Amazon Destroys Brands

By John Wantz, December 8th, 2018

Dear Amazon recruiters, please see below:

If you’ve looked at Chinese e-commerce giant Alibaba and said that it got to be the largest business in China without the collusion of the Chinese Government, you might get laughed at.

Similarly, when discussing Amazon, it would be impossible not to claim that the domestic e-commerce monster got where it did today without the officially sanctioned collusion of the American government.

The problem with an all-knowing, all-selling monopoly like Amazon is that it not only kills innovation and small businesses, but it also encourages corruption among other companies that attempt to replicate the same type of massive marketplace growth across retail, food delivery, and other on-demand services. Jet.com, for example, tried to achieve the same results as Amazon, but it turns out that it’s difficult to compete in this way.

This is not to say Amazon hasn’t innovated, but the relationship they now have with American business and offshore dollars has become malignant at best. While Amazon may improve convenience, it is achieved on the backs of a suffering middle class and through the abuse of both big and small businesses in the USA. What’s even more incredible, is that the US Government has allowed this to happen unabated.

Here’s a list of the three methods Amazon leveraged to achieve market dominance through policy meandering and tax dodging which I believe are questionable.

Tax Gymnastics

  • “A new report says Amazon paid zero dollars despite making $5.6 billion in profits last year, and will be getting a $789 million tax cut thanks to the Trump administration’s new law in 2018. (source)
  • The company’s zero percent rate in 2017 reflects a longer term trend. During the previous five years, Amazon reported U.S. profits of $8.2 billion and paid an effective federal income tax rate of just 11.4 percent. This means the company was able to shelter more than two-thirds of its profits from tax during that five year period.
  • Good Jobs First estimates that Amazon could soon surpass Wal-Mart as the largest retail-sector recipient of state and local government aid, meaning that it would have received over $1.2 billion in public subsidies. (source)
  • At the end of 2016, Good Jobs First and the Institute for Local Self Reliance (ILSR), a progressive policy group focusing on sustainable community development, pegged Amazon’s record for state and local subsidies at just over $1 billion ( for data on Amazon-awarded subsidies since 2015, see chart below). The new year began with Amazon committing to build out its rapid-delivery business model, and states and municipalities lined up to help. In less than three months, Amazon racked up another $92 million in tax credits and exemptions to develop warehouses and fulfillment centers in California, Illinois, Kentucky, Maryland and Michigan. (source)
  • The company’s early success as a retailer was due in part to its refusal to collect state sales and use taxes. Amazon cloaked itself in immunity under the nexus standard established by the U.S. Supreme Court in Quill Corp. v. North Dakota504 U.S. 298 (1992), which bars states from requiring remote sellers to collect and remit taxes if the vendor lacks a physical presence in the state.
  • Critics contend the practice provided Amazon with a 6 percent to 10 percent price advantage over traditional retailers, which were obligated to collect such taxes due to their physical presence within each taxing jurisdiction. Before 2005, Amazon maintained warehouses and distribution centers in just a handful of states to avoid physical nexus and maintain its market advantage in the vast majority of states.
  • Using data developed through “ Subsidy Tracker,” Good Jobs First’s national search engine for economic development subsidies, Mitchell said Amazon collected tax subsidies totaling $613 million between 2005 and 2014 as it constructed 77 warehouses and fulfillment centers. Amazon also grabbed $147 million in tax benefits linked to its development of data centers, bringing it $760 million in total benefits through 2014.

(source)

More on taxes: https://itep.org/amazons-local-state-and-federal-tax-issues-explained/

Worker Abuse

Amazon’s warehouses comprise about 80 percent of the company’s U.S. workforce. The way they treat workers is deplorable.

  • Many of the workers in Amazon warehouses are subcontracted temporary workers, which the company refers to as “seasonal,” but are, in many cases, year-round “permatemps.” This set-up allows Amazon to skirt responsibility for these workers and any injuries they suffer on the job, and helps deter its direct hires from advocating for better conditions.
  • Employees describe running across warehouses that sprawl the distance of 17 football fields; production quotas, or “rates,” that can be set 60 percent higher than the industry standard and a disciplinary system that tracks workers’ every action and inflicts “points” for any deviation from Amazon’s standard. (source)
  • “If you’re a picker you have this scanner gun that counts down 22-seconds between every pick and you’re running sometimes to the other side of the warehouse to get that pick,”
  • “One day we came in to work and they said, ‘Your rate is now 500 units per hour,’”
  • Another worker, this one assigned to be a “picker,” told the paper, “It started with 75 pieces an hour. Then 100 pieces an hour. Then 125 pieces an hour. They just got faster and faster and faster.”
  • As Beth Gutelius, a researcher who has looked extensively at Amazon, told us, “It’s actually impossible to meet the productivity standards and do so safely.”155 The International Business Times has reported that these production quotas are set intentionally too high. “Amazon’s productivity numbers are apparently purposely designed to be unattainable for most workers so that employees feel that they are falling down on the job and push harder to hit the impracticable levels,” IBTimes wrote. “This strategy [is] known as management by stress.”
  • Closely managing workers’ injuries so that they don’t get reported. For instance, “A former warehouse safety official said in-house medical staff were asked to treat wounds, when possible, with bandages rather than refer workers to a doctor for stitches that could trigger federal reports,” a Seattle Times investigation found.
  • Drawing on more than 1,300 wage postings on Glassdoor.com, we found that that Amazon’s fulfillment center positions pay an hourly mean wage of $12.32,167 which is 9 percent less than the industry average for comparable work, according to Bureau of Labor Statistics (BLS) data.
  • In the Dallas-Fort Worth area, where Amazon has seven large facilities, its mean hourly wages were 11 percent lower; in Seattle-Tacoma, where Amazon has five warehouse facilities, wages were 18 percent lower. The smallest gap was in the Phoenix metro area, where Amazon workers make an average of 6 percent less than other warehouse workers. The largest gap was in Kenosha, Wisc., where Amazon has one fulfillment center and one sortation center, and pays an average wage of $12.23–22 percent less than the average wage for comparable work, and 26 percent less than the living wage for the county.
  • Across these eleven metro areas, we found that Amazon wages were an average of 15 percent below the wages for comparable positions. It’s important to note here that though there are examples of better warehouse jobs, much warehouse work is not very well-paid to begin with and Amazon is dragging those low wages down further. Amazon is paying 15 percent less than an already low-wage job. These low wages disproportionately affect African-American and Latino workers, who comprise 45 percent of Amazon’s warehouse workforce, but only 8 percent of the company’s management.
  • Workers have been dying in Amazon warehouses since 2014 (source)

Merchant Abuse

  • Read this source.
  • Amazon merchants fear their voices are drowned out by the company when policy decisions are made that affect their livelihoods and the future of e-commerce. They think an association will help them lobby more effectively. (source)
  • The Online Merchants Guild has big ambitions, which include negotiating better terms with Amazon, pushing the company to respond more effectively to sellers’ complaints and lobbying government officials to make sure merchants’ viewpoints are being heard.
  • Amazon raised seller fees for several categories, increasing the percentage of the sale it takes from third parties, according to analysis from Instinet. The company raised the fee for the Clothing & Accessories category from 15% to 17% and for the Handbags & Sunglasses category from 15% to 18% on items priced above $75. Items under $75 will still be charged the 15% rate. (source)

Amazon has eliminated about 149,000 more jobs in retail than it has created in its warehouses, and the pace of layoffs is accelerating as Amazon grows.

Many more jobs are at risk: the retail sector currently accounts for about 1 in every 8 jobs, and unlike Amazon jobs, these jobs are distributed across virtually every town and neighborhood.

By using Prime to corral an ever-larger share of online shoppers, Amazon has left rival retailers and manufacturers with little choice but to become third-party sellers on its platform. In effect, Amazon is supplanting an open market with a privately controlled one, giving it the power to dictate the terms by which its competitors can operate, and to levy a kind of tax on their revenue.

Already there’s evidence that Amazon is using its huge trove of data about our buying habits to raise prices, and it’s also started blocking access to certain products, charging higher prices, and delaying shipping times for customers who decline to join its Prime program.

To focus too much on prices, though, is to miss the real costs of monopoly. Amazon’s tightening grip is damaging our ability to earn a living and curtailing our freedom as producers of value.

New business formation has plummeted over the last decade, which economists say is stunting job creation, squeezing the middle class, and worsening income inequality.

The case for damaging centralization, monopoly, and oligarchy are strong with Amazon. Something must be done…

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