Always low prices, for now
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monopolyThe excellent Annie Lowrey in New York Magazine argues that Amazon is not a monopoly. I disagree. Or at least, I have to say the premise is not supported quantitatively. The problem is the denominator. Monopoly resides in market share. AL compares Amazon to all retail sales, but that is the wrong comparison. Amazon’s market is the market for intermediaries that shepherd you through the sale of Everything. It’s a consumption manager. The best comparison is the up-and-coming Walmart. Google doesn’t really count, since it just throws you at individual retailers.

The fact that Amazon sells low does not debunk the monopoly thesis. A monopoly grows through predatory pricing (as with Diapers.com recounted by AL) and investment in fixed capital that provides competitive advantage. The stage of reaping monopoly rents via price increases lies before us. That is what the market for AMZN is saying, in light of the astronomical price-earnings ratios. It could be wrong. The future monopoly rents might not be realized, in which case Amazon’s shares should crash, big time. It wouldn’t be the first time that happened to a dot-com company.

I’m not offering any moral guidance. I use Amazon all the time. It’s just too convenient, and life is short. It is not Amazon’s market power over its own suppliers that facilitates its treatment of its own workers. That could happen under other circumstances. In fact, the organization of work — huge shipping centers employing lots of people — lends itself to union organizing. It’s the overall labor market — workers chasing jobs, rather than the converse — plus the indulgence of employers over unions by the government that is the root of Amazon’s labor pains.

 


Comments

Always low prices, for now — 8 Comments

  1. 20 years is a hell of a long time to be doing “predatory” pricing and 0% margins.

  2. I’d never thought before about how vulnerable Amazon is to a strong union and the threat of a strike. Two weeks in December would be enough to seriously damage the company. Could that be the reason why the Obama Admin has gone overdrive to stop the workers complaint about unpaid overtime? Stop this nonsense before it gets out of hand?

  3. I try my damnedest *not* to use Amazon, because, well, life is too short. The local bookstore and its publishers’ warehouses don’t treat workers like Amz subcontractors do.

    The predatory rents are just beginning to be extracted: see what’s happening with Hachette.

  4. Good God, Max, when the hell did you start blogging again? I was sitting around in despair, at the complete lack of feck in our side, and I wondered, whatever happened to Max, who used to be my favorite blogger! And there you are!

    Damn!

    Anyway, back on topic, my stance on Amazon is I’ll use it to buy Kindle books and nothing else. Fuck those warehouses. I noticed they’re building one on I-94 in ScottWalkerstan.

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