My expanded thoughts from a recent Retail Wire article on Amazon’s recent decision to back off its price parity rule.
TYPICAL RETAIL MARGINS NO LONGER TYPICAL
Amazon’s price parity rule stipulates that third-party merchants can’t offer the same goods on a non-Amazon website at a lower price. These days, pricing is a moving target and there’s no such thing as typical retail margins as brand marketers seek diversification through digital platforms. The ability to move and groove with dynamic pricing is table stakes, so lower prices don’t necessarily reflect preferential treatment.
REGULATIONS VS. REALITIES
Amazon has largely eluded scrutiny on a few fronts and even though its retail business is most visible (and is therefore an easier target), other ambitions, including government contracts and associated data-gathering gropes , may soon eclipse it and turn up the heat.
I’ll say it again, regulations haven’t caught up with (digital) realities. I’m not necessarily advocating for more regulation, just stressing that, based on recent comments, elected officials may be missing the point. Senator Elizabeth Warren has a stated mission to “break up” a short list of digital behemoths including Facebook, Google and Amazon. Her beef with Amazon is that it can control and suppress how small businesses are represented on Amazon.com. However, the same holds true for any brick-and-mortar retailer that can give its private brands prominent shelf space or delist brands on a whim. Her idea of lopping off Whole Foods and Zappos from Amazon is also misguided. The two businesses are bolt-ons that aren’t central to Amazon’s ecosystem. I’m not bashing Ms. Warren – She’s is taking a stand. But it would be nice to see the spotlight shined more brightly on issues like unfettered data collection and flimsy privacy guardrails.
AMAZON’S TURN IN THE SPOTLIGHT
In any case, Amazon is starting to get the kind of scrutiny that Walmart has been hammered with for years, only the stakes are higher given Amazon’s multiplying non-retail tentacles. As a global digital operator, anti-Amazon momentum can build quickly as countries with tighter anti-competitive and privacy controls amp up examination, which in turn draws attention to the U.S.’s more lax standards. None of it good for Amazon. In fact, Senator Richard Blumenthal cited Amazon’s 2013 retreat from a similar price parity rule in Europe in an antitrust lob to the Justice Department. So, this is a good time for Amazon to throw a bone and revoke its price parity rule. Doing so may dim the scrutiny spotlight, if only temporarily, while not hindering Amazon’s ability to pull price-related levers across its platform.