Morning Consult recently released its report on “U.S. SMB Trends and Challenges for Q3,” and the message is clear: Small- and medium-sized businesses need the government to support their success, not sabotage it.
Yet that’s precisely what President Joe Biden and the Federal Trade Commission are doing with their new lawsuit against Amazon. While they claim to be going after a large retailer, breaking up Amazon puts smaller businesses at risk.
In 2022, independent U.S. sellers sold more than 4.1 billion products total, and each seller averaged more than $230,000 in sales, in Amazon’s store. Considering that these independent businesses sell 60 percent of the products in Amazon’s marketplace, they are the ones who are truly under attack by the government right now.
Here are three takeaways from the Morning Consult report:
Small- and medium-sized businesses are not optimistic about the future.
Inflation remains a major challenge for smaller businesses according to Morning Consult, and sales optimism has hit a low point: fewer than half of respondents said they expect to sell more in the next 12 months than they did in the last 12 months. And only 12 percent of these businesses said they think loans will be easier to obtain in the next three months. This is yet another obstacle to new entrepreneurs in this economic climate.
Why should they be optimistic? The very agency that should be supporting them filed a lawsuit that runs counter to the foundational principles on which the FTC is built. If anything, this lawsuit discourages smaller businesses from dreaming too big. It essentially tells business owners that it doesn’t matter what the free market dictates or what Americans want; the government has the final say over how big a company can grow.
This case only hastens the erosion of businesses’ confidence in the government in general. Year after year, businesses have ranked higher than the government on the Edelman Trust Barometer, precisely because Americans see figures like FTC Chair Lina Khan pursuing their own agendas at the expense of what we actually want.
Americans believe actions, not words. The FTC isn’t in their corner even if it claims to be. Amazon, on the other hand, offers free resources through the Amazon Small Business Academy; runs a podcast specifically for helping and promoting small businesses; with its financial partners loaned $2.1 billion to independent sellers in 2022; and is giving out more than $250,000 in small business grants this year alone. The retailer makes a point to promote women-owned, Black-owned and military family-owned businesses, too.
Both reported and projected sales growth for small- and medium-sized businesses shrank in Q3.
The number of businesses that told Morning Consult their sales were higher this quarter shrank to 27 percent, from 39 percent in Q2. 70 percent said their sales were lower or the same as last quarter.
How are owners of smaller businesses supposed to increase sales in this environment when hundreds of thousands of them could be cut off from the platform that helps them gain brand awareness and keep operational costs low?
If the lawsuit against Amazon succeeds, consumers won’t have the same options to turn to smaller businesses. Instead, they’ll turn to large retailers like Home Depot, Costco, Best Buy, T.J. Maxx, Wayfair and Dollar General, which offer a diverse range of products, quick shipping and competitive prices – the very things for which Amazon is being targeted.
The FTC ultimately will give a leg up to these big competitors while cutting the feet out from under small businesses and entrepreneurs trying to make a living.
Costs are rising.
Compared to the second quarter of 2023, more respondents said they expect costs to rise in technology, supplies, rent, insurance, utilities and shipping over the next 12 months.
While bureaucrats turn their attention to Amazon instead of addressing inflation, Amazon is lowering costs for smaller businesses. Fulfillment by Amazon (FBA) fees, for example, are an average of 30% less expensive than standard shipping methods offered by other major third-party logistics providers, and they are an average of 70% less expensive than comparable two-day shipping alternatives. Additionally, by relying on reviews instead of paying for marketing, sellers on Amazon have the option to let their products speak for themselves.
Contrary to the FTC’s statements, Amazon isn’t a monopoly suppressing small- and medium-sized businesses. It was an early mover in building a trustworthy marketplace open to third-party sellers. As Farhad Manjoo says in his New York Times op-ed, “Amazon all but invented the notion of an online store that sells everything, and it’s been building out that idea for more than two decades… It seems sort of like citing Chipotle’s dominance in the choose-your-ingredients burrito business.”
In 2021, National Economic Research Associates released an in-depth study of the economic effect of the (now failed) antitrust bills in Congress, which pursue a goal of structural separation similar to that of Khan’s ideology and lawsuit against Amazon. The economists’ report concluded that the bills would result in hundreds of billions of dollars in economic impact – increases that would be passed on to businesses and consumers.
In the face of an already strained economy, America’s entrepreneurs don’t need government-imposed cost increases.
The Takeaway
Americans stand by businesses they like. NetChoice’s recent polling shows that 84% of Americans say the government should have better things to do than attacking Amazon. 73% of respondents noted their support for the free market system and that it should operate largely without interference.
This is what has always made the U.S. economy work: companies that are liked by consumers succeed, and those that are disliked fail. It’s why small- and medium-sized businesses eventually grow when they run good businesses, have quality products and offer something people need or want. Let’s not forget that in 1996, Amazon.com had only 180,000 customer accounts.
If Khan thinks she’ll prove something through her crusade against Amazon, she’s sadly mistaken. She may win favor with retailers like Walmart, Target and Costco that want to see a competitor cut down, but the only thing she’ll show is that she doesn’t think small- and medium-sized businesses are worth protecting.