Has Amazon ‘destroyed the retail industry’ in the U.S.?

Discussion
Source: Amazon
Jul 25, 2019
George Anderson

Steven Mnuchin, the U.S. treasury secretary, thinks Amazon.com is deserving of some legal scrutiny.

In an interview on CNBC’s “Squawk Box” program yesterday, Mr. Mnuchin, said that he agreed with the Justice Department’s decision to open an antitrust investigation into Amazon and other technology giants, including Alphabet and Facebook. 

Amazon, according to Mr. Mnuchin, has “destroyed the retail industry across the United States, so there’s no question they’ve limited competition.” 

Mr. Mnuchin admitted that concerns about limiting competition have been raised in the past as other retailers, notably Walmart, grew to dominant positions in the U.S. market. The difference, he said, is that Walmart developed a business model that didn’t shut off opportunities for smaller companies to compete.

Amazon maintains that its model is good for small and medium-sized businesses. It frequently cites that half of the sales transacted on its platform come from third-party sellers. The recent two-day Prime Day event was the biggest 48-hour period for marketplace sellers in Amazon’s history with sales exceeding $2 billion on a global basis.

The retail business is not completely foreign to Mr. Mnuchin. He was once a board member of Sears Holdings and was among those named in a lawsuit that alleged individuals, led by former CEO and chairman Edward Lampert, were responsible for taking billions of dollars out of the company, leading to its eventual demise.

Although Amazon is not alone in the government’s focus on big tech, the company has been the target of criticism by President Trump, who has frequently objected to coverage of himself and his administration by The Washington Post. That paper is owned by Jeff Bezos, Amazon founder and CEO, and operates independently of the company.

DISCUSSION QUESTIONS: Do you agree with Steven Mnuchin’s assessment that Amazon has “destroyed the retail industry across the U.S.” and “limited competition” to the detriment of American consumers? Do you think Amazon is deserving of antitrust scrutiny, whether or not you agree with Mr. Mnuchin’s assertion?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Amazon may be portrayed as the 'bad guy' of retailing today, but it wasn’t that long ago that Walmart was held up as the 'retail killer' — it wasn’t."
"Amazon if anything is helping to accelerate change and an evolutionary cycle that was going to happen anyway."
"I can’t say that Mnuchin’s comment that Amazon “destroyed the retail industry” is far from the truth. "

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33 Comments on "Has Amazon ‘destroyed the retail industry’ in the U.S.?"


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Bob Phibbs
BrainTrust

Anyone who doesn’t answer yes to that question would seem to be naive after Amazon has amassed huge advantages first with no-tax sales, then Wall Street capital they would eventually turn a profit and now the cheap capital of AWS. The rules of profit were thrown out to become the force they are now. The U.S. government broke up Standard Oil for less.

Paula Rosenblum
BrainTrust

Here’s one naive person. When a company has 50 percent of 11 percent of the retail market, and about half of that is as a broker for other retailers’ stuff, it’s very hard for me to call it a monopoly.

The fact that the Street constantly gives it a pass for not making money (I think those days are over, by the way) is irrelevant. There are no barriers to entry as long as you’re willing to lose money, and there are lots of other choices for consumers.

If Bezos didn’t own so much of the stock, the company would be broken up in a heartbeat by the shareholders. It’s not a great move for investors to have two separate businesses, one subsidizing the other.

But monopoly? Of all the things I could ding it for – monopoly is not one. Invasion of privacy? Sure. Monopoly? No way.

Bob Phibbs
BrainTrust

OK so poor choice of “naive” on my part Paula, my apologies. Undercutting competitors with predatory pricing, forcing itself into their business, vertically integrating into strategic markets across the business line, Amazon is on track to gradually take over every aspect of e-commerce and to control and decide what we shop and what is allowed to be sold using data few companies could hope to match.

Neil Saunders
BrainTrust

This is ignorance of the highest order from someone who should, but clearly does not, know better.

First, the retail industry is not destroyed. Far from it. There are loads of successful retailers – big and small – who happily thrive alongside Amazon.

Second, where there has been failure, Amazon is rarely the primary cause. Take Sears for example, Amazon did not destroy them: that was down to lousy management – and yes, that management team included Mr. Mnuchin!

Mark Ryski
BrainTrust

I wholeheartedly agree with Neil. Amazon may be portrayed as the “bad guy” of retailing today, but it wasn’t that long ago that Walmart was held up as the “retail killer” — it wasn’t. If anything Amazon is pushing the retail industry in new directions which is causing retailers to compete in new ways.

Brandon Rael
BrainTrust

I completely agree with you, Neil. Amazon has become the poster child for “destroying retail” when in fact that couldn’t be further from the case.

Amazon if anything is helping to accelerate change and an evolutionary cycle that was going to happen anyway. Alibaba has a much more significant hold on the Chinese retail economy, compared to Amazon’s stake in the U.S. market.

Jeff Sward
BrainTrust

Amazon has absolutely elevated the retail industry. Neil and Mark have nailed it.

Sure, they broke a lot of rules. Disruptors tend to do that. And comfortable complacency tends to complain about that. This is competition in its purest form at work. Amazon wasn’t given anything. They leveraged every possible angle to their maximum advantage. Amazon is a dominant player, but not the Orwellian monolith some want to portray it to be.

Ken Cassar
BrainTrust

Amazon has not destroyed U.S. retail, quite the contrary. It has put it at the forefront of retail globally, destroying individual retailers that were over-leveraged or unable to compete for other reasons. However, that doesn’t mean that Amazon’s power in the market doesn’t need to be checked.

Dr. Stephen Needel
BrainTrust

It has certainly changed retailing, but I’m not sure it’s “destroyed” it. I don’t find any reduction in competition having been harmful. Indeed, I think I’m paying less for a lot of stuff on Amazon and that seems to be a positive for American consumers, not a detriment.

Go search for something and see the 10 sites that pop up offering an item – that’s not limiting competition.

Brandon Rael
BrainTrust

While it may appear on the surface that Amazon has a monopolistic hold on the retail industry, it’s not exactly the reality. Amazon has extended its reach, scale and platform to cover all aspects of retail, with the main exception being the luxury space. Yet, the Seattle e-commerce giant is not solely responsible for “destroying the retail industry.”

Amazon has adapted its model to meet the needs of a changing marketplace for a customer base that is engaging with brands and retailers 24/7, and on their terms. The legacy department store model, along with the middle retail segment, was ripe for disruption, as that experience no longer resonates with today’s experience-first customer.

I certainly disagree with Mr. Mnuchin’s sentiments, as the retail competitive landscape is alive and well, with Walmart going head to head with Amazon, retailers evolving and adapting, along with DTC brands opening physical showrooms at a record rate.

Ben Ball
BrainTrust

Steve Mnuchin is a good Treasury Secretary, but sitting on the board of Sears Holdings hardly qualifies him as a “retailer.” The U.S.retail industry is hardly “destroyed.” Bombastic statements that are blatantly false are supposed to be the purview of advertisers as “puffery” — but they have no place in policy making. At least that has typically been limited to politicians. Now they have spilled over into justice and fiscal policy.

As for Amazon deserving antitrust scrutiny, one of the conditions for antitrust violations is whether consumers are being harmed. This justice department seems to be doing gymnastics worthy of a Cirque show to get around that with Amazon.

Richard J. George, Ph.D.
BrainTrust

Ironic that a former board member from the now dead Sears raises these issues. Competitors do not put companies out of business, customers do.

LAURA RAMIREZ
Guest

“Competitors do not put companies out of business, companies do.”

You do it to yourself. (Side-eyes Sears and JCP and ….)

David Naumann
BrainTrust

There is no question that Amazon has been a thorn in the side of nearly all retail segments and has been blamed for the demise of some retail chains. While they may have limited competition in many respects, they have also created competition.

Retailers have been pushed to find creative ways to be more competitive by focusing on services and capabilities that Amazon doesn’t offer. Successful retailers are offering customers unique experiences and personalized service that customers appreciate.

That said, Amazon should be scrutinized for any antitrust activities that are limiting competition, as limited competition is not good for the retail industry or consumers.

Ron Margulis
BrainTrust

I’m not impressed with Mnuchin’s handling of the economy, particularly his role in the Tariff Wars and the increase in the federal deficit. I’m also quite sure he’s not an expert at either retail (he was a board member of Sears Holdings and is being sued by them for allegedly stripping the retailer of billions of dollars as it collapsed into bankruptcy) or antitrust policy.

That written, there are guardrails on operations that Amazon’s actions are pushing out. Certain inflection points, like proof the company’s sales represent more than say 60 percent of a category, should trigger antitrust scrutiny.

Harley Feldman
BrainTrust

Amazon has not destroyed the retail industry. If there were no Amazon, some other company would have stepped into the e-commerce world as Internet technology now enables. Between Amazon and eBay, small sellers now have access to customers that they would not have had in the past. In fact, it is quite easy and inexpensive for small retailers to sell directly from websites they create. The retail market is just different now and, in this booming economy, doing quite well.

All massive organizations that dominate markets should be analyzed for antitrust behavior. This does mean they are guilty, but some scrutiny is appropriate.

Rich Kizer
BrainTrust

First off, I don’t take a lot of comfort in knowing that Mnuchin, an associate of Lampert who took Sears down (and who with Lampert was accused of taking billions of dollars out of Sears) is the first choice for “retail watch dog.” Yes Amazon has had a tremendous impact on retail at many levels. However I believe that Walmart earned their way through selection and pricing strategies and merchandise availabilities. They have created a market philosophy directive for retailers to create their own unique experiences with presentations, promotions and helpful staff. Has Amazon destroyed retail? Nope. Just changed it for ever. But isn’t that (competitive marketplace) how it has always been?

Gene Detroyer
BrainTrust

Amazon, according to Mr. Mnuchin, has “destroyed the retail industry across the United States, so there’s no question they’ve limited competition.” It is hard to believe that this guy is the Secretary of the Treasury. Maybe he should go back to Hollywood. He did much better, or at least he seemed much smarter.

What did Amazon do? It changed the retail industry to an industry that consumers wanted. Without the shoppers shopping at Amazon, there would be no Amazon. It wasn’t Wall Street, it wasn’t taxes (if you don’t like the tax laws, change them).

Funny, maybe Wall Street should be blamed for forcing retailers to think about the Wall Street metrics every quarter rather than what is good for their business.

And retailers are hardly being burdened by taxes. NYU’s study of effective tax rate by industry shows the retail industry as one of the lowest (3.1 percent).

Bob Andersen
Guest

Mnuchin dislikes Amazon because, like Trump, he dislikes the Washington Post, owned by Bezos. Adding trillions in debt every year is the real threat to retail and all industries. Mnuchin should focus his “talent” on finding ways to balance the federal budget.

Joe Panka
Guest
23 days 7 hours ago

Private Equity has more to do with some failing retailers than Amazon.

Gene Detroyer
BrainTrust

When I teach strategy one of the things I do is review the history of companies in the DJI averages. One company I spend time on is Sears. I describe how Sears began with the famous Sears catalog. I describe the catalog and how people anxiously waited for it to be delivered. I ask the students, what company does that remind you of now?

The answer is a quick and resounding AMAZON. Then I ask them, why didn’t Sears become Amazon?

Shep Hyken
BrainTrust

I can’t say that Mnuchin’s comment that Amazon “destroyed the retail industry” is far from the truth. First, Amazon has done well – very well. That’s what businesses strive to do. Second, they offer the opportunity for other businesses to participate on their platform. They’ve made a lot of retailers very successful. Third, they aren’t always the lowest price, and are willing to tell the customer where to go to get a lower price. Yet many customers choose to buy from Amazon because they trust the experience. Fourth, Amazon raises the bar and forces everyone to up their game. That’s good for all involved – especially the customer. Finally, I remember when there was a big issue about Walmart’s expansion. Walmart moves into a town and puts retailers out of business. Well, that’s business. And you know what happened? Many retailers learned to compete in the marketplace, even when Walmart moved practically next door to them. The same is happening now with Amazon. Retailers are learning to navigate the digital consumer space.

Michael Terpkosh
Guest
I also don’t think Amazon has “destroyed the retail industry across the U.S.” Amazon is the latest “boogeyman” in a long line of previous monster competitors like Walmart, Pet Food Warehouses, Home Improvement giants, Boston Market (take out meals), and way back in the day A&P (trying to be a national supermarket). You could argue Sears with their catalog business in the 1800s destroyed the pioneer town general store. However, I do agree some “government inquiry” can be a good thing to keep things in check-and-balance competitively. I have participated in many panel discussions and presentations where I maintain the “boogeyman” of competition has made retail business more efficient, stronger and more progressive to answer the changing needs of the consumer. To continue winning a great retailer must stays focused on understanding the consumer, creating value to move the consumer to a customer and then providing retail excellence moving the customer to a loyal shopper. There will always be a “boogeyman” lurking in the shadows, ready to pounce on a retail channel. Great retailers remain… Read more »
Liz Adamson
BrainTrust

Mnuchin’s assessment is ill informed. Amazon has not “destroyed the retail industry.” They make up approximately 50% of ecommerce sales which was 14% of retail sales in 2018, a small percentage of total retail sales. The reality is that ecommerce is growing, and it will continue to grow with or without Amazon as things like shipping and returns continue to become more convenient. This is a natural evolution in customer shopping habits, as technology continues to improve, customer behavior will shift. Retailers can either adapt and learn to capitalize on the trend or put their head in the sand and become obsolete.

Ken Morris
BrainTrust

There have been other retailers in the past who have been villainized by disrupting the industry status quo. Just look at Sears or Walmart back in their heydays. Amazon has not destroyed anything; it has changed the customer engagement model and adapted to rapidly changing and growing customer expectations.

I find it difficult to agree with Steven Mnuchin when it feels like this has been driven more by political reasons (i.e. Bezos’ ownership of The Washington Post) than truly trying to protect American consumers.

Lee Peterson
BrainTrust

Where were these guys when Walmart was running amok? Blatant prejudice against someone who also owns a newspaper that hasn’t exactly been kind to the “right” people. So transparent, as usual.

Cathy Hotka
BrainTrust

This is an obvious ploy by the Administration to punish Jeff Bezos for purchasing the Washington Post.

They can’t have it both ways. They can’t brag about the economy on one hand, and on the other claim that it has been “destroyed.”

Paco Underhill
BrainTrust

Retail is about birth, life, death and compost. The biggest threat to modern retail has been the distance between the decision makers and the changing customer. Every ten years for the past fifty you look at the top ten list in the USA and you see change. Sears, Kmart, Wards, Korvette’s, A&P, Montgomery Ward, Woolworth — any one remember Crazy Eddie? — the list is long. Amazon has its own vulnerabilities. Local bookstores are doing just fine. The Farmer’s Market movement is underneath the radar screen — and expanding the range of product they sell.

Herb Sorensen
BrainTrust
Absolutely disagree! Bricks retailers are largely frozen in a 100 year old mind set, unprepared for the massive shifts in society, yet pending. These are being driven by the interconnectedness of the entire human race, 8 billion people, with retail being their common nexus, worldwide. The internet, of course, is racing into the lives, particularly of the younger generation. None of this means the death of bricks retailing, but they need to be far more “heads up” than Sears was, or they will self-selectively go that way. Regardless of their size. Amazon has just built an important component of the wave of the future. It is not all about the internet — any retailer can go there. And bricks retail has two iron-clad advantages: immediacy of the transaction and the 360 experience of the transaction. What bricks retailers do NOT have is any kind of realistic focus on the small baskets that absolutely drive the traffic in their stores. As one retail executive in an internal conference explained to me, “But our target demographic is… Read more »
NAVJIT BHASIN
Guest

In my opinion, Amazon is the leading force in meeting the ever-increasing expectations of today’s consumers, especially Millennials and Gen-Z – who are the future of this nation. In fact, Amazon has the chops to take risks and innovate to expand beyond the traditional retail model. It didn’t destroy the retail industry – It elevated it. Amazon is a pioneer in the 21st century Retail Revolution and should be used as an example to foster innovation in a struggling industry. Look how Alibaba followed their footsteps.

What Walmart did 50 years ago, Amazon did in the digital age. This doesn’t mean that Amazon is immune to competition, or will eradicate all other retailers. Alongside Walmart, Target and Sears coexisted for decades. Don’t live in the past, embrace change and grow.

Rather than curbing innovators like Bezos and inhibiting others from being risk-takers for innovation, lawmakers should stay away from such “witch-hunting.” If a law is broken, absolutely, they should be scrutinized.

Peter Charness
BrainTrust

1. Last I looked, the retail industry was vibrant and growing … some retailers not so much, others more so. Kind of the quick and the dead. Just like it’s always been, and faster today … like most things. Retail industry destroyed? Not by any measure.

2. What illegal acts did Amazon do, other than invest for the long term, focus on the customer, and be smart, innovative and create success? Price fixing? Restraint of competition?

3. Concentration of power, too much market share? Well not by any meaningful percentage, and if you take “marketplace” as an analogy for a shopping mall, then one could as easily argue that the few dominant retail mall owners should be broken up as well — way too powerful.

The retail industry was due for a change when the Internet became a practical medium for browsing and buying. Hardly been an act of treachery by Amazon.

gordon arnold
Guest

Retail executives and investment mavens find it much easier to blame unfair trade practice and even the weather for their own shortcomings. A breakdown of the events leading to their demise and/or failures generally leads to the conclusion that they simply are in over their heads.

Amazon didn’t create e-commerce and its appeal. They simply accepted it and engaged the market. More interesting is how Amazon, with all their growth, still finds acceptable profit taking somewhat elusive. Who should they blame?

Kenneth Leung
BrainTrust

Amazon is getting criticized in the same way Walmart was criticized for destroying main street. The reality is as Paula said, “When a company has 50 percent of 11 percent of the retail market, and about half of that is as a broker for other retailers’ stuff, it’s very hard for me to call it a monopoly.”

Innovation in customer experience and supply chain is Amazon’s forte and they have set customer expectation for ecommerce at a high bar. That didn’t destroy retail, it only changed it, just like Walmart did on store format, price and supply chain in the past.

wpDiscuz
Braintrust
"Amazon may be portrayed as the 'bad guy' of retailing today, but it wasn’t that long ago that Walmart was held up as the 'retail killer' — it wasn’t."
"Amazon if anything is helping to accelerate change and an evolutionary cycle that was going to happen anyway."
"I can’t say that Mnuchin’s comment that Amazon “destroyed the retail industry” is far from the truth. "

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