Gators and Amazon tag-team small sellers
Amazon’s bad conduct is good for (a certain kind of) business.
Any time a government starts to make noises about regulating Amazon Marketplace to end its predatory and negligent management towards third-party sellers, the company trots out all kinds of apologists who claim that “Amazon is great for small businesses.”
But the daily reality for users of Amazon’s platform is very different. Between automated account suspensions and terminations that can only be appealed to barely-supervised bots; floods of counterfeits and fake reviews; SEO tricksters and Amazon’s own ripoffs of its sellers’ data, the platform is a minefield for sellers.
Today in The American Propsect’s “Rollups” series on monopolized industries, Krista Brown dissects the “Amazon Gator” industry — a multibillion-dollar, deep-pocketed “aggregator” sector that buys up independent sellers and rolls them up into a sprawling gigacompanies.
Companies like Thrasio — valued at $5–10b — gobble up small merchants who have all of their savings tied up in small businesses that are being destroyed by Amazon’s neglect or predation. Thanks to its cash reserves, Thrasio can perform SEO tricks (like selling a product below cost for six months to get it “recommended” status) and work its backchannels to Amazon when its products are hit by automated takedowns or fake review attacks.
Thrasio’s business is so successful that it has spawned at least 85 competing “gators” who are buying up these distressed SMEs and putting them under common management. As Thrasio’s founders candidly told investors, the more precarious the life of an independent seller is on Amazon, the more bargains it can get buying out those businesses and rolling them up.
Things are very bad for independent sellers. In Congressional testimony, they describe their lives as Amazon sellers with words like “bullying,” “fear” and “panic.” All of this is great for Amazon, which charges “fees” to try to smooth over its own dysfunctions, to the point where sellers are now remitting 30% of their revenue in fees and commissions.