I'm the Co-founder and CEO of The Grommet. We launch undiscovered consumer products. It's also the birthplace of Citizen Commerce. I write about design, cultural anthropology, and start-ups, mostly.

What if your paycheck got adjusted every week–by greedy strangers?

Yesterday I found the box of accessories that came with a long-forgotten sewing machine. The aqua Singer was an antique when I bought it so the accessories are a blast from the past. But one simple aspect of this unexpected treasure trove stopped me in my tracks.

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Namely, that some of the accessories had the Singer prices listed boldly on the packaging. Until fairly recently we lived in a world where prices were set by manufacturers and were stable enough to be printed on packaging in long manufacturing runs. Of course there was price pressure from other companies, and manufacturers had to adjust to fair and real competition. But as a consumer, it was ultimately reassuring, especially for a person on a strict budget. Other than seasonal store sales, pricing was relatively transparent and you could spend your time on more important things, like earning a living!

Unfortunately today, when it comes to prices, the competition is not real or fair.  Amazon sets prices that suit their needs and ambitions. It seems they are driven to own distribution of every product on Earth. They are taking on Etsy with Amazon Handmade.  They forced Diapers.com to sell to them by undercutting the entire market and selling diapers below cost. They are being sued by Angie’s List for stealing their proprietary information. They are using Grommet’s curation and product testing to populate their new venture Amazon Launchpad.

What’s really alarming, and what most people don’t realize, is that Amazon makes their money outside of e-commerce. This $95B corporation doesn’t need to make money on diapers, or books, or most any product, because they make their profits elsewhere. So we quite innocently and unknowingly threaten the health of thousands of businesses by buying from Amazon.

For a manufacturer with dozens or hundreds of employees, selling to Amazon is like letting Amazon decide your internal salaries. They, above all other retailers, set market prices and are notorious for setting prices that are unsustainable for manufacturers. Big brands like Procter and Gamble have enough leverage to somewhat contain the damage. For new small businesses, the story is much different.

These small business founders are ecstatic when an Amazon buyer calls. They give away their future, lured with the siren song of a large P.O. and promises of a partnership leading to untold riches. But Amazon is not in the business of supporting small companies–they are working, quite successfully, to control pricing of every product on Earth. They are “The Everything Store.” As soon as the small business’ product becomes important to Amazon, they won’t hesitate to sell it at whatever price they want to.

I asked my co-founder about this, as Joanne‘s team at The Grommet evaluates the potential of 300 companies per week. Over the course of seven years, we have worked closely to launch almost 3,000 of them. She reflected on the shifting sands of a Maker who goes from a happy consumer customer of Amazon to a business partner, “Makers are in the dark. They do not realize that Amazon’s business is not a benevolent one. Amazon has demonstrated time and time again that they compete with their own sellers, drive prices down recklessly, ruin businesses with their practices–all in the name of competing.”

Joanne also pointed out that some of the most trusted advisors of startups are part of the problem. “The venture capitalists and startup accelerators like YCombinator and 500 Startups that are endorsing Amazon to their portfolio companies are all are misguided if they think that Amazon is going to provide a soft landing into the market for their partner start-ups. These investors and tech leaders tend to come from software backgrounds and don’t realize that consumer and hardware products are an entirely different ball game. They need to know that Amazon can’t be trusted to honor pricing and behave as an honorable competitor. They will dry up every other opportunity and sales channel for these nascent companies.  Mark Andreessen [one of the prominent venture capitalists  endorsing Amazon Launchpad] should know that his endorsement holds great weight with start-up entrepreneurs. For him to publicly and enthusiastically say that Amazon has the best interest of Makers and that they care about Maker innovation is just plain untrue and wrong.”  

Every time I use my Amazon Prime account for my own convenience (and I do) I think about the entire industries that have been decimated by that simple act of sending my dollars to Amazon: books, toys, bikes.

It’s popular to discredit Walmart for similar reasons to Amazon–because they are a visible symbol of a rapacious company that blights our landscape. Walmart is a choir boy compared to Amazon.

I don’t like the idea of Amazon deciding what employees in other companies get paid. When I buy from this giant enterprise I feel guilty for damaging my fellow citizens, and those in other countries. I’ve radically changed my habits around this knowledge. But how do we make this understanding more ubiquitous? It’s so hard to ask people to act against their own immediate interest in gaining convenience and low prices. But the suburban town we lived in for 22 years used to have five bookstores. Now it has none. I have seen promising Makers lose their hard-earned enterprises overnight. These mental images of meaningful loss provide clear reminders to me when I wobble and try to shirk my values.

I am seeking ways to expand this knowledge. This affects all–even knowledge workers who have never been in a manufacturing company. We live in a dynamic economic ecosystem.

It matters because you and your employer should determine the value of your work, not Amazon.

6 Responses to “What if your paycheck got adjusted every week–by greedy strangers?”

  1. Stephanie Grey

    Dear Jules, Thanks so much for this detailed and thoughtful post. Convenience isn’t everything. We need to be reminded of the meaning of our choices. You are doing the good work! Thank you thank you.
    Stephanie Grey

    Reply
  2. Drew Beja

    Well stated Jules–we all need to be more mindful re: the full picture of Amazon. Just this morning I came across the article below illuminating just one example of why sellers need to be wary. Amazon is squeezing sellers on inventory storage fees with virtually no notice–not exactly the moves of a friendly partner.

    http://www.ecommercebytes.com/cab/abn/y15/m08/i06/s01

    Reply
  3. Mina Jiang

    Spot on analysis. Crack is the perfect analogy. And the recent NYT work/life article on Amazon further reinforces the insidious nature of “winning” at all costs.

    Reply

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