Telling tail

Virtual Consumer column from Ethical Consumer magazine May-Jun 2013

Ethical Consumer is calling on readers to boycott Amazon because of the very small amount of tax it pays in the UK. Despite billions of pounds worth of sales in the world’s most lucrative e-commerce market, Amazon has paid just £1.8m in UK tax by claiming these are all due to its Luxembourg subsidiary.

Concerns about Amazon’s behaviour however don’t stop at the sophisticated way it avoids paying tax. Recent increases of up to 70% in the fees it charges third parties who sell through the site will be having a massive impact on these traders, particularly in the highly price-sensitive markets that Amazon dominates. Few are prepared to speak out however,  and then anonymously for fear of reprisals from the giant retailer.

An estimated 2 in every 5 sales made by Amazon are from third-party sellers. Items are listed alongside those supplied by Amazon itself, but sourced from small independents, many of whom now rely on Amazon for their entire business. This reveals an important paradox at the core of the net.

In e-commerce, as in many other areas, the Internet can have a profound levelling effect. The speed and efficiency of modern search engines has empowered consumers who are able to track down a better deal but it has also enabled small and niche traders to find a market. In his book ‘The Long Tail: Why the Future of Business Is Selling Less of More’, Chris Anderson pointed out that niche and slow-selling items that it made no sense to stock in conventional high street stores could be made available on the net because of the national or even global reach. Amazon has turned this to its advantage by offering the convenience of finding all items - both mainstream and niche - on one site, firstly through its own scale, and secondly by recruiting an army of 2 million third party traders. The Long Tail has opened an opportunity for small independent entrepreneurs, and concentrated power in Amazon’s hands at the same time.

All internet sites are equally easy to reach but there is a powerful tendency for traffic to ‘swarm’ around favoured destinations: Google, Facebook and Amazon are all beneficiaries. Things can change however, sometimes quickly. MySpace was the most visited US website in 2006 - more visited than Google. It was overtaken by Facebook in 2008, and is now number 130. Arguably all the Amazon traders have to do to get control over their destiny is to create an alternative and move there en masse. The net is a superb vehicle for aggregating effort: with its monopolistic behaviour Amazon has arguably created the ideal conditions for creating a mutual alternative, owned and run by the traders.