started selling many of the same products he had in his shop, making it nearly impossible to compete. Finally, fees for things, including warehousing and delivery, shot up.
MRDEZA: That’s your entire margin, you know? How are we supposed to keep the lights on?
KERR: The Federal Trade Commission says these actions by Amazon are illegal. It filed a lawsuit against the company this week, which was joined by 17 states. Amazon called the government’s lawsuit wrong. It says sellers buy things like placement at the top of the page because it gives them, quote, “more value than they can get elsewhere.” People don’t hear sellers’ stories often. Stacy Mitchell says that’s because they don’t want to upset Amazon. She’s at the Institute for Local Self-Reliance and has worked with dozens of sellers.
STACY MITCHELL: So many of them cannot speak out. They fear retaliation from Amazon.
KERR: Retaliation is something hot sauce vendor Nicholas Parks thinks about. He’s based in Alabama and has sold on Amazon since 2002. Even though he fears Amazon could yank him from its marketplace, he thinks it’s important to talk about his experience.
NICHOLAS PARKS: My wife has this sign in our house that says, do what’s right, not what’s easy.
KERR: Selling on Amazon was initially great for Parks, but like Mrdeza, it didn’t last. He says the fees he now pays Amazon eat up about half of his revenue. And after selling a product like Valentina brand hot sauce for years, Amazon started selling it, too.
PARKS: It doesn’t even matter if I’ve sold it for 10 or 15 years.
KERR: Amazon could sell Valentina for less, put it up higher in the search page and essentially squeeze them out.
PARKS: Right now, I have, like, seven or eight pallets of Valentina in my warehouse.
KERR: Parks says he tried to sell Valentina elsewhere, but it’s difficult because Amazon is the behemoth. Mrdeza faced the same obstacle. Even after his business selling Suavecito and other beauty products went bust, he pivoted to selling toys and sporting goods also on Amazon.
MRDEZA: Unfortunately for us, those categories don’t hold the same types of margins that the beauty categories did.
KERR: Mrdeza had to lay off his employees and eventually went bankrupt. He says he tried to stay nimble, but there was only so much he could do.
Dara Kerr, NPR News.
(SOUNDBITE OF MALO SONG, “SUAVECITO”)
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