According to a recent report, Canadian small and medium-sized businesses who sell their products on Amazon say that e-commerce giant has created an imbalance of power which puts them at a disadvantage.
The Canadian Federation of Independent Business (CFIB) also found many of its members who don’t use Amazon’s services are having a hard time to compete with the company and other large digital retailers — mainly as Canadian consumers endure to prioritize online shopping over brick-and-mortar supplies.
According to the CFIB’s report, the combination of Amazon’s dominance in the e-commerce space, and a lack of government support for small businesses who need to enter that space to survive, is leading to fewer startups in Canada and driving entrepreneurs away from the marketplace.
The report comes shortly after the U.S. Federal Trade Commission (FTC) and 17 states filed an antitrust lawsuit against Amazon, accusing it of unlawful conduct and illegally maintaining a monopoly over the U.S. retail and technology marketplace by stifling competition and squeezing small businesses who use Amazon’s services with high fees.
The Competition Bureau of Canada proclaimed an investigation into Amazon’s business practices in 2020 — roughly a year later the FTC started looking at the company — but has been quiet on its development since attractive market members to provide input in August of that year. Amazon says it is cooperating with the investigation.
Much of the allegations in the U.S. lawsuit are echoed in the CFIB report, which includes first-hand accounts from business owners across many industries who use Amazon’s Marketplace platform to sell its products.
Businesses mentioned that if a product which they were selling on a platform became popular, then Amazon pushes customers away from those products toward identical ones which is sold directly by Amazon. Independent listings were then buried in search results and suppliers would suddenly stop working with the businesses — even threatening legal action.
The report also says businesses reported facing confusing fee structures that hurt their bottom line, and felt forced to reduce their prices further to qualify for Amazon’s “buy box” feature that allows for one-click ordering.
Businesses complained that Amazon did not allow them to communicate directly with customers who may have a problem with a product or an order, and took control of refund decisions that unduly favour the customer at the expense of the sellers. Those businesses also reported a lack of support from Amazon when disputes arose, including unexpected suspensions of seller accounts.
Amazon was estimated to control nearly about 40 per cent of the U.S. e-commerce market previous year, according to market study company eMarketer. The next top 14 corporations — as well as major brands like Walmart, eBay and Target — make up a shared 31 per cent.
In Canada, Amazon’s footprint is even higher, according to eMarketer, accounting for 41.5 per cent of all e-commerce sales this year. The firm’s U.S. share remains relatively stable at 37.6 per cent.
Amazon said the two per cent of CFIB members that said they have used the company’s services is a very small fraction in comparison to the tens of thousands of sellers in Canada that use Amazon to sell and reach customers.
Barbara Agrait, a spokesperson for Amazon, told Global News the data in the CFIB report appeared “cherry-picked to fit a false narrative.”
According to the report, the continued importance of e-commerce has led a majority of CFIB members to say they are planning to maintain or grow their online presence this year. Yet it also records that nearly to 90% of those members feel the supremacy of Amazon, Walmart and other online titans is intimidating their ability to compete in that space.
The report includes many recommendations for Amazon, the federal government and consumers themselves to make sure small and medium-sized businesses have a fighting chance in the modern economy.
The CFIB says Amazon should be clearer with-it customers, algorithm and marketplace data, so that it will allow smaller businesses to compete well. It also wants Amazon to reduce its seller fees, promote independent sellers and hire an independent ombudsman or committee to resolve disputes with customers and Amazon.
The report says the federal government should also step up its support for smaller businesses, including through its modernization of the Competition Act, which remains under review.
The CFIB is also calling on Ottawa to reduce the $500,000 annual revenue threshold for small businesses to access grants through the Canada Digital Adoption Act which can help with the financial pressure of shifting to an e-commerce platform, and the continuation of other financial relief programs, next year the government plans to begin phasing out like the AcceleratedInvestment Initiative.
Finally, the report recommends the government work with Canada Post to provide more varied price points, including deeper discounts to small businesses, to lessen the financial burden of shipping their products.
Auger says Canadians can also play a role to help small businesses to survive and thrive by prioritizing them for their shopping needs, mainly as the holiday season gets underway.
