Amazon Is Killing Small Business.

Amazon is killing small business.  Or is it?  This week while visiting a client, I overheard a conversation about how Amazon is killing small business.  Slightly ironic given Amazon’s ad campaign about how they help build small business.

Uber is another company being blamed for killing the taxi and limo industry, and yet it touts the success of so many of it’s drivers.

So are Amazon and Uber the heroes or the new Walmart?

First you must accept that we are a country of hypocrites.  We all want better incomes and agree with increasing minimum wage and then we do everything not to pay it.  It is a national epidemic, so don’t think I am pointing my finger at you.

The government has it in it’s best interest to make you think you are living better than your parents.  When you don’t revolution occurs.  The french, the soviet union, many south american countries come to mind quickly.

As wages and income go up, so do the cost of goods, unless you can find cheaper labor.  Hello China and India.  Walmart essentially bankrupted Rubbermaid by going overseas for similar products at a lower price after killing many of Rubbermaids other sales channels.  Did you care?  Nope, you just went to Walmart or Target and bought the newer, cheaper brand of whatever it is made in China.

62% of us say we will pay more for US made goods and yet 4% actually do.

So what does this have to do with Amazon killing small business?

Every product has an end cost.  Tesla tried to upend the model by only selling card directly to consumers and by not building the car until it was ordered.  If they used the traditional model, the company would have never sold a car.  Explaining why might explain Amazon and Uber better.

By eliminating the very high costs of building cars that aren’t sold, parking them at dealerships, damage at dealerships, dealership costs, dealership profit and sales commissions, Tesla can create a car that competes with a BMW 7 series, and costs 40% more to build.  But is that really better for the economy?

Henry Ford built his companies like Kingford charcoal and Ford Motor company and understood that people needed good paying jobs to buy those luxuries.  When you compare buying a Ford to a Tesla you quickly see how many more people are employed and paying taxes when you buy the Ford.

Amazon  and Uber have done the same thing.  They have eliminated all of the people in the middle of the equation.  Effectively Amazon and Uber have wiped the 1% and made it the .1%  The real profits go to Amazon and Uber, not the Uber drivers and sellers on Amazon.

Uber is careful to advertise Uber as “additional income” not a job, since they don’t allow commercial drivers to sign up.  The states created the requirement for a commercial drivers license for taxi and limo drivers and Uber convinced the states to look the other way and let Uber do the filtering.

Amazon simply ignores the states calling all the little Amazon stores “independent” and leaving it up to them to pay taxes.  But does the mean that Amazon is killing small business?

The answer is yes.  In the traditional sense, any small business that doesn’t own it’s brand and can’t differentiate will be dead.  Those employees might go on to create Amazon stores, and the cost to the economy is way more than Amazon ever wants you to know.  Payroll taxes lost,  Social Security taxes not paid, buildings not rented are just some of the ways you save money by shopping on Amazon.

Is Amazon Killing Small Business Amazons Fault?

To say that Amazon Killing Small Business is Amazon’s fault would be like saying Jeff Bezos is true evil and has a plan to take over the world (I’ve heard that saying somewhere).  But did Amazon force us to buy from them?  No they made it easier and cheaper to get things we think we want.  The .1% of the world that is getting really rich are those that take advantage of the gig economy or economies of scale.  Think Costco, Walmart and Ikea and then add in Google, Amazon and Apple.

So how can a small business survive in the world of Amazon and Uber?

Being different is the answer.  Create something that isn’t on Amazon, create a connection to your customers.  Create a product that actually makes peoples lives better and makes them feel better.  It is sad how connected we are to our screens.  As a teenager I used to go out and cruise because I didn’t have enough money.  Now my niece is glued to her smart phone.  She can get just about anything with the swipe of a finger.

The gig economy is an interesting challenge for small businesses and  cities.  After studying a business that was completely “virtual” we did the same with ours.  None of our work is done by employees.  At the Bourquin Group companies you are either an owner or a subcontractor.  I learned this watching the entertainment industry from the inside and found smart business owners like Jason Fried of 37 signals.

It is ironic that the same people clamoring for higher minimum wage and better social services are the same ones working in the gig economy running little Amazon Stores and driving Ubers.

The way to compete has never changed.  How you attract customers has.  To learn more get our newsletter or call us for a free business review.

Do something so well people want to see it again, and when they do they want to bring their friends. – Walt Disney.