Half of small businesses say they are finding it harder to compete with digital giants such as Amazon.com Inc. AMZN-Q, according to a new report from the Canadian Federation of Independent Business.
The group, which represents 97,000 small and medium-sized businesses, says its members are increasingly concerned about how they are being crowded out by corporate giants in the online market, and are urging Ottawa to help.
The report, released Thursday, comes after the U.S. Federal Trade Commission sued Amazon for allegedly using unfair business practices to take market share away from small competitors.
A survey conducted in January of 2,423 small-business owners who are part of CFIB found that 48 per cent agreed or strongly agreed with the statement that they were finding it hard to compete with the rise of digital competitors, such as Amazon. Another 18 per cent disagreed or strongly disagreed, while 3 per cent weren’t sure and 30 per cent said it wasn’t applicable to their business.
When asked whether they had noticed an increase in the presence of corporate giants that was making it hard to compete, 66 per cent agreed or strongly agreed, 21 per cent disagreed or strongly disagreed, and 13 per cent weren’t sure or said it wasn’t applicable.
The results were in line with other polls CFIB has conducted in recent years. In October, 2020, 89 per cent of 3,607 surveyed members said the dominance of large online sellers such as Amazon threatened Canadian small businesses. Of those members who sold through Amazon’s platform, 55 per cent responded negatively about the experience, 42 per cent were positive and 3 per cent weren’t sure.
Michelle Auger, a senior policy analyst at CFIB, said some sellers feel competitive pressure to list items on Amazon’s marketplace because of the size of its audience. However, she said they believe Amazon gives its own products preference over those of smaller third parties in its search results and charges too much in fees.
“Amazon is leveraging their power because they know they have the upper hand on small businesses,” Ms. Auger said.
CFIB is recommending that Amazon be more transparent with small businesses about how its search-result algorithms work, lower the fees it charges small retailers and improve its service department to help sellers who run into problems.
The group also recommends that the federal government keep digital marketplaces in mind during the continuing review of the Competition Act, and that Ottawa should work with Canada Post to lower shipping fees for small retailers, so they can better compete with the giants.
Sean Liburd, the owner of Knowledge Bookstore in Brampton, Ont., said continually rising shipping fees are his No. 1 concern. He founded his bookstore, which specializes in works by authors of African descent, in 1997, and for many years sold online to U.S. readers. But he said those sales dwindled as giant retailers created their own fulfilment networks.
“You can’t compete with free shipping,” he said.
Amazon spokesperson Barbara Agrait said 41,000 Canadian small- and medium-sized businesses sold more than 100 million products on Amazon in 2021, averaging over US$85,000 in sales. “These numbers show that our partners are succeeding when they choose to use our powerful, cost-effective services,” she said in a statement.
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The U.S. FTC and 17 states launched a lawsuit against Amazon on Sept. 26, alleging, among other things, that the company discriminated against third-party sellers by punishing them if they listed the same items for lower prices on other platforms. The lawsuit also alleged the company had steadily increased its fees on third-party sellers to the point that some were charged half of their revenue.
In a response to the FTC suit, Amazon accused the commission of misunderstanding its practices. For example, the company said its policy of pushing retailers to offer their best prices on the Amazon marketplace was actually pro-consumer.
“Just like any store owner who wouldn’t want to promote a bad deal to their customers, we don’t highlight or promote offers that are not competitively priced,” said a September statement from David Zapolsky, senior vice-president of global public policy, and general counsel.
The Competition Bureau announced in August, 2020, that it was investigating whether Amazon’s conduct was harming competition among retailers, and invited sellers to confidentially share information with the bureau.
On Wednesday, the agency said the file was still open. “I can confirm that the Competition Bureau’s investigation of Amazon is ongoing and that there is no conclusion of wrongdoing at this time,” bureau spokesperson Sarah Brown said in an e-mail. “As the Bureau is required by law to conduct its work confidentially, I am not able to share additional information regarding our investigation.”
Ms. Agrait said Amazon was co-operating with the Competition Bureau’s review.
For his part, Mr. Liburd said he’s had to shift what he offers his community to keep readers engaged, such as hosting live events. He said he stays positive by trying not to think of Amazon as a direct competitor.
“You’ve just got to focus on the things you can control, which is giving good customer service, having products that are unique and not accessible on Amazon and so forth.”
He added: “But the shipping would help tremendously.”
Chris Hannay