July 6, 2017
Amazon’s recent acquisition of Whole Foods has many people wondering, have tech giants like Amazon gotten too big? Already the dominant player in online sales, could Amazon’s entry into brick and mortar threaten our country’s competitive open-market system? And what does all this mean for small businesses?
Amazon began as an online book reseller, expanding into cloud computing services through AWS (Amazon Web Services), and now AWS (just one arm of the giant corporation) dominates over 30 percent of the cloud infrastructure market—more than Microsoft, IBM, and Google combined.
This near monopoly has people worried—and it doesn’t even include its growing domination of online sales. According to Barry Lynn of New America, “The [Amazon] corporation wields vastly too much power over America’s markets for books and music, and is fast consolidating control over other key flows of information and ideas.”
John Kwoka, a professor of economics at Northeastern University in Boston argues that tech giants like Amazon gain power by collecting more and more user data, allowing them to direct the flow of information and control consumer access to the firms that use Amazon platforms.
Does Amazon, Apple, Microsoft, and Google’s near monopoly of cloud services, commerce, and communications threaten the free flow of information and ideas that the internet is founded on? Perhaps, but others argue that consumers are still free to choose where they buy their products and store their data.
Consumers are choosing corporations over small businesses
Consumers do still have a choice—we can choose to buy our books from Amazon or the local bookshop. (Of course, Amazon is the cheaper option and often more convenient, so most people opt for the former.) We can also choose where we store our data. As Amazon Founder Jeff Bezos puts it, “Our customers are loyal to us right up until the second somebody offers them a better service. And I love that. It’s super motivating for us.”
Most people choose Amazon when they want to purchase a book, or pretty much any other product you can think of, and thousands of businesses store their data on the AWS service. This is impacting small online and brick and mortar businesses alike.
A survey of nearly 3,000 independent businesses, conducted by the nonprofit Institute for Local Self-Reliance, found that their biggest threat was competition from Amazon. This ranked well above other concerns such as competition from chains and big-box stores, the cost of healthcare, finding employees, and rising rents.
Are we putting all our eggs in one tech giant’s basket?
Another concern is that of AWS cloud storage. According to market research firm SimilarTech, 148,213 sites store videos, images, and databases on an AWS server. That’s a lot of information and what happens to all that information if the service goes down?
AWS service did go down in February of this year, causing hundreds of thousands of websites to go offline for several hours. You could argue that allowing just one corporation to control most of our data is like putting all of our eggs in one basket—if that 'basket' fails, where does that leave us?
What the Whole Foods acquisition could mean for small businesses
Amazon’s acquisition of Whole Foods has the potential to take business away from scores of mom & pop grocery stores. Consumers do have a choice but we’re most likely to choose convenience over supporting small businesses.
If Amazon uses its Amazon Go technology in Whole Food stores across the country, for example, thousands of people could be out of a job. Local grocery stores could be put out of business if Amazon decides to add ‘personal grocery shopper’ to its Amazon Home Services.
Should we be worried about storing so much of our data, and in turn leaning so much of our economy, on one corporation’s cloud storage platform? Should we let tech giants like Amazon have so much control over our daily lives, from book prices to how we get our groceries?
The answers to these questions will slowly reveal themselves as Amazon, Google, Microsoft, Apple, and other tech giants continue to dominate the market, for better or for worse.
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