The Amazon monopoly and the problem with Jeff Bezos’ business model

The Amazon monopoly and the problem with Jeff Bezos’ business model


This is Jeff Bezos. No this is Jeff Bezos. Sorry this is Jeff Bezos. His net worth will soon surpass $150 billion. And
this is his home. Amazon. The second company in the world to pass the
$1 trillion mark. But did you know that during more than two
decades of existence, Amazon has struggled to make any profit? In fact, the company has been regularly operating
at a loss, especially on international markets. This is despite its exponentially growing
revenue stream peaking at $232 billion for the last year. In the final quarter of 2018, Amazon reported
profits of $3 billion with the revenue 24 times bigger. And it wasn’t until the late success of
Amazon Web Services, the world’s leading cloud computing service, that Amazon began
reporting consistent profits. So what is happening with all this revenue? It has everything to do with the business
model of Jeff Bezos. In his own words, Bezos believes in shareholder
supremacy, which means everything is justified as long as the share value is growing. The key metric for Bezos is the ability to
lock customers in their Amazon ecosystem. Bezos reassures his shareholders that Amazon
“has invested and will continue to invest aggressively to expand and leverage their
customer base, brand, and infrastructure as they move to establish an enduring franchise”. The revenue growth is the manifest of this
very expansion. Amazon absolutely dominates e-commerce – controlling
roughly half of all online sales, more than all of their competition combined. In five different categories, Amazon claims
more than 90% market share. Jeff Bezos pushed Amazon great lengths to
claim this dominance. From undercutting competitors with predatory
pricing, through forcing itself into their business, to vertically integrating into strategic
markets across the business line, Amazon is on track to gradually take over every aspect
of e-commerce and to control and decide what we shop and what is allowed to be sold. One of the first key steps for Jeff Bezos
was to lock Amazon’s grip on consumers. To lure more customers to stay with Amazon,
the company launched Prime membership subscription for a flat annual fee of $79. By offering free two-day delivery and e-book
renting along with music and video streaming, about half of Amazon customers have been converted
to Prime membership. On paper, this was an immediate success, because
on average, Prime members spent more than twice as much as non-Prime customers. But by 2011, estimates showed that the average
annual cost of each Prime membership ranked up to $55 in shipping and $35 in streaming. This left Amazon losing about $11 per Prime
customer. All in all, Amazon was losing about $1 to
$2 billion a year on Prime alone. Not to mention that the expansion of Prime
was happening right in the middle of the deepest recession since the Great Depression. But Jeff Bezos managed to persuade shareholders
to stick with Amazon and their stock prices went up by almost 300% in two years, when
everyone else in retail was failing. So what made Amazon investors so loyal to
the company that was losing profit during a heavy recession? It was Amazon’s ability to lock down their
grip on customers and claim monopoly position on the market. In the words of a former member of Prime development
team, “It was never about the $79. It was really about changing people’s mentality
so they wouldn’t shop anywhere else.” And this strategy really succeeded in its
mission. When Amazon finally raised the fee to $99
in 2014, 95% of Prime members claimed to stay loyal and renew their subscriptions. Studies found that less than 1% of Amazon
Prime customers would consider competitor retail sites during the same shopping session,
while non-Prime customers were 8 times more likely to shop between different retailers. Investors back Amazon when it’s losing profits,
because sacrificing short-term profit for aggressive long-term expansion pays off. Amazon did this with e-books, when it began
selling Kindle devices below its manufacturing cost. Like with Prime, the goal of Kindle was to
lock book readers in the Amazon ecosystem. Amazon did this with digital rights management,
DRM, that locked its e-book formats to Kindle, so they couldn’t be read outside of Kindle. With this strategy, Amazon also succeeded
in dominating the e-book market, claiming around 83% of e-book sales in the US and the
only real competitor left is Apple. Undercutting competition with below-cost prices
and locking users in its ecosystem is a classic strategy of predatory monopolization. It gives monopolies opportunities to unfairly
raise prices and enjoy the cash flow in a market with only that competition left which
they can contain or control. In ideal circumstances, antitrust regulators
would have stepped in long before such dominant positions could have been acquired through
anti-competitive practices. However, purposefully operating at a loss
with the aim to price out competitors is not viewed as an anti-competitive practice on
its own under the new anti-monopoly regulatory view in the US. In order for the FTC or the courts to step
in, there has to be an intent to raise prices for consumers once the dominance is taken. And this is what Amazon has been extraordinarily
clever at hiding. Every new service Amazon rolls out allows
them to track user behavior and collect personal and usage data of their customers. Amazon then deploys algorithms to personalize
pricing on individual scale, and even goes as far so to use bots to monitor prices of
their competition and match them with Amazon prices in real time. This mechanism obfuscates the baseline from
which it could be possible to observe price fluctuations and so if there is no body, there
is no murder. Obfuscating its true intentions allowed Amazon
to vertically integrate into the markets on which its competitors were dependent on. It’s not a coincidence Jeff Bezos turned
Amazon into a marketing platform, a network for logistics and delivery, a book publisher,
a hardware manufacturer, a fashion designer, a film and TV producer, a payment service
and a cloud service provider. Every industry domination is a step in the
Bezos’ plan. Amazon expands to these different markets
by either acquiring key businesses or undercutting them with below-cost pricing if they refuse
to sell. A company called Quidsi used to be one of
the fastest growing e-commerce businesses in the world, overseeing Diapers.com, Soap.com
and BeautyBar.com. First, Amazon offered to buy the whole company
in 2009. When Quidsi refused, Amazon bots began tracking
Diapers.com and cut their own prices for baby products by up to 30%. But unlike Amazon, Quidsi was a new venture
and didn’t have investors backing their losses while they competed with Amazon’s
monopolistic ambitions. Amazon then began rolling out subscription
services for care takers and significant discounts on diapers, which cost Amazon additional $100
million per quarter. Quidsi was bleeding and had no option but
to sell. Both Walmart and Amazon made an offer. When Bezos found out Walmart offered a higher
bid, his deputies went to Quidsi founders with threats that Amazon would cut their prices
even further if Quidsi sells to Walmart. The FTC investigation found no evidence of
anti-competitive behavior, and in 2010 Quidsi sold to Amazon. What happened to the generous offers and discounts
on baby products? They were discontinued or significantly reduced. Many users who converted to Amazon from Diapers.com
because of those discounts, wanted to go back after they were abruptly scraped. But there was no Diapers.com anymore. Amazon doesn’t just compete with their competitors. It forces itself into their business. As a dominant online retailer, Amazon had
enough bargaining power to secure discounts of up to 70% on deliveries from fulfillment
companies like UPS and FedEx. Amazon then used these discounted deliveries
to pack them in its own delivery service called Fulfillment by Amazon. Because Amazon was almost bigger than the
whole e-commerce industry combined, UPS and FedEx didn’t have enough negotiating power
over Amazon. To make up for the excruciating discounts
requested by Amazon, UPS and FedEx began hiking their prices to other independent sellers. This created a paradox – Amazon’s strategy
effectively directed sellers to use Fulfillment by Amazon as it was cheaper than to use UPS
and FedEx directly. And now Amazon is investing hundreds of billions
of dollars to establish its own physical delivery capacity to completely eliminate reliance
on UPS and FedEx and it will succeed in doing so. Controlling e-commerce infrastructure enables
Amazon to build a marketplace where it discriminately favors its own products without getting punished
for it. As a marketing platform, Amazon opened its
door to third party sellers to reach customers in exchange for fees ranging from 6% to 50%. What these third party vendors also unwittingly
gave up was the valuable data of their businesses and their customers. Amazon is using this data to study purchasing
patterns and trends to undercut third-party merchants on price or give their own products
a featured placement. Another benefit none of Amazon’s retail
competitors enjoy, is Amazon world leadership in cloud computing. Amazon Web Services is on track to control
half of the cloud infrastructure market share with Microsoft as the only strong competition
currently standing. Many new startups rely on Amazon cloud service
to deliver their services without committing to build expensive infrastructure on their
own. But this also serves as an ultimate tool of
industrial espionage that Amazon can use to learn about new emerging competition to acquire
or undercut on price before it endangers its business. It gives Amazon a control over data none of
its competitors have, and thus Amazon can enter new markets much more quickly and effectively
than any other retailer out there. There is no real competition to Amazon left. There is no company quite like it. Amazon’s path to become a global monopoly
across different markets isn’t just an anomaly. It was Jeff Bezos’s intention from the very
beginning. Monopolies destroy free markets, and with
them the freedom to choose not just as a consumer, but as a small business owner, a worker, an
Internet user, and a citizen. The best solution users of the Internet can
do right now is to support merchants, authors, developers, entrepreneurs and vendors by purchasing
their products directly from them, rather than going through an intermediary like Amazon. Sure, you might be getting a better bargain
on Amazon, but the long-term cost of saving few bucks now is unbearable. Decentralizing our economy away from monopolies
back to middle class and small businesses is the only sustainable solution and is a
responsibility of every individual participating in this economy. The story of Amazon domination isn’t unique
but rather reflects the nature of the business model that’s become a standard in Silicon
Valley. It leads towards market domination and monopolization
within the hands of the most aggressive corporations. The little convenience of economic centralization
comes at the cost of small businesses, middle class jobs, wealth distribution, privacy,
free speech and free market as a whole. Should we let Amazon monopolize one market
after another? Or should we step in with drastic measures
to protect what allowed Amazon to exist in the first place? It’s time to have this conversation now.

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About the Author: Oren Garnes

100 Comments

  1. > Okay so you're telling us bottomline to support more local/smaller businesses rather than Amazon even tho we save more money by buying products by Amazon…
    BUT that's not our(the consumer) problem that Amazon is cheaper… It's the job of the government/institutions to limit their monopolistic behaviour…. Why should a conscious consumer be forced to do more expensive purchases? That's just absurt.

    Edit: if our economy goes to shit because the goverment didnt act upon Amazon's monopolistic behaviour then the whole world would be upside down, I think that the US goverment and foreign goverments know exactly how dangerous Amazon can/could be

  2. JEFF BEZOS IS THE SINGLE BIGGEST SCUMBAG ON PLANET EARTH, PERIOD.
    Doesn't anyone in Washington realize that fair competition is the backbone of America?? His next goal is to be the Emperor of the World, only after he puts every, single business in America out of business, then staffs his companies with hardcore, uneducated unemployables, and sends the rest of the jobs to the Philippines, China, and Mexico. All other jobs will be handled by robots, destroying MILLIONS more jobs.
    Soon, he will be totally out of control, and no one will be able to stop him. Welcome to the Brave New World of megalomaniacal maniacs like Bill Gates, Mark Zuckerberg, George Soros, and Lord Rothschild… and did forget to mention the Bilderbergers and the Carlisle Group?? We're all toast, and we don't even know it.

  3. I mean, Amazon has good customer service & gives the people what they want. It's not like these other businesses care about you either. So it's a wierd thing

  4. He’s a damn jerk. He wants to put every brick and mortor business under water. No longer will I be able to hit on young college girls who work retail. What a fucking dick. Not to mention he just looks like I guy you wanna fight. Sometimes I wonder how crazy Walmart is scrambling to fuck them up.

  5. I hardly buy stuff on Amazon now & if I do it's only prime. Mostly I buy stuff from AliExpress for wholesale prices.

  6. There is no such thing as “free markets” – markets are an ideological institution and process devised by people with stuff to sell that must ensure a return on their investment, where the “free hand of the market” achieves efficiency the same way every time – by supplying products to the highest bidder. This process favors the wealthy, and exacerbates the ability of the wealthy to accumulate resources, investments, disparity in wealth, and re-influence the market process to benefit their interests, which becomes extractive, stratified, elitist, sociopathic, predatory, social Darwinist, and abstracted through two-tiered financialization from the resource needs of the poor. In addition, the dynamics of competition produce an immense contradiction of capitalism (which requires competition to function), of defeating other competition in order to dominate the market, which organically leads to competition-killing monopoly. Both of these phenomenon of markets and competition are self-reinforcing and exponential in function, where the need to escalate and maximize growth and profits requires an increasingly fundamentalist ideology, until the “objectivist” ideology of capitalism requires abusing human and environmental externalities until social and environmental systems each collapse. We see that occurring now, with globally discredited and imploding neoliberalism, and the climate catastrophe.

    When you review the people produced by the increasingly fundamentalist ideology of maximizing growth and profits, which requires capitalism to abuse human and environmental externalities – the central bankers, the institutionalized militant fascist religious movements, the billionaire oligarch elites, the establishment politicians, and even the common “libertarian” – you will find that private capital through fundamentalist ideological capitalism has enabled, promoted, and produced the worst people in the world. These people have the worst socially and economically conservative social Darwinist ideologies of Evangelical biblical prophecy Theo-conservatism, Wall Street war-profiteering and authoritarian nationalist neo-conservatism, social Darwinist economic libertarianism, and of course discredited imploding neoliberalism causing a litany of socio-economic anomie, cultism, and demagoguery, including horrific suicide, addiction, and homelessness health epidemics. In addition, these ideologically fundamentalist and profit maximizing people in positions of power, influence, and authority demonstrate the worst sickest pathologies of hyper-individualism, sociopathy, psychopathy, narcissism, malignant narcissism, megalomania, social Darwinism, and even sadism.

    “The best system” is not a system that produces what we have now, or the premature extinction of the species. Homo sapiens are the species that broke the planet through the Anthropocene, the 6th mass biodiversity extinction, industrial, pesticide, and nuclear contamination, resource depletion, climate change, and global warming. After 240 years of the Western experiment and the Enlightenment philosophy secular protectionism of growth-model authoritarian church-state tribalism, we are seeing the violent deluded anti-science anti-environmental growth-model imperative and resource wars of empire, imperialism, and colonialism compounded by the toxic, growth-model, maximized profit imperative of market fundamentalism each abusing human and environmental systems to the point of collapse.

    The definition of insanity popularized by Einstein is repeating the same thing, and expecting a different result. The solution to the human condition isn’t repeating the way mindless indifferent natural selection determined Homo sapiens poorly in a pre-science open environment through violent deluded anti-science anti-environmental growth-model authoritarian church-state tribalism competing in the evolutionary arms race, or through the structural violence, social Darwinism, and sick ideologies and pathologies of the toxic, growth-model, profit maximizing imperative of market fundamentalism, which each abuse human and environmental systems to the point of collapse. The solution is performing a cognitive-based intervention to these biological phenomenon’s and institutions, negating the influence of the conservative authoritarians that defend, reproduce, and prosecute those agendas, and designing the human condition through reverse engineering universal physical needs in sustainable unification with the environmental determinism of finite and limiting resources, nonlinear feedback loops, and limiting physics that govern climate and global warming.

    The process of initial supply and demand cost-value hierarchy and profit extraction leading to disparity in wealth, social Darwinism, and competitive escalation to exceed exponential limits needs to be replaced with a directly coordinated supply and demand through the controlled conditions of a scientific model. This mode of production requires the energies of an efficient scientifically designed and controlled experiment, which will not function while being sabotaged by the products born of primitiveness that led to our species pending premature extinction, through unscientific unregulated self-interested individualism, corporatism, and church-state tribalism, or the artificially inflated populations they have produced. You could call this methodology science-based systems-based egalitarian eco-socialism, which distributed applications remain coordinated and unified through the incorruptible immutable authority of scientifically identified, physics-governed, and environmentally deterministic protocols.

  7. A lot of work went into this presentation but the argumentation does not hold up. Monopoly and domination are natural phenomena like gravity. Jeff Bezos is leveraging human behavior. Good luck trying to change the human desire for bargains and convenience. But please stop calling in the enemies of the people (government) and even more evil (regulators). Bar few exceptions these low-IQ parasites degrade our lives, screw up our societies with regulations that favour bloodsucking protectionists.

  8. When you kill business, you take away jobs. Amazon will be the death of america. Ironic, it will use capitalism to turn into a giant and force us into socialism haha

  9. Amazon ought to be broken up into its constituent parts – or – nationalised/internationalised

  10. The Hated One, I am beginning to have a crush on you . I am all for capitalism, but America is a FASCIST country (with enough capitalism and socialism thrown in to placate the dumb-masses) and, the stronger America gets, like Amazon, the fewer options the rest of the world (people everywhere) will have. And, we consumers and citizens are giving our money and power willingly to the enemies. Thank you for all that you do. I'm not for a Russian or Chinese superpower, either, though. F+ck authority, regardless of what nationality or continent or political system.

  11. Circular reasoning. The fact that Amazon won above all its competitors means customers love to use its products and services. Period. Bezos is a heroic industrialist and a moral man. You should read milton friedman and stop making stupid youtube videos.

  12. Amazon, Apple, Microsoft, Facebook. There is zero monopoly problem here, NOBODY has to use these products or services. You choose to.

  13. Why do people think that successful business people are evil. This is how business works. You try to undercut your competition and push them out of the market. This is how cost is kept as low as possible. If you don't like it, start your own business and compete, or sign on as an Amazon partner and move your product that way. Stop bitching and moaning and live your life.

  14. The US gov't should tax the shit out of this company and Starbucks and all the other turds that are sneaking around while the US goes bankrupt.

  15. It's always cheaper on fleabay……and often no postage. And as for Prime "The Boys" is the first thing I have watched on that channel in ages. Still cancelled it.

  16. Pathetic, giving out plane tickets for memberships, fucking up the planet because of greed.
    All of this can be summed up in one word, control, they want to put their platform in the hands of as many as possible so they don't "go to the competition", it's the same as iphone and android, if you want an iphone app, song or video you go to the apple store, if you want the same for android you go to google store, it's all about control.
    Don't let them control you.

  17. I have completely stopped shopping at Amazon. It's super inconvenient, but we need to stop handing this company the keys to the kingdom…

  18. To give an economic explination for why amazon doesn’t get split as other monopolies got.

    The main problems with monopolies is, that they raise prices as long as the get more profit by raising the price as they loose profits due to the lowered demand. In a market with many suppliers a firm can’t easily raise their product prices as it would be underbidden by its competitors.

    Amazon in contrary has the monopolistic power to theoretically reduce their supply and raise their prices but surprisingly doesn’t. Hence their is no loss for the consumers because of Amazon’s monopoly power and therefore their isn’t an incentive for the government to split the company. Instead amazon finds new ways to make trade more efficient.

    BUT: as soon as amazon will raise their prices above market prices it surely will get split.

  19. Meh. A lot of howling about how evil Jeff is, but from a customer perspective he's a genius. You get what you want, delivered to your door, at a great price. That addiction is what powers his empire and I'm not sure it's a bad thing.

  20. Amazon delivers heavy cat foods, 28lbs bag of cat litter to my door step super fast! Also, it drops off $35+ worth of fresh grocery at my doorstep in the morning , and I always gives at least $10.00 tip for making my life easy! Being over 70 yrs old with knee problem, Amazon fast delivery is God-send for me! I am happy ! Most of all, price is always good !

  21. If we were all subsistance farmers trembling for our lives every single day, only then you would be happy. There would be no toxic competition.

  22. You really ride on the mystical power of fallacious reasoning. I clearly understand that valid reasoning is immoral for you.

  23. Preventing monopolies is the job of our governments! Too bad all our politicians are bought and corrupt.
    Bernie or warren 2020!! Time to change it up!

  24. I think they are doing a great job. I will keep buying as long and I get what I want when I want it. It’s not evil to make money, and if the competition wants to beat him they need to compete which is best for the consumer.

  25. Amazon has opened the floodgates to far eastern sellers and the junk I get now I don’t trust…. that’s where there gonna really suffer

  26. People: hating

    Amazon: “well, you’re fucking welcome for creating hundreds of thousands of jobs across the planet…And paying employees good money, even if I use some of them to test their loyalty to make them stay longer, when their not too lazy to get fired, so they can grow in our company and…HOLD SHARES!!! And bam we’re the biggest company in the world”

  27. We shop less & less on Amazon. First, it was all the cheap china stuff, then when they bought WholeFoods & immediately started to replace quality w/ cheap stuff (even their brand products became suspect w/ orange colored organic ice cream), & last was his wife leaving him. I felt she left for a reason beyond personal. Like she knows something about his evil plans for the future.

    I think it is time to put Amazon on the same page as Walmart & boycott altogether. It seems his business model is "Do evil".

  28. HOW DARE YOU MAKE THIS VIDEO!!!!! DO YOU HAVE AMAZONS PERMISSION????? You will be hearing from Amazons goons soon. You asked for it buddy. ALL HAIL AMAZON!!! ALL HAIL CORPORATE AMERICA!!!!

  29. Well, I get the idea but can't complain. Thanks to this guy, there are 10.000 people with a job in my country and in many others. Actually, if Amazon controlled their expenses and paying ridiculous salaries to people not deserving them, I think Amazon could be 2x as big as it is now.

  30. I deleted my amazon web services, but was still being charged. I discovered a few sneaky health checks and snapshots still lingering in the background. Thanks sneaky Jeff

  31. Where is the real problem ? All of them want to profit and all of them wish to steal from us , if u asked any of the companies that was closed by amazon , if they had the chance to do the same they would do it ..
    I don't buy from amazon , but in my eyes all of them are equaly evil

  32. I prefer amazon over the US government so screw it. This video reminded i gotta order some things on amazon, thanks

  33. He's not a villain, hes a mommas boy; the bald look is just a pr stunt to look more manly. Bozos is still the bitch boy he always was. As far as wanting to monopolize everything, hes no different from any other business man. The only difference in his case, is the air tight relationship Amazon has with the US government and Pentagon. If you are close to the feeding trough, you will benefit the most. Who do you think benefits the most from the low interest rates set by the Fed, Amazon of course. They rapidly expand and need massive amounts of loans. The US government has been propping up Amazon ever since it was clear who would dominate the web services market, and the cloud. I mean the Pentagon uses Amazon servers to store its own info…

  34. I’m sorry, but whatever shenanigans Amazon are doing, they provide a brilliant, if not an ideal service for a consumer. Mostly a good price, you can buy almost anything you can think of, loads of real reviews, very fast delivery, good customer service, what more can a person want, and there aren’t any others that offer this service.
    I can get by without google etc, but would find it hard to get by without Amazon.

  35. I like to think I'm fairly savvy, but even I've ended up a PRIME member by mistake twice now. They are clever with the delivery options so that you accidentally sign up. I like the service but man, I HATE the aggressive monopoly type behavior. It so easy to miss how bad these firms are. We're still very much living heavily in the survival of the fittest times. Stay safe all!!

  36. Jeff is from the high hopes. Ford once was. Oracle is into space that projects them as a super power.

  37. I use Amazon because they never refuse to ship their products to a freight forwarding company address, and I think many other Koreans do so for the same reason.

  38. It is difficult to quantify all the damage Amazon has done to America as it has burrowed its way into the fabric of society. Amazon is the destroyer of the stores that provide valuable jobs. The following article explores how Amazon has exploited communities by continually telling consumers it is the answer to a "better America" while it feeds at the government teat. https://brucewilds.blogspot.com/2019/07/amazon-is-bad-for-america-boycott.html

  39. Amazon exploits its workers and its vendors. It also negotiates special deals with the government and even electric companies that shift costs to its other customers. Amazon has caused thousands of retailers to close destroying jobs across America. The following article delves into whether there is anyone or anything that Amazon doesn't exploit? https://brucewilds.blogspot.com/2019/07/amazon-quietly-exploits-everyone-and.html

  40. Which English speakers pronounce price = pric ie s, businesses = business ie s, services = servic ie s, performance = performan ie s like this narrator?

  41. If BBB (bloody bald bastard) is so tough and business savvy, how did dum dum AOC get it right to prevent Amazon from moving to New York?

  42. I only pay 24€ a year for prime. I can watch movies, listen to music, get free delivery in 2 days, ect… So I don't know if that's bad but I really enjoy it a lot.

  43. I make it a point to not ever purchase from Amazon. All warehouses treat their people like Tyson slaughterhouse animals. Amazon and Walmart being the worst.

  44. My ad was bob shnack who sells to amazon. telling me his buisness model. To buy low and sell high getting authorized retailers and brand names.

  45. Im so sick of Amazon… its true they are forcing UPS to be their bitch.. and now its becoming too much.. they want us to work like dogs for scraps…. Its rediculous… f amazon.. sooner or later those companies they are bleeding out will get tired of the bullshit…

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