Study Raises Concerns About Amazon’s Impact on US Economy

I'm sure there are various ways to look at these issues, but the concerns highlighted in this Air Cargo World article are fundamental.  We are all well-aware that Amazon has been a huge company for some time in the online retail space but the storyline here is that it is becoming newly dominant and gaining far more control of the retail space and by extension some important related sectors. The issues associated with the expected level of control of the retail marketplace are significant and will increasingly impact bricks and mortar, logistics (transport assets and service companies), industrial real estate and the wider laborforce.  These issues are playing out to varying degrees in other parts of the world, with Amazon and other online players. 

What's fascinating is the range of issues that are associated with increasing degrees of monopolistic control of the retail sector.  So yes, expectations of sheer domination of retail spend is astounding - with Walmart and Amazon controlling almost 80% of online sales in the US and Canada (Amazon owning the lion's share of that).  But the extended ramifications to business negotiations in the property and logistics space is substantial and should not to be underestimated.  As well, Amazon's control of an increasingly large swath of the service laborforce is very important and far under-reported.

Note the reference in the article about public incentives for Amazon. It's not that Amazon as a firm is doing anything "wrong" or illegal, but for public bodies to subsidize what are essentially distribution warehouses represents why economic development has lost it's way in some instances.  In many communities over the past five or seven years, we've watched the community pride and excitement of "winning an Amazon DC".  Sure, there may be situations where taxpayer support is about challenged places that are hungry for even low-skilled, low-wage jobs, but this is not where most communities should be investing. 

Air Cargo World Article: Within five years, one-fifth of the US$3.6 trillion retail market in the United States will have shifted online, and Amazon is on track to capture two-thirds of that share, according to a report released by the Institute for Local Self-Reliance (ILSR). The organization’s assertion that “Amazon is a monopoly hiding in plain sight” is sure to ruffle some feathers, even if Amazon’s notoriously circumspect public relations team remains mum (Amazon did not respond to queries about the ILSR publication).

The report estimated that Amazon currently captures $1 for every $2 that Americans spend online. Now, the e-retailer is moving towards a stake in the brick-and-mortar realm.

The report raises concerns that Amazon increasingly controls “the infrastructure that rival companies depend on to reach the market, making Amazon a novel and particularly potent threat to competition.”

By locking in a growing share of online shopping, ILSR contends that Amazon has left competing retailers and manufacturers with little choice but to become third-party sellers on its platform. The report says that 55 percent of shoppers now start their searches at Amazon.com. This gives the e-retailer the power to “dictate the terms by which its competitors and suppliers operate, and to levy a kind of tax on their sales.”

In addition to raising monopolistic concerns, Amazon has taken at least $613 million in public subsidies for its fulfillment facilities since 2005, according to ILSR. “More than half of the 77 large facilities it built between 2005 and 2014 have been subsidized by taxpayers,” the report found. ILSR’s researchers also contended that the jobs created by the e-retailer are reminiscent of labor’s darker days, “with many workers performing grueling and underpaid jobs, getting trapped in precarious temporary positions, or doing on-demand assignments that are paid by the piece.”

The ILSR isn’t the first critic of the e-retail giant’s labor practices. A cursory internet search brings up dozens of similar studies and reports. In the air cargo community, Amazon’s foray into launching its own cargo airline has raised the same labor complaints that employees at its other branches have raised.

In early December, the union representing Atlas Air Worldwide pilots released a survey of more than 1,000 pilots, or about two-thirds of the company’s roster, that showed morale on the fritz. ATSG pilots, who also fly express shipments for Amazon, complained that their scheduling, night and day from Wilmington to Dallas to Stockton, Calif., to Rockford, Ill., and back to Wilmington, prevented proper rest, according to Bloomberg. Such routes can increase fatigue because of rotations between night and day.

In early December, Atlas Air pilots demonstrated in front of Amazon’s South Lake Union headquarters.

The Amazon business model, however, certainly has its share of benefits, such as increased choice, convenience, and reduction of time constraints. But as the company becomes ubiquitous across the U.S. economy, it may be held to account for its impact on the economy and society at large.