Is Amazon Good or Bad For Small Businesses?

Amazon has pissed off a lot of small businesses. I’m not even going to get into all of the Internet tax stuff, but earlier this month, the company launched an app. The app is called Price Check, and it allows users to go into a store, scan a product, find it for a cheaper price through Amazon, and purchase it immediately. Oh, and Amazon gave users discounts of up to 5% when using the app on some items last weekend.

Brick and mortars were and continue to be furious, but Amazon maintains it actually helps small businesses.

The categories available within Price Check include: Books, Textbooks, Movies, Music, Video Games, CDs, Electronics, Home & Garden, Automotive, Baby, Beauty, Camera & Photo, Cell Phone & Services, Clothing, Computers, Grocery, Health & Personal Care, Home Improvement, Industrial & Scientific, Jewelry, Kindle, Kitchen & Dining, Magazines, Music Instruments, Office Products, Patio & Garden, Shoes, Software, Sports & Outdoors, Video, & Watches.

User reviews in the Android Market are pretty positive. The average rating is 4.3 out of 5. At the time of this writing, it has 120 5-star reviews, 32 4-star reviews, 15 3-star reviews, 9 2-star reviews and 8 1-star reviews.

Here’s a sampling of what people who have rated it 5 stars had to say:

Brilliant.

A very simple and easy UI. Allows you to make quick comparisons, so you can make the best decisions when out shopping.

Love this. Love Amazon! What more is there to say, it’s Amazon.

Awesome app. Works great.

Will definitely find a better price.

Here’s a sampling from the 1-star and 2-star reviews:

This doesn’t benefit the user any more than any barcode scanner. All it does is turn users into tools of amazon researchers.

Everything it does, the original Amazon app does as well, including barcode & camera search, and wishlist & account management. Completely redundant.

I hate the limited interface. I am used to reading reviews and comparing similar products. This app feels like a small prison. The bar code scanner is waaaaaay too finicky, unlike other android scanner apps. Overall 2 stars rating from me.

Some other ones indicate there are bugs and crashes.

Again, however, the majority seem to be pretty pleased with it. And why not? Really, what’s not to like from the user perspective? Especially in this economy. Consumers want to save a buck wherever they can.

But that doesn’t mean small businesses are pleased. There has been outcry about this from businesses since it was introduced.

Republican Senator Olympia Snowe, recently spoke out about the app in favor of small business’. She is quoted by Bloomberg BusinessWeek: “Amazon’s promotion — paying consumers to visit small businesses and leave empty-handed — is an attack on Main Street businesses that employ workers in our communities. Small businesses are fighting everyday to compete with giant retailers, such as Amazon, and incentivizing consumers to spy on local shops is a bridge too far.”

As previously reported, the Retail Industry Leaders Association’s VP of public affairs, Katherine Lugar, said:

“Retailers compete on price 365 days a year, and at no time is that competition hotter than during the make-or-break holiday shopping season. However, by continuing to evade collecting state sales taxes, Amazon’s exploitation of a pre-Internet tax loophole is resulting in a 6-10 percent perceived price advantage over their competitors on Main Street.”

“Amazon’s aggressive promotion of its Price Check App shows the lengths they are willing to go to exploit this tax loophole, and is a stark reminder of why Congress needs to act to protect retailers on Main Street. A failure to act is an implicit endorsement of a subsidy of Amazon, a subsidy that distorts the free market and puts jobs on Main Street at risk.”

“Main Street retailers have been forced to compete on an uneven playing field for too long. Retailers cannot afford another holiday season where they are forced to compete on an uneven playing field.”

Obviously, Amazon doesn’t think it deserves all of this harsh criticism. The New York Times shared a statement from Amazon spokeswoman Sally Fouts this week, who said the controversial app was “primarily intended for customers who are comparing prices in major retail chain stores,” and that Amazon’s third-party sellers, which she says includes “more than two million individuals and businesses of all sizes that sell on Amazon” benefit from the app as well.

The promotion in question may be old news at this point, but the app is still fresh, and has received a lot of attention. Clearly, based on the reviews above, users like it. Combine that with the brand power of Amazon, and one has to assume that this thing is going to be on a whole lot of smartphones, being used by a whole lot of consumers in a whole lot of stores.

Just because the that promotion is over, doesn’t mean people won’t be tempted to look for cheaper prices on Amazon. Of course they could’ve been doing this already, but having an app specifically for this purpose makes it more convenient than ever. And it’s not as if Amazon can’t launch similar promotions in the future.

I own a bike shop in New York and try as I might I lose sales to online retailers such as amazon. Our prices are modest by NYC standards and better yet our labor prices are some of the lowest in the city and because of this we often get the Amazon/eBay shopper coming in with close out parts,no name carbon parts and all sorts of suspect components . I have to speak from experience that I for one having been in retail for so long would feel ashamed to come into a shop with one of these parts and request that we install them. We have never turned anyone away or given them anything less than stellar service but as of Jan 1st we’re taking a stand and charging a surcharge for any part or accs not bought in our shop. I will post a sign explaining our policy and reasoning why. If youre not familiar with the NYC marketplace it is a hard place to compete with our overhead so high and our net so low. I admit volume sales are the only way for us to stay alive but we don’t do anything to jeopardize our dealer agreements but on the flipside at least 6 majors accessory companies including bell/giro , pearl Izumi and others are selling directly to amazon at a discounted price often lower than my cost. Guess how I deal with those companies? I DON’T ! They will eventually suffer by not having the distribution they once had and eventually change. I can see if they’re selling close out product but that’s as long as they make it abundantly clear that they may be buying a helmet that is at least a solid year out of date so that you have now in essence a helmet that is sub standard at the time of purchase. As a matter of fact I only warranty products bought with a receipt from a local bike shop only . It’s a shame that I as well as others work do hard to bring to our customers products that we ourselves would buy and do all the foot work while some company in Boise Idaho reaps the rewards . I won’t stand for it anymore and by he way they do make signal blocking devices that you can buy from Asia to counter the app. Look it up and good luck to all of those in retail and speciality stores.
Happy new year?

There are 81 Comments. Add Yours.

John
December 29, 2011 at 9:21 pm

I own a bike shop in New York and try as I might I lose sales to online retailers such as amazon. Our prices are modest by NYC standards and better yet our labor prices are some of the lowest in the city and because of this we often get the Amazon/eBay shopper coming in with close out parts,no name carbon parts and all sorts of suspect components . I have to speak from experience that I for one having been in retail for so long would feel ashamed to come into a shop with one of these parts and request that we install them. We have never turned anyone away or given them anything less than stellar service but as of Jan 1st we’re taking a stand and charging a surcharge for any part or accs not bought in our shop. I will post a sign explaining our policy and reasoning why. If youre not familiar with the NYC marketplace it is a hard place to compete with our overhead so high and our net so low. I admit volume sales are the only way for us to stay alive but we don’t do anything to jeopardize our dealer agreements but on the flipside at least 6 majors accessory companies including bell/giro , pearl Izumi and others are selling directly to amazon at a discounted price often lower than my cost. Guess how I deal with those companies? I DON’T ! They will eventually suffer by not having the distribution they once had and eventually change. I can see if they’re selling close out product but that’s as long as they make it abundantly clear that they may be buying a helmet that is at least a solid year out of date so that you have now in essence a helmet that is sub standard at the time of purchase. As a matter of fact I only warranty products bought with a receipt from a local bike shop only . It’s a shame that I as well as others work do hard to bring to our customers products that we ourselves would buy and do all the foot work while some company in Boise Idaho reaps the rewards . I won’t stand for it anymore and by he way they do make signal blocking devices that you can buy from Asia to counter the app. Look it up and good luck to all of those in retail and speciality stores.
Happy new year?
fran
January 4, 2012 at 12:11 pm

In theory, isn’t the marketplace supposed to work like this: A business offers a more competitive price, gets big, drives its competition out, then gets complacent and raises prices, cuts service. The consumer then desires better prices and better service, so startups pop up fulfilling these consumer desires. In the long run, when Amazon gets so big that they raise prices and cut service to the point that they piss consumers off, smaller players should come in and fill the need. Of course, this is no consolation to small business in the short term.
John
January 12, 2012 at 12:26 pm

Large businesses like Amazon and Walmart are absolutely devastating to small businesses. First of all, because of their online presence, for the sake of convenience, anyone can buy whatever they need without ever leaving their house. End result, less and less people frequenting actual store locations and these businesses having to shut down for lack of customers. Next, these companies offer a lot of free shipping promotions to entice people. End result, many mail & parcel stores across the nation are going belly up. Why go somewhere to have to pay anything to have something shipped when the big businesses will offer to do it for free; only buy “X” amount of merchandise to qualify and usually the amount you have to buy isn’t very much. And the biggest of all are the prices large companies charge for their products. Large businesses deal in such incredible high volume, they can get such tremendous bulk discounts on products, they can offer products at lower prices. Small business can’t compete with that in any way, shape or form. Small business charge what they do in order to pay the bills, overhead, insurance, rent, their employees, inventory, and hope they still have something left over so they can earn an income, so they can pay their mortgage, insurance, utilities, feed their kids. But do many people in this day and age care? No. They only want what is cheap and easy, regardless of the fact that thousands upon thousands lose their jobs every day and that small businesses continue close down because large companies undermine them at every turn. You want to help the economy? Stop supporting the corporate fat cats and their enormous companies; start supporting your local small businesses again. Only by shopping with your local small businesses and not the giant conglomerates like Amazon and Walmart (as examples) will these small businesses be able to grow, causing a need to hire more people, and that means people will be able to get jobs again, earn income again, and in turn be able to support other local small businesses and let that circle of growth to continue.