Amazon's Transformation From a Retailer to a Platform Helps China and Looters

Aside from the 'N' in FAANG, the Big Tech monopoly strategy has been for companies to transform themselves into platforms. (Netflix has gone the other way, edging away from being a platform to generating its own content at a staggering cost, but also staggering profits.)

Amazon's transformation from a retailer to a platform for third-party sellers has been massively profitable.

 In 2019, Amazon pocketed $60 billion in seller fees.This year, its take will soar to $121 billion, our new research finds.

To put that in perspective, had Amazon’s third-party marketplace been a stand-alone company in 2020, when it took in $90 billion in seller fees, it would have ranked 31st on the Fortune 500 list of the world’s largest corporations — bigger than Citigroup, Facebook, and General Electric. This year, with its revenue from seller fees expected to swell by an additional $31 billion, Amazon Marketplace may end up large enough to qualify for a spot in the top 25 (if it were a stand-alone company).

That's a huge increase. Some of that may be due to more people trying to run home businesses during the pandemic and the drop in local retail. But it's been part of an overall growth trend. And, much of that growth, as I've documented, is driven by Communist China.

Three years ago, third-party sellers topped Amazon's own sales. They now make up 58%. Who are they? If, like most Americans, you shop at the giant dot com retail monopoly, you’ve already waded through a stream of random shop names, fake misspelled reviews, and counterfeit products while searching for just about anything. What happened? China happened.

Between 40% to 48% of top third-party sellers on Amazon are operating out of China. The massive growth in Chinese third-party sellers has been fairly recent and transformative.

What Amazon Prime members are really buying is membership in a club that helps third-party sellers from China push counterfeit and imitation products to Americans. Amazon acts as a middle man, charging Chinese sellers and American customers for handling listing, shipping and sales.

Another major stream comes from thieves. When looters clear out stores, what do they do with the merchandise? Some of it pops up on eBay and Amazon.

The next time you make a purchase from a third-party seller on Amazon or eBay, you may be buying stolen goods.

More than two-dozen people have been charged in federal court in Dallas with being part of a crime ring in which thieves shoplifted goods from stores across the U.S. like Walmart and Best Buy. They then sold the products on online platforms such as Amazon and eBay, according to the indictment.

Retailers are lobbying to more closely monitor Amazon's marketplace. That's as likely to work as the efforts to get copyrighted material off YouTube. When the marketplace is massive, trying to monitor it is all but hopeless.

When it comes to third-party sellers, the 800-pound gorilla is Amazon, whose net sales are running at a rate of more than $400 billion a year. The company says that slightly more than half of the items sold on its platform are sold by third parties, not Amazon itself. The Buy Safe America Coalition, which represents retailers and manufacturers, charges that Amazon “has had an alarming history of failing to address counterfeits and stolen products.”

And why should it? It's far from the first FAANG to build an empire by ignoring mere matters such as property rights.

 

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