How Amazon transformed the EU into a planned economy
Amazon is a perfect parable of enshittification, the process by which platforms first offer subsidies to end users until they’re locked in, then make life good for business customers at users’ expense, until they’re locked in, then claw back all the value they can for themselves, leaving just enough behind to keep the lock-in going.
In a new report for SOMO, Margarida Silva describes how the end-stage enshittification of Amazon is playing out in the EU, with Amazon repeating its US playbook of gouging the small businesses who have no choice but to use the platform in order to reach its locked-in customers, making European customers and European sellers poorer:
The mechanism for this isn’t a mystery. Amazon boasts about it! They call it their flywheel: first, customers are lured into the platform with low prices, especially through Prime, which requires pre-payment for a year’s shipping, which virtually guarantees that customers will start their shopping on Amazon. Because customers now start their buying on Amazon, sellers have to be there. The increased range of goods for sale on Amazon lures in more buyers, who lure in more sellers, with both sides holding each other hostage:
This flywheel creates a vicious cycle, starving local retail so that customers can’t get what they need from brick-and-mortar shops, which funnels sellers into offering their goods for sale on Amazon. The less choice customers and sellers have about where they shop, the more Amazon can abuse both to pad its own bottom line.
There are 800,000 EU-based sellers on Amazon, and they have seen the junk-fees that Amazon charges them skyrocket, to the point where they have to raise prices or lose money on each sale. Amazon uses both tacit and explicit “Most Favored Nation” deals to hide these price-hikes. Under an MFN deal, sellers must not allow their goods to be sold at a lower price than Amazon’s — so when they raise prices to cover Amazon’s increasing fees, they raise them everywhere: