Does Amazon Dominate the U.S. Supply Chain? Book Review: “The Cost of Free Shipping: Amazon in the Global Economy” (London: Pluto Press) Editors: Jake Alimahomed-Wilson and Ellen Reese (Release in September)

By Stas Margaronis

Jake Wilson, a co-editor (with Ellen Reese) of The Cost of Free Shipping: Amazon in the Global Economy, says that Amazon is increasingly dominating the U.S. supply chain using its vast database and mass cloud computational capability to consolidate data.

The result, he says, is that Amazon expands its surveillance and control of truckers, air freight pilots, warehouse workers, suppliers and subcontractors.

Amazon’s growing power over the economy is an area of concern for both Republicans and Democrats.

On July 29, the House of Representatives “in rare bipartisan accord” ordered Big Tech CEOs to testify about perceived abuses of their power, as the House Antitrust Subcommittee continued its year-old investigation of anti-competitive practices and the concentration of power among Big Tech companies, according to The Los Angeles Times:

“The chief executives of four of the most prominent technology companies in the world — Google’s Sundar Pichai, Amazon’s Jeff Bezos, Facebook’s Mark Zuckerberg and Apple’s Tim Cook — appeared remotely amid the pandemic and fielded questions about their business practices and market dominance. Though their companies represent new-age innovations — including search engines, smartphones and social media — the criticisms they faced recalled those lodged against late 19th century industrial barons…. Subcommittee Chairman David Cicilline (D-R.I.) set the tone in harsh opening remarks. “Many of the practices used by these companies have harmful economic effects. They discourage entrepreneurship, destroy jobs, hike costs and degrade quality. Simply put: They have too much power.”[1]

Jake Wilson is a sociology professor at California State University at Long Beach and the book’s co-editor along with Ellen Reese, a professor of sociology at University of California, Riverside and author of “They Say Cutback, We Say Fightback!”

Wilson said that the Covid pandemic has been a huge boom for Amazon’s business. For example, the net worth of Amazon founder Jeff Bezos rose from $110 billion at the beginning of 2020 to $168 billion today:

“This year we saw a dramatic increase in the role that Amazon took in the retail business as brick and mortar stores had to shut down or restrict operations while Amazon expanded its business. During the pandemic Amazon hired 200,000 workers and rapidly increased its sales while other retailers curtailed their businesses or went out of business. Jeff Bezos’ net worth at the beginning of 2020 was 110 billion dollars whereas in August his net worth has risen to 168 billion dollars. It is possible that within the foreseeable future, Jeff Bezos will be the first human being to be worth 1 trillion dollars.”

Wilson provided an advance copy of the introduction of The Cost of Free Shipping.

The introduction describes how Amazon uses its Prime membership as its economic base of power: “As of 2020, there were over 150 million Amazon Prime members, making it the world’s second largest paid subscription program. Indeed, about 60 percent of American households are Amazon Prime members. Among the affluent, the numbers are even higher. A staggering 82 percent of households making more than US $112,000 per year are Amazon Prime members. Prime members pay an annual subscription fee in order to utilize Amazon’s platform and receive perks such as free, expedited shipping on millions of items purchased through Amazon. Amazon Prime membership is also growing rapidly among U.S. households earning less than US $50,000 annually, partly due to fee discounts of 50 percent or more for college students and very low income households. To further reach the college student market, the “Amazon Campus” program created countless Amazon pick-up locations on university and college campuses throughout the United States, further exacerbating the privatization of public higher education. Although the company has lost money in the short term by offering its customers various perks and discounts, it helped the company to gain customer loyalty and market dominance.”

Foreign Expansion Meet Pushbacks

Wilson says Amazon is engaged in expansions in Europe and in India: “The company is making a major push into the German market. German workers are unionized and enjoy strong labor protections, so Amazon has built up its warehouse capacity in Poland in order to ship products into Germany and by extension into other EU countries,” he says.

The book points out that unlike in the United States, many countries have successfully kept Amazon out or restricted its market penetration to protect local retailers.

Wilson co-authored the introduction to The Cost of Free Shipping in which he argues:

“Yet it remains unclear that Amazon’s success in the U.S. will be duplicated abroad. Amazon’s retail market share in Western Europe was 8 percent in 2018, according to Eurobarometer, compared to 35 percent in the United States. Despite Amazon’s significant e-commerce inroads … Amazon has also found increasing government scrutiny of, and organized resistance to, its negative impacts, including reducing brick-and-mortar retail—the “Amazon effect”— and air pollution, and bad working conditions. Amazon’s economic influence elsewhere outside the U.S. is weaker than in Europe. In China, Japan, and South East Asia, Amazon has so far yielded to regional e-commerce leaders, such as Rakuten in Japan and Alibaba in China. In 2019, Amazon formally closed its retail business in China, and strengthened its efforts in Latin America, Australia, and India. The established Argentinian online retailer, Mercado Libre, has kept Amazon at bay in Latin America. Still, Amazon’s Latin American operations include logistics centers in Mexico and Brazil, multiple call centers in Colombia, and corporate offices as well as call centers in Costa Rica—Amazon’s biggest Latin American location. Direct competition from multi-service e-commerce companies remains less consequential in Australia and India. It took two years for Amazon to double its sales in Australia, where the company’s retail market share was 3 percent in 2019 … Though e-commerce in India is an emerging market—3 percent of the nation’s total consumption—the nation’s 1.3 billion customer base represents one of the world’s fastest-growing retail markets.”

Although not omnipresent around the globe, Amazon remains important not only due to its sheer size and value, but also because it has propelled many novel features that currently animate the world’s economy such as one click orders and next day deliveries. These changes have made Bezos a pioneer and revolutionary in global commerce and retailing, the book argues.

Supply Chain Moves

Wilson says that in the United States, Amazon is moving to dominate the logistics business and the U.S. supply chain:

Trucking: According to the introduction: ”In the United States, although Amazon continues to use the U.S. Postal Service and private delivery companies, its packages, particularly Amazon Prime packages, are increasingly delivered by two main contingent groups of third-party Amazon workers: Amazon Flex drivers and Amazon’s Delivery Service Partners (DSPs). Amazon Flex drivers are gig workers, legally classified as independent contractors, who are paid per completion of a delivery route, or “block,” by the hour. Amazon Flex drivers use their own personal vehicles (or rented vans) to make deliveries. Similar to other gig-economy platform jobs, such as Lyft, Uber, Postmates, and Doordash, Flex drivers must pay for all expenses related to their vehicle, road tolls, parking, insurance, vehicle maintenance, among other expenses; in addition, these workers receive no overtime pay, benefits, union representation, or minimum wages. DSPs are small subcontracted ‘independent’ parcel delivery firms with approximately 20–40 delivery vans that exclusively deliver packages for Amazon, mostly Prime. DSP fleets are limited to 40 vans to avoid unionization efforts and to increase Amazon’s flexibility and power over the price paid per delivery. By 2019, Amazon’s own delivery network surpassed the U.S. Postal Service as the carrier delivering the plurality of its packages.” Wilson added: “Last year I drove around L.A. with one driver who worked 9 hours and had one stop to go to the bathroom. He even had to eat in his truck. He complained that his schedule was so intense that he had no time to stop. At Amazon, any evidence of higher wages, benefits and especially union protections is something to be avoided. The result is that the USPS is losing business and revenue because of the withdrawal of Amazon business. At the same time, Amazon is also decreasing the use of UPS and FEDEX and so both companies will lose air freight and trucking business that used to come from Amazon.”
Warehousing: Amazon has been building up its warehouse operations that are supported by last mile truck deliveries to undercut brick and mortar retailers who lack its warehousing capabilities. The larger and more automated warehouses allow Amazon to store and deliver large volumes of merchandise at lower prices and with fast deliveries when integrated with last mile trucking. The problem is that this warehousing occurs at the cost of low wages paid to workers and massive surveillance of every aspect of the product packing operation. As much as possible Amazon uses robots to supplement the workforce and maintain the speed of work through surveillance and robotics. A number of community organizations and labor unions are trying to organize Amazon workers into unions so they can enjoy better wages and working conditions.
Air Cargo: Wilson says Amazon will soon be one of the leading U.S. air cargo carriers. According to a DePaul University published in May: “Since making its maiden flight in 2016, Amazon Air has been on a rapid growth trajectory, having grown to 42 airplanes by May 2020 and announcing plans to have at least 70 airplanes by 2021. In just three years, it has become a major component of Amazon’s overnight and two-day delivery business. Amazon Air complements the retailer’s massive groundbased shipping network, which by one estimate now surpasses 20,000 trucks. The carrier’s growth is being spurred by the expansion of Amazon Prime, which heavily promotes overnight and second-day delivery, and there has been speculation that the COVID crisis has accelerated the carrier’s expansion. Based on estimates by our DePaul team … Amazon Air now operates almost 100 flights per day despite being still primarily confined to North America. The steady flow of investment to expand Amazon Air paves the way for the retailer to both reduce reliance on FedEx, UPS, and USPS and— eventually—possibly enter the general package delivery market (i.e., the business of delivering not only packages generated on the Amazon platform, but others as well) in competition with FedEx and UPS. If and when that occurs, however, remains a matter of speculation.”[2]
Ocean Shipping: Wilson says Amazon has plans to build ocean-going ships so that it will have its own merchant fleet and avoid dependence on the current fleet of container carriers. He says Amazon is also interested in building autonomous ships that can operate without crews or very minimal crews. Development of autonomous ships was thought to be years away until the problems of crews being stranded on board ships for long periods of time surfaced during the Covid emergency. The stranding of crews during the pandemic is threatening disruptions in ocean carrier service. A prolonged disruption could create an opening for shippers such as Amazon to urge the United States consider autonomous vessels as a means to support the global supply chain. Coincidentally, on August 11^th, the U.S. Coast Guard issued a request for input regarding autonomous vessels: “The Coast Guard is seeking input regarding the introduction and development of automated and autonomous commercial vessels and vessel technologies subject to U.S. jurisdiction, on U.S. flagged commercial vessels, and in U.S. port facilities.”[3]
Amazon Web Services (AWS): Wilson says Bezos’ and Amazon’s success are effectively integrating traditional mail order sales with software and the Internet. According to the book, Amazon Web Services (AWS) plays a major role. The AWS division sells cloud computing services—i.e., storage space, bandwidth for website hosting, and processing power—to individuals and companies such as Netflix and Instagram, and Amazon itself. Over the years, Amazon accumulated a lot of data about its customers that it fed back into developing algorithms that are used to advertise and track customer purchases, buying histories and other demographic information which support its marketing efforts. This was the original rationale for Amazon Web Services, a cloud-based service. However, since then, AWS has grown as a huge profit generator for Amazon because it not only tracks purchases and buyers but also Amazon contractors and suppliers and their performance. This has led AWS to sell its computational capabilities to companies who need high speed computers for their research. The book notes: “Despite challenges by Microsoft, Google, and Alibaba, Amazon made headlines in summer 2019 for owning fully half of the world’s public cloud infrastructure market, valued at more than US$32 billion.” Meanwhile inside the home or apartment Amazon sells Echo a smart speaker that responds to voice commands using Alexa, its artificially intelligent personal assistant. All Echo models can answer questions, research the internet, command smart home devices, and stream music. Some models, like the Echo Show, have specialized abilities, like playing video and video chat.[4] Wilson says Alexa/Echo provide data for AWS to process about the consumer’s spending habits. Also, the book’s introduction says “Alexa, only chooses Amazon items when asked to purchase something.” To further household information gathering, Amazon acquired Ring Doorbell. In 2018, Business Insider reported the acquisition achieved the following objectives: “Amazon is acquiring Ring, a startup that makes smart doorbells with cameras. This gives Amazon an extra leg up on smart-home tech and complements existing services that make ordering items from its website easier… All of this could … also benefit from facial-recognition software, which it looks like Ring is developing.”[5] In addition, Amazon contracts for its services with the CIA, ICE and other law enforcement agencies, Wilson says, and police departments access this data which represents an encroachment on privacy. The AWS database is further enhanced by the surveillance it provides on warehouse workers, truck drivers, customers, subcontractors, air freight pilots and many others.
Surveillance Capitalism: The AWS data processing capabilities complement the discussion of how Amazon has advanced “surveillance capitalism.” The introduction argues that: “Along with other high-tech companies, such as Google, Amazon has also been on the forefront of a phenomenon that Shoshana Zuboff calls ‘surveillance capitalism.’ Surveillance capitalism refers to ‘a new economic order that claims human experience as free raw material for hidden commercial practices of extraction, prediction, and sales.’ Amazon employs a collaborative filtering engine to surveil consumers using its electronic shopping platform in order to promote its own commercial interests. Each time customers purchase products through Amazon’s online shopping platform, they turn over their private information and buying habits to the corporation. Amazon executives use this data to decide which products to manufacture and sell, and at what price, as well as what products to suggest to customers, and in what order. Although Amazon claims this strategy is designed to serve customers by ‘anticipating’ their needs, critics highlight how Amazon’s use of surveillance technology manipulates consumers to further the corporation’s own commercial interests. Likewise, Amazon uses electronic technology to surveil its fleet of workers, including warehouse workers, delivery drivers, ghost writers, and other high-tech workers, in order to extract valuable information about their work flow that is used to further exploit, discipline, and control workers, increase labor efficiency, and inform the development of workplace automation and other business investments. Amazon’s surveillance technologies pose serious privacy and civil liberty threats in the context of the company’s operations and relationships to governments and municipal police. Along with providing cloud data storage for the U.S. Pentagon and the Central Intelligence Agency, Amazon has pioneered and sold new surveillance technologies. Amazon’s 2018 acquisition of the Ring home surveillance system has also fueled the rapid penetration of the state-corporate nexus of surveillance of everyday life. In addition to Ring, police departments in several U.S. states are already using Amazon Rekognition, a new face-recognition computer system and database, and the system has been offered to the U.S. Homeland Security Immigration and Customs Enforcement (ICE) agency. Civil rights organizations have raised concerns about the use of this new surveillance technology, which tends to misidentify people of colour more commonly than white people, and which could be used to better identify protesters.”
Tax Avoidance: Wilson says that one of Amazon’s success secrets is that it avoids paying taxes and paid no U.S. taxes in 2018. A CNBC report explains: “In 2018, Amazon paid $0 in U.S. federal income tax on more than $11 billion in profits before taxes. It also received a $129 million tax rebate from the federal government. Amazon’s low tax bill mainly stemmed from the Republican tax cuts of 2017, carry forward losses from years when the company was not profitable, tax credits for massive investments in R&D and stock-based employee compensation. In a statement to CNBC, an Amazon spokesperson said, ‘Amazon pays all the taxes we are required to pay in the U.S. and every country where we operate, including paying $2.6 billion in corporate tax and reporting $3.4 billion in tax expense over the last three years.’ The statement also mentioned Amazon’s investment and job creation in the United States.”[6]
Better Wages and Working Conditions: In 2020, Wilson says, Amazon has sparked protests among its employees about low pay and working conditions that were exacerbated during the Covid crisis around concerns that the company could do more to keep its warehouses free from contamination. According to a Reuters report: “Amazon.com Inc employees across the country are seizing on the coronavirus to demand the world’s largest online retailer offer more paid sick time and temporarily shut warehouses with infections for deep cleaning. Employees in at least 11 states this year have voiced their concerns and staged actions to highlight a variety of purported workplace deficiencies, allegations the company has denied. Supporting these Amazon workers are labor groups and unions eager to penetrate the Seattle-based behemoth after years of failed attempts to unionize its operations. Reuters spoke with 16 unions and labor groups targeting Amazon. They included established organizations such as the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), the United Food & Commercial Workers International Union (UFCW) and the Retail, Wholesale and Department Store Union (RWDSU)… Most unions acknowledged their long odds at organizing Amazon using traditional tactics such as holding meetings and gauging interest. Legal hurdles to unionizing the company’s workplaces and mounting elections are steep. For now, many groups said, they are showing workers how to harness public opinion to shame Amazon into granting concessions.”[7]