Amazon is huge. Really huge. The firm set up by Jeff Bezos in a Seattle garage in 1994 brought in $232bn revenue in 2018. The market values Amazon at over $1tn and according to Forbes, Bezos is the wealthiest man in the world.
Amidst the craze surrounding the company’s plans for flying delivery drones, its grocery service and Jeremy Clarkson’s rant on its original show The Grand Tour, one might forget about Amazon’s origins as an online retailer. Online sales remains the largest driver of revenue, totalling $72bn in 2018.
However, as the famous saying goes, “behind every great fortune lies a great crime”. Is this true for Amazon?
Williams-Sonoma would say so. In December 2018, the California-based furniture retailer filed a patent infringement lawsuit against Amazon, claiming “it is implausible that Amazon could have conceived of a product line with nearly identical product designs… other than by intentionally undertaking to copy WSI’s West Elm product line”.
The Williams-Sonoma case is an example of a relatively large company taking on Amazon over alleged copying of products but in reality, many (often voiceless) smaller businesses are facing the same troubles. An oft-cited example is Rain Design, whose £40 laptop stand is alleged to be the direct inspiration for an almost identical product offered by ‘AmazonBasics’, which sells for just £13. Unlike Williams-Sonoma, Rain Design has neither the resources nor grounds to file a legal suit. According to them, “there’s nothing we can do about it because they didn’t violate the patent”.
Key to Amazon’s ability to capitalise on products of smaller businesses is the wealth of data it amasses. This supports the whole product process, from deciding which products are in vogue through search and sales statistics, to marketing them directly to consumers through ads. Moreover, Amazon has the budget and scale to produce and sell these products at knockdown prices. Produce a high volume of products at a low cost, sell at low prices and rely on volume, not the profit per unit sold, to drive up profits. If a product makes a loss? Amazon has the coffers to easily absorb it.
Sub-brands are also key. AmazonBasics is the most prominent of these, but it’s one of over 70 brands owned by Amazon, selling everything from spare DIY parts (‘Small Parts’) to baby products (‘Mama Bear’). The illusion of choice created by these ‘stealth’ brands, along with their competitive prices, mean Amazon’s sub-brands have thrived, often at the cost of smaller businesses. These small businesses can do little about it. Lawsuits are money-draining, lengthy and almost impossible to win against a firm as powerful as Amazon. Trying to compete with Amazon on price is just as hopeless.
Many still consider Amazon to be a valuable platform for small businesses, to access massive amounts of customers online. But as the firm continues to invest hugely in its own products, Amazon seems to be taking this platform back for itself.