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Amazon's Supply Chain Is Breaking and Small Businesses Are Screwed

Amazon Prime is breaking amid the coronavirus panic and independent sellers who rely on its services are getting locked out.

by Edward Ongweso Jr and Jason Koebler
Mar 17 2020, 2:41pm

Image: Sebastian Kahnert/picture alliance via Getty Images

Amazon and the global supply chain are faltering under the pressure of the coronavirus pandemic. The world's largest retailer announced Tuesday morning that it is suspending all shipments of non-essential products to its warehouses, a move that may help people ordering things like toilet paper and food but will singlehandedly destroy thousands of independent businesses that have come to rely on Amazon’s monolithic platform.

“We are seeing increased online shopping, and as a result some products such as household staples and medical supplies are out of stock,” Amazon wrote in a letter to sellers who use its “Fulfilled by Amazon” service. “With this in mind, we are temporarily prioritizing household staples, medical supplies, and other high-demand products coming into our fulfillment centers so that we can more quickly receive, restock, and deliver these products to customers.”

Fulfilled by Amazon is a service in which businesses and individual product sellers ship their products directly to an Amazon warehouse. Amazon then sells and ships those products and takes a small commission from the seller. In recent years, this has, for many product categories, become the dominant way to sell products online, and has allowed Amazon to not only monopolize the consumer-facing online shopping experience but also the back-end of ecommerce. Amazon has strongly encouraged sellers to use this service, which makes products owned by third parties eligible for Amazon Prime and lets people “grow their businesses easily.”

“For products other than these, we have temporarily disabled shipment creation. We are taking a similar approach with retail vendors,” Amazon wrote. “This will be in effect today through April 5, 2020, and we will let you know once we resume regular operations. Shipments created before today will be received at fulfillment centers.”

While desperate times call for drastic measures, the effect this will have on businesses cannot be understated, and highlights the extreme control Amazon has over its platform.

“Amazon just put tons of businesses out of business. Destroyed thousands of jobs amidst a crisis,” one seller wrote on Amazon’s Fulfilled By Amazon forums. “Horrible joke. Absolute joke. No warning. Expect major lawsuits coming from sellers who now will go bankrupt.”

People on a Fulfilled by Amazon Discord server are also panicking; some people are suggesting that they should try to code their products as falling under “Health” to try to get past the new ban on nonessential products (Amazon says it will suspend sellers who do this.) Another seller put it quite bluntly: “Hey, this is pretty fucked up.”

For weeks, experts have anticipated a failure of Amazon’s delivery infrastructure thanks to the triple threat of supply chain disruptions, rapidly increasing demand, and the risk of outbreaks within its warehouses. Amazon has indeed been running out of things like toilet paper, and the company announced Monday that it will hire a mind-boggling 100,000 additional workers to handle the influx of demand during the coronavirus pandemic.

The coronavirus pandemic is making clear what should’ve been painfully obvious these past few years: too many companies have unimpeachable control over large swaths of daily life and economic activity. In the face of a delayed response by the Trump administration, this sort of swift action may be reassuring but it betrays a disproportionate influence on the lives of everyone else.

The terrible truth is that Amazon is not only the world’s biggest retailer, it is also one of the world’s most important infrastructure companies, both physical and digital. Because it owns that infrastructure, it has monopoly power over how it’s used. It has spent the last several years centralizing that power, and now has the ability to make quick decisions like this that can immediately destroy smaller businesses without warning.

Amazon did not immediately respond to a request for comment.

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