Back

Amazon has radically transformed small businesses in both the U.S. and China

176 points18 hourssemafor.com
ChuckMcM17 hours ago

Interesting that this "transformation" is pretty close to what Sun and other dot com infrastructure sellers were promising in 1998. They phrased it as "take your small town business and give it a world wide footprint" but it is the same. They missed the "we'll take 1/3 of your price too" part :-).

That, in itself, is just curious. But the interesting lesson here is that the real thing has not been "web presence" or world wide visibility, it was Amazon has built a pretty impressive logistics setup for moving stuff from vendors to users. It rivals what Sears & Roebuck did in the 60's and 70's. THAT seems to be the missing piece which one might call "logistics as a service."

It makes me wonder why Aliexpress doesn't have more warehouses in the US. Clearly there are a number of Amazon vendors who buy from factories advertising on AE and then drop ship to Amazon, and sell at a markup that covers Amazon's take and gives them a profit. So basically Amazon is taking a big piece of the "value chain" from factory to customer. If you can run a distributed logistics operation at 20% or even 15% of the market value of the goods your distributing, you can under cut Amazon.

Given that Walmart already has relationships with freight forwarders from China and a bunch of brick and mortar stores that could double as warehouses, I wonder if they have considered this as a "side hustle."

Considering that this hinges on the cost of operations for the logistics service the interest in logistic based robotics is quite understandable.

wombat_trouble15 hours ago

> It makes me wonder why Aliexpress doesn't have more warehouses in the US

My guess would be liability. A lot of what's sold on Aliexpress is... questionable. Fakes, products that are patently unsafe or don't meet US regulations, fraudulent specs, etc.

What's happening right now is basically a bit of a laundering operation where small "front" businesses in the US, often registered to residential addresses, import small chunks of the inventory, collect markup, and resell it domestically on Amazon, eBay, Etsy, walmart.com marketplace, or whatnot.

And if their USB chargers keep catching fire or a big brand gets uppity about trademark infringement, the retailer disappears, and a new one pops up. Amazon gets some flak in the media every now and then, but they are several steps removed from the phenomenon.

If you had a Chinese megacorp with a large US footprint, they would likely soon find themselves in hot water with all kinds of regulatory agencies. Partly because there would be a single party with gobs of money to go after, and partly because of anti-China sentiments.

wkat424214 hours ago

Yes my neighbor is one of those resellers. He's had several shipments from Alibaba vendors intercepted by customs for non-compliance.

If Aliexpress would do this, they themselves would be liable. Here in Spain that do have stores but they have a highly curated inventory.

ge966 hours ago

Here's a 60TB external usb hard drive for $60!

lazyeye13 hours ago

And the obvious side-effect which nobody really wants to talk about is the destruction of the manufacturing industry in the US and the off-shoring of jobs to China.

This is why it's so galling to see people in Silicon Valley moaning about the recent round of IT retrenchments. The f*king nerve of them.

rybosome9 hours ago

Your bitterness is misplaced.

Tech companies didn’t cause offshoring of US manufacturing. That’s been a long running trend since the 70’s across business sectors.

Not to mention that generally it’s executives at the companies who made the decisions leading to offshoring, and executives aren’t the ones losing their jobs.

Tech workers are grossly overpaid, but even so at the end of the day they’re still working class.

+1
tcmart148 hours ago
astrange11 hours ago

US manufacturing output is up, though, just not jobs. That's generally good, just like it's good we aren't all subsistence farmers anymore. US unemployment is of course currently the lowest it's been in 50 years.

China got low-value-add final assembly work, and it's now starting to leave them as their wages have risen.

+1
lazyeye10 hours ago
throwawayytr9 hours ago

Exactly. These are the ones who gave us ads most of which are outright scams.

kneebonian16 hours ago

To be honest maybe I am just old but it seems like every argument and quibble people have been having over Amazon is the exact same arguments I saw back in the early 2000's the only difference is the company was Wal-Mart instead of Amazon.

zaphod1215 hours ago

There is one single really key difference. Walmart takes responsibility for the products they put in their store. That they are genuine and represented as they are. They squeezed sellers, encouraged moves to china and all of that, but they aren't a marketplace - they are a store. Amazon has abrogated all responsibility in that area and pretended they are the equivalent of the open field on which a flea market is set up.

phil2115 hours ago

> Walmart takes responsibility for the products they put in their store.

Amazon also did this for it's physical stores. Walmart does not do this for it's web presence - it has a third party marketplace you need to actively avoid.

I have both Prime and Walmart+ due to credit card benefits, and honestly don't see a huge difference in either experiences. Amazon is more spammy but faster shipping, Walmart less selection and slower but more reliable shipping. Walmart is more curated, but you still need to ignore the third party crap.

+1
rkagerer14 hours ago
makestuff14 hours ago

Walmart now operates a marketplace (https://marketplace.walmart.com/). However, I am unsure if they take those same validation steps as they do in their physical stores or not.

klyrs11 hours ago

Came here to make that point. I know that newegg and bestbuy have done the same. And, much like amazon and ebay, I expect pretty much zero verification and Sisyphean dispute processes.

user393938215 hours ago

Yep. For the curious, go search Amazon for "1 TB USB" for a good laugh.

vel0city15 hours ago

Sadly walmart.com is the same kind of trash. I searched 1TB USB and the top non-sponsored result was this:

https://www.walmart.com/ip/Jonephe-USB-Flash-Drive-1TB-Metal...

Which has some obviously fake reviews along with probably a real comment stating:

"Only problem is the transfer speed sucks and it causes errors in half the files I transfer to it."

Truly emblematic of how these scam USB drives work. And its the top organic result on walmart.com!

+1
seanmcdirmid7 hours ago
tcmart148 hours ago

I do agree with your point on Walmart, what is on the shelves at a physical location. However, Walmart's online store is just as bad, if not worst, than Amazon.

rileyphone15 hours ago

Another really key difference is that Walmart operates retail locations that compete with (more realistically, undercut) smaller local businesses and gut small town America. Let's not paint a rosier picture just because it happened a while ago.

+1
Retric15 hours ago
autoexec15 hours ago

There are a few complaints that are unique to Amazon, but really it just speaks to how little has been done to fix the problems Walmart brought to our attention decades ago. Not dealing with those issues back then just opened the door for Amazon to come in and screw people over in similar ways. I hope people realize that their problems they have now aren't just about Amazon either and that unless things change it'll be some other company 10-20 years in the future doing the same things to the next generation.

scarface7413 hours ago

So how do you propose those “problems” be “fixed” and not cause harm to customers who are getting cheaper goods?

+1
autoexec10 hours ago
hammock16 hours ago

> "take your small town business and give it a world wide footprint" but it is the same. They missed the "we'll take 1/3 of your price too" part

For someone that doesn’t sell consumer goods that cut can sound like a lot.

But getting distributed in brick and mortar retail, the cut is far greater (at least 50%).

And the alternative is direct online sales, which only recently has become viable in a scalable way for most consumer brands (thinking of the DTC revolution here)

ChuckMcM16 hours ago

I think this is a solid point. Different distribution methodologies change the numbers. If you sell to a distributor at 60% of list (giving them "40 points" in the lingo) and they then sell to a reseller at 80% of list, the brick and mortar store has the option of having a "10% to 15% off sale" and still making money.

Hence the "rule" that your cost of goods needs to be 1/3 of the MSRP if you want to go through two tiers of distribution.

At Freegate we shipped directly to retailers and gave them 30 points off MSRP, but that meant on a new order, they ordered from us, we shipped to them and they shipped to the customer so a fairly long lead time between order to arrival.

When I was at Google the PM for "consumer devices" was looking at what it would cost to get things on the shelf at Fry's and Bestbuy and the price negotiation was more about where on the shelf it sat rather than store profit it seemed. Something to factor in to the economics as well.

But the bottom line here is that there is a "market price" for something, and the "cost to get it to market" + "cost to make it" and if that market price is less than the sum of the other two, well you can't make it up on volume :-).

I think Amazon's LAAS business made that calculation simpler and thus there was less uncertainty about whether or not one could make any money selling them.

TylerE16 hours ago

My understanding is that most stores (especially grocery stores) basically make no money on sales...purely break even +/- a percent or two... all the actual profit comes from selling premium shelf space.

a9h74j13 hours ago

> make no money on sales

On the model of "make the profit on replacement parts," perhaps grocery chains should be buying hospitals chains to profit from all the unhealthy food they are selling.

+1
mtnGoat12 hours ago
hammock9 hours ago

The fact that a retail store buys their goods for half the retail price does not automatically mean they make a great profit

AussieWog935 hours ago

>It makes me wonder why Aliexpress doesn't have more warehouses in the US

I'd suspect they do. Here in Australia, it's really common to get AliExpress goods delivered in 2-3 business days, with an AusPost label on the box and a return address in Melbourne.

Even for goods not physically located in the country, they're clearly doing something clever in terms of consolidating packages, booking out large chunks of air cargo space and dispatching from a local warehouse. Same deal with the Australian return address, but 7-10 days instead of 2-3.

You can tell when they're coming via this route, as they'll have the shipping method "AliExpress Standard Shipping". CaiNiao is still your bog standard 4-6 weeks by boat.

This is a pretty new thing, and only came about after China lost access to subsidised global shipping (as in, subsidies from other developed countries, not the Chinese Government) in 2021. AliExpress sellers also lost access to subsidised shipping from the Chinese government in the last few years. Prior to this, for certain locally manufactured goods, they could send them overseas at a rate of something like 1 yuan per half-kilo (essentially US$0.02 or so for a USB cable), hence why you'd get all these $1 items with free shipping.

jerf16 hours ago

"Interesting that this "transformation" is pretty close to what Sun and other dot com infrastructure sellers were promising in 1998."

Everything promised in the dot com boom has basically happened, right down to the much-maligned delivering pet food over the internet.

It just didn't happen fast enough to save them in the late 1990s, and the space was just overinvested even so.

time_to_smile16 hours ago

Chewy hasn't solved the problem that Pets.com had, we've just had enough free cash flowing around for longer this time so it doesn't matter.

When Chewy starts to make more than they spend then it will be interesting, but as it stands now it just looks like we're in a bigger bubble rather than solving problems that couldn't be solved back then.

RhodesianHunter16 hours ago

A lot of us order our pet food online from our local pet stores these days.

xwolfi12 hours ago

Not enough for profits to generate

slim16 hours ago

  It makes me wonder why Aliexpress doesn't have more warehouses in the US
because US is not a free market. Gatekeepers got to take their cut (if you don't get outright denied access to the market because nationalism). Amazon is as good as any other gatekeeper, so why change ?
ChuckMcM16 hours ago

I see it differently, do you have a description of what a "free market" would be that the US doesn't have? You mention Gatekeepers but I'm not sure I understand that reference. As I see it there isn't anything stopping me from selling things directly from my web site to anyone in the world right? Where is the gate keeper in that scenario?

makeitdouble15 hours ago

We're talking about a scenario where AliExpress builds warehouses and logistics inside the US to better deliver chinese imports, in direct competition with Amazon.

I see an obvious gatekeeper.

As a game, can you find any example of a foreign company successfuly setting up infra in the US to chalenge an US behemoth ?

+1
beepboop75314 hours ago
+1
ChuckMcM14 hours ago
kcb9 hours ago

The US isn't nearly as protectionist as you're trying to imply.

slim7 hours ago

In that scenario the main gatekeepers could be (depending on what you are selling) Google, Facebook and US Department of Commerce

xwolfi13 hours ago

Hong Kong for instance is a freer market. Ofc it s easy: we dont build cars, we dont produce sugar, we dont design processors, all the stuff that's severely restricted in the US is due to an imbalance between the need of voters and the ideology of free markets.

As long as the US listens to or need the votes of their people, they cant be a free market.

eunos14 hours ago

> It makes me wonder why Aliexpress doesn't have more warehouses in the US

Temu by Pinduoduo are trying their luck. Let's see in a few years.

up2isomorphism15 hours ago

If you think “taking 1/3 of your price” is big, you might never sold anything to an end customer.

No these small business owners are way smarter than you on this, they won’t even consider Amazon if that’s not saving their cost.

dieselgate11 hours ago

Heck, didn’t Sears n Roebuck used to sell kit homes from a catalog back in the day? I couldn’t imagine buying a whole house kit from Amazon

sp33210 hours ago

Yeah, you can buy similar prefab homes on Amazon. Actually most of the ones linked from blog posts are now "currently unavailable", and most of the ones that show up in search results now are sheds or cabins with no bathrooms. But here's one with a bathroom and is ready to buy for $8,800. https://www.amazon.com/dp/B0B6V1G81D/

sp3327 hours ago

Late edit: the one above is too small to be a real house. Anyway it looks like they don't sell houses anymore, but there used to be some on there.

dieselgate7 hours ago

Yeah figured fair enough though, the pics had a bathroom so at least it's designed as guest house/ADU type thing.

skybrian16 hours ago

Walmart does have an online presence and a lot of third-party sellers. I don't know how well they do, but it seems like they're trying?

RC_ITR16 hours ago

>They missed the "we'll take 1/3 of your price too" part :-).

Maybe revealing - the incentives provided by the 1/3 cut are maybe why Amazon succeeded and Sun did not.

thaumasiotes16 hours ago

> But the interesting lesson here is that the real thing has not been "web presence" or world wide visibility, it was Amazon has built a pretty impressive logistics setup for moving stuff from vendors to users. It rivals what Sears & Roebuck did in the 60's and 70's. THAT seems to be the missing piece which one might call "logistics as a service."

I can't really agree with this. Amazon started out by using existing delivery services. And the quality of delivery from Amazon at that time was much higher. Now that they prefer using their own delivery services, their delivery sucks. They've built a logistics setup that is much worse than what we already had.

guardiangod18 hours ago

Not sure about U.S. SMBs but Amazon's influence on China small business is a rounding number. Only a relatively small number of vendors sell items on Amazon. They made good money but the good days is almost over given recent quality/piracy crackdowns.

Taobao (under Alibaba) has 100 times more influence on how small business in China conduct business. I know small store owners whose business were wiped out by the rise of Taobao. Amazon? They've never heard of it.

nebula880418 hours ago

There is a different 'class' of junk sold on Taobao vs Amazon but both stores still seem chock full of junk. Maybe they were affected in the same way just by different players.

hezralig17 hours ago

I frequently find the same items on Alibaba and Taobao as I do on Amazon. I find myself ordering items next day on Amazon and returning them as soon as I receive the exact item for 1/10 to 1/100 the price elsewhere.

Returning an item because you have found a better price elsewhere is a pre-filled option for a return, so it is expressly allowed.

chongli17 hours ago

Keep in mind that Amazon tracks people’s return histories and has been known to ban people who are deemed return abusers.

+2
sharkweek17 hours ago
ApolloFortyNine16 hours ago

The one example I've seen of this is someone who would order, no joke, 30 different items of clothing and keep 2. Regularly.

I haven't seen an example that wasn't obvious abuse.

TheCraiggers8 hours ago

>Returning an item because you have found a better price elsewhere is a pre-filled option for a return, so it is expressly allowed.

Well, expressly tracked anyway. Not saying it isn't allowed, but if you do it enough you'll eventually get blacklisted. And rightfully so, since you're costing them money.

canadianfella16 hours ago

[dead]

CHSbeachbum4209 hours ago

Jesus Christ get off your fat ass and quit shipping everything

nonethewiser17 hours ago

> There were an estimated six million merchants on Amazon’s marketplace in 2021, and around 2,000 opened new accounts each day. On average, Amazon collects 34% of each sale they make, according to research published the same year by the Institute for Local Self-Reliance. Estimates from 2020 showed that around 54% of Amazon sellers in the U.S. market were based in the country, while 40% were in China.

hulitu17 hours ago

> were based in the country, while 40% were in China.

were based.

nomay17 hours ago

Amazon sellers are actually researching the market and designing new products, which can't be said about domestic Chinese brands and sellers that are mired in cutthroat price dogfights.

The profits maybe not be that big, but big enough to drive a skeleton team, make a small fortune. One item with $500 a day in revenue can let you make more money than a typical coder.

notatoad14 hours ago

>Amazon sellers are actually researching the market and designing new products

some of them are, but a lot are just dropshipping stuff from alibaba

rcme17 hours ago

$500 * 365 days is 182,500 / year. With a 50% margin, that's only $91,250.

selectodude17 hours ago

Average income in China is about $15,000/yr, so $90,000 is pretty damn good.

rcme17 hours ago

The comparison was to a software engineer, which earns more than $15,000 in China. And also with a 50% margin, which is extremely generous. Most margins are closer to 10% - 20% in manufacturing.

catach17 hours ago

That's a big potential impact for an individual sure, but the context here is the existing impact for entire economies.

Ztynovovk17 hours ago

[dead]

thetinguy18 hours ago

Taobao is a direct influence whereas Amazon is an indirect influence through the sellers importing things from China to sell on Amazon.

Barrin9217 hours ago

Yes. There's the concept of a "taobao village" in China where you have entire rural communities of online merchants supplying smaller towns/villages that otherwise wouldn't really use ecommerce.

And the funny thing is these even exist in Germany now. In Duisburg I met some Chinese taobao merchants years ago who'd settled as expats in the city because it has particularly strong ties to the country as there's a direct freight train route to Chongqing.

baybal217 hours ago

[dead]

coderintherye17 hours ago

This title, which is not the title of the article nor the study (it's the first sentence in the article) could be seen as misleading. I've directly worked with thousands of small businesses in the U.S. and what is being discussed here has almost no relevance nor impact on them. Also the study is based on just 40 interviews with Amazon merchants.

What this is really about is highlighted in the study's post[0]:

"This report highlights how Amazon’s scale has also given rise to new kinds of small businesses — ones optimized for Amazon"

As well as the lead in the study: "This report recounts a history of third-party (3P) sellers who have played a key role in building up Amazon’s retail business—and thus, Amazon as a whole—over the last two decades."

[0] https://datasociety.net/library/amazons-trickle-down-monopol...

black617 hours ago

It's changed small online retail businesses. The vast majority of small businesses I interact with are not even retail.

miga1 hour ago

Interestingly, transformation happened in the absence of Amazon. For example, Allegro in Poland offered much wider choice than Amazon. Basically competitor for eBay but with transportation included (thanks to InPost!)

The main difference is that the brand is more visible on Allegro.

whywhywhydude17 hours ago

It’s interesting how a lot of products in Amazon are just rebranded stuff from Alibaba. It seems like the Amazon sellers are auto generating the brand names. There is probably some kind of drop shipping app that does it for you.

latchkey16 hours ago

I look at Amazon as faster shipping from Aliexpress.us.

Sometimes the prices are insanely different and if I don't care about shipping times, I'll just get the same exact stuff from Ali for a lot less money. Other times, the prices aren't much different and I just get it from Amazon.

Some sort of marriage between the two systems would be nice. Ali's search engine is not as easy to use as Amazon's and it is a pain searching on both and comparing prices.

95% of the time, if the sellers name on Amazon is all uppercase, you can bet it is cheaper on Ali.

Sebguer17 hours ago

spend five minutes on tiktok and you will get about 30 videos from 'influencers' selling you their classes on becoming a dropshipper.

nostromo17 hours ago

The influencers are not even creating the content and are just dropshipping the courses on dropshipping from another vendor.

artificial16 hours ago

It's turtles all the way down.

a9h74j13 hours ago

And it's whitelabel all the way down. So, is this just one generic universe of many?

tjpnz10 hours ago

Related is what China's currently doing through the Universal Postal Union. The tl;dr is that they're claiming developing nation status in order to get heavily subsidised airmail to the United States. The following describes the situation in more detail and how it poses a threat to US retailers.

https://youtu.be/BA6gDep6jVM

Wingman4l72 hours ago

We could end the scourge of Chinese junk overnight if we overhauled their status. It's unconscionable that it costs more to mail something domestically within the US than it does for a Chinese seller to mail a comparable item internationally via ePacket... which is then handled and delivered via the USPS. I'm sick of US-based businesses' shipping costs subsidizing their own competition.

shever7316 hours ago

For anyone who wants to read a small bookshop owner’s take on Amazon’s “transformation” of business, I can highly recommend “How to resist Amazon and why” by Danny Caine.

11235813217 hours ago

That "book" is 20 pages long. Surely it's available for less than $5 somewhere?

shever735 hours ago

That must be his original pamphlet unless the metadata is wrong. My copy is much longer.

I appreciate the irony of ordering it from Amazon, but do your local bookshop a favour and order it from them.

baron81615 hours ago

I want to see a study of the impact of Amazon on unemployment and inequality. Inequality has been flat and then declining in the US since about 2013. Unemployment has remained at rock bottom rates. I think a lot of this is the competition Amazon provides for low skilled labor.

scarface7413 hours ago

This is true. There have been plenty of stories about small businesses and franchises having to raise wages to compete with Amazon warehouse jobs

throwawyzxc7 hours ago

I don't buy any food sources from China. It's too risky

LatteLazy15 hours ago

It was amazing in the early days on the pandemic here in the UK how few businesses could do basic things like know what was in stock or let you pay on line. Amazon came through when I needed a bunch of what I considered essentials (fuses for my house for instance). Brick and mortar stores were useless.

dazc3 hours ago

A lot of small scale UK retailers have already proven to themselves that internet retailing isn't worth the bother. I know of some who've invested huge sums of money, sometimes as much as £100, creating social media channels with up to 12 individual posts that have yielded no sales at all!

There's also a dire shortage of UK developers willing to do all the work, with no retainer, based purely on a shady prospect of a share of the profits at some distant time in the future.

LatteLazy2 hours ago

I mean, if someone isn't willing to take a day off work to visit a retail establishment with no parking that is only open 10-4 just to be told the thing they want is out of stock, that's on them really!

toss115 hours ago

>>The seller said she spends 80% of her time optimizing the keywords she uses in her product descriptions and advertisements, in order to ensure her goods rank highly in Amazon’s search results. “I don’t use any other social media channels to draw traffic to my store,” she told Weigel.

That looks like an opportunity for someone to build some specific tools...

I expect there are some already out there, but if the task still consumes that much time, i.e., is that much of a pain point, obviously there is opportunity still left on the table.

Kukumber18 hours ago

I don't think Amazon has an impact in China, they already have many online marketplaces, and it predates Amazon doing business in China

AdrianB115 hours ago

If I read correctly, Amazon adds a 50% increase over the price from the seller. If we think about the cost of manufacturing to the price the person that buys from Amazon, the price hike is significant, the buyer is paying a lot of money for something that in theory is way less expensive. The 100$ coffee.

say_it_as_it_is16 hours ago

What quality control is there on Amazon when 40% of its merchants are from China? That's a huge portion of the marketplace.

lotsofpulp15 hours ago

Surely it must be 90%.

luckylion18 hours ago

The tone is accusatory, the content is that many companies start businesses selling on Amazon specifically and don't just use Amazon as one medium among many. I fail to see the problem.