The Impact of Amazon on Small and Medium-Sized Businesses | Is Amazon Killing Retail Industry?

The lockdown and quarantine protocols implemented during the height of the COVID-19 pandemic have accelerated the transition of consumers into the eCommerce marketplace. With an increasing number of people choosing to shop online, Amazon is among the triumphant companies in the competitive consumer and retail industry.  

A testament to their success, the company still managed to rake in huge profits at the height of the Coronavirus pandemic and its aftermath. As of the second quarter of 2023, it was reported that Amazon net sales increased by 11%, from  $121.2 billion in Q2 of 2022 to $134.4 billion in Q2 of 2023. 

The success of Amazon is mainly because of the resources they allocated for the improvement of processes and policies. By spending over $4 billion for “incremental COVID-19 related costs,” the company managed to make a successful adjustment to their services.         

Along with the eCommerce company’s success, the accusation of Amazon killing small business has surfaced. Many ask, is Amazon killing small businesses, is Amazon killing the retail industry?

Amazon Killing Retail Small to Medium Enterprises  

Despite the success of Amazon and its offering of a safer avenue for shoppers to buy essential goods during the pandemic, some groups remain wary of its dominance. In particular, some people believe that Amazon’s success is actually causing more harm to small and medium-sized retail businesses. In unison, the concerned group asks, is Amazon killing small businesses?

This issue of Amazon apparently destroying the retail industry ecosystem is not something new. It can be remembered that in 2019, even the United States Treasury Secretary Steven Mnuchin believed that Amazon is adversely impacting the retail industry.

“I think if you look at Amazon, although there are certain benefits to it, they’ve destroyed the retail industry across the United States so there’s no question they’ve limited competition,” Mnuchin told CNBC.

The Impact of Amazon to Small to Medium Businesses

Amazon itself is not deaf to such allegations regarding their company and its practices. However, despite the accusations, Amazon remains to be one of the trusted eCommerce companies both in the USA and abroad. 

In contrast to the accusations of their critics, Amazon firmly believes that they are not killing small businesses, but rather helping them to reach more audiences while providing growth in the process. This was further emphasized by Jeff Wilke, Amazon’s CEO Worldwide Consumer, during one of the Amazon Accelerate virtual conferences

In the interview, Wilke highlighted the existence of a mutually beneficial relationship that Amazon has with its sellers, a greater portion of which is composed of small to medium business owners. It is estimated that nearly 2 million small and medium-sized businesses are operating on Amazon

With the growing members of third-party sellers, like those small and medium business owners, Amazon remains unthreatened by this growing population

According to Wilke, Amazon’s goal is to help sellers thrive, for if they thrive they will bring more selection that will in turn, lower item prices. Hence, benefiting more customers in the process. 

Innovations Amazon Introduced to Empower Small and Medium Enterprises

In order to empower small and medium businesses, Amazon introduced new seller tools and updated some platform features intended to drive success for small and medium enterprises. These Amazon seller tools and features help sellers facilitate better product launching, optimization, marketing, and customer service.  

Some of the tools launched and features improved by Amazon that offer powerful and cost-effective capabilities include:

Local Selling: Local selling empowers small businesses to provide the option of “online purchase, in-store pickup,” thereby expanding their reach to a more extensive local customer base.

Product Opportunity Explorer: This Amazon seller tool helps business owners determine new and high-potential products to sell online based on unmet customer demand. It gives sellers insight into what consumers search for, click on, and purchase online. 

Global Selling: In order to facilitate the expansion of small businesses’ international sales, Amazon has enhanced its global selling capabilities. This enhancement permits small businesses based in the United States to pinpoint opportunities for selling their products internationally. Moreover, sellers who handle order fulfillment independently can access Amazon’s Customer Service at no cost.

Search Analytics Dashboard: Amazon also introduced the Search Analytics Dashboard to help business owners better understand customers’ interests and shopping choices. It helps small businesses optimize their online store listings and develop effective inventory planning and product development roadmaps to grow their business on and off Amazon. 

Brand-Building Innovations: Amazon also introduced brand-building innovations to help businesses develop their brand, grow their customers, and increase sales. Some of the programs for brand-building that Amazon introduced include the Amazon Brand Referral Bonus, Amazon Customer Engagement, and A+ Story Cards.

Amazon Small Business Academy: To demonstrate its commitment to aiding business owners in their business growth endeavors, Amazon initiated and has been consistently updating the Amazon Small Business Academy (ASBA). This platform serves as a comprehensive digital resource hub catering to both aspiring and established business owners and online entrepreneurs.

Amazon’s Impact on Small Businesses In Numbers 

Last May of 2023, Amazon released its annual U.S. Small Business Empowerment Report, detailing that their investments and innovations to support business owners and entrepreneurs increased sales of U.S. independent sellers—most of which are small and medium-sized businesses.

Based on the report, the top categories by sales for independent dealers in Amazon’s stores include the following:

Top 1 – Health and Personal Care

Top 2 – Home

Top 3 – Beauty

Top 4 – Grocery

Top 5 – Apparel

In 2021, Amazon allocated $1.4 billion to foster the expansion of small and medium-sized enterprises. Consequently, independent sellers in the United States managed to sell over 4.1 billion products, which equates to an average of 7,800 products sold every minute.

The Vice President of Worldwide Selling Partner Services at Amazon, Dharmesh Mehta, emphasized that Small businesses are the lifeblood of our local communities and the foundation of the U.S. economy. Amazon dedicates billions of dollars each year to offer entrepreneurs an ever-enhancing array of valuable tools and resources…”

Amazon serves as an effective platform for small businesses to make their online stores more visible to shoppers and ultimately grow their online sales. It is estimated that over 60% of Amazon’s store sales are generated by independent sellers, the majority of which are small and medium-sized businesses

Amazon’s support for small businesses extends beyond the borders of the United States, offering improved opportunities for small enterprises globally. Amazon EU also dedicated more than €20 billion to support logistics, tools, services, programs, and training for the success of Small and Medium Enterprises (SMEs) on its platform.  

Through these initiatives, Amazon enabled small businesses to actively engage in the European Single Market and international export arenas, leading to SMEs generating over €14.5 billion in exports and generating 100,000 new jobs.

Additionally, being in business with Amazon also means access to their advanced Amazon seller tools, including FBA calculator, repricers, and so much more. Therefore, allowing small business owners a seamless transition from traditional retail business to eCommerce

Embracing Change For Business Success 

Undeniably, Amazon has changed the retail and consumer landscape. However, it cannot be denied that with the entry of Amazon into the retail industry, it has become easier for sellers to reach more customers and suppliers alike. This is in direct contradiction to the claim that Amazon killing retail. 

From a performance standpoint, Amazon has somehow leveled the playing field. Independent brands and small businesses are now able to compete with huge corporations and their firmly established brands. 

As the digital marketing landscape continues to develop and global consumers are increasingly becoming more open to online shopping, small and medium businesses should likewise embrace the digital transformation and the ever-growing popularity of eCommerce.

Borrowing the words of the famous naturalist, Charles Darwin, “it is not the strongest or the most intelligent who will survive but those who can best manage change.

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