Among the rain of executive actions, judicial assaults, and other depredations to our country, culture, air, water, soul, and democracy under the current administration, the Supreme Court decision on South Dakota v. Wayfair could easily pass almost unnoticed. Yes, specialists in eCommerce are all up in arms about the removal of their structural advantage. But most of us aren’t Amazon, eBay, NewEgg, or a thousand other depots that have been shipping goods, or had their goods shipped, all around the country without anyone paying sales tax.
Win-win, right? Consumers pay less, companies make more, shipping volume goes up (good for shippers). Except for the losers: local businesses and governments — and, as communities die, local everything. Sometimes one local factory is all that stands between the wolf and some remote village’s door.
So, when eBay sent me (and, no doubt, tens of millions of others) its petition to the executive and legislative branches and state governors, looking for me to sign on to their side in the battle, I had a decidedly mixed reaction.
On the one hand, I have been a good eBay seller and sometime buyer, getting rid of goods that would be hard to unload otherwise. Not too long ago, I took my son’s entire childhood collection of Bionicles, which he had scrambled irreparably when he made the final mashups of his creative childhood, and moved them to a guy in the Midwest who played with them as a child and wanted to pass his passion down to the next generation. After he paid $191.50 for a huge box lined with a trash bag full of plastic parts, he wrote me: “I’m just happy I won, ’cause, truth be told, I bought these to bond with my son. Bionicles were my best childhood memory, and I wish to share that experience with him.”
What a great outcome! A young father who can’t afford to buy all these sets new in retail gets an entire childhood’s worth for a couple of hundred simoleons. And I am free of my otherwise unmovable plastic burden.
So, yeah, I get that exhilarating frontier experience of buying and selling tax free over the Internet.
But, one the other hand, seriously folks, the eCommerce companies have had a two-decade free ride, coddled by a government that didn’t wish to undercut the development of new markets based on the Internet. Well and good. Perhaps these companies needed protection in their infancy — just like all things need protection in their infancy — but follow the money!
Amazon is now a monster, and it’s CEO, Jeff Bezos, the richest guy in the world. People sometimes debate whether a given firm is dominant or even a monopoly, but just looking at the money clarifies the mind. High profit margins in and of themselves demonstrate market pricing power. If there were viable competitors, the dominant firm would have to lower prices to compete. Ditto for relative revenue growth. Amazon has sacrificed profit for revenue growth. So, the 2.2% operating margin the company achieved in 2017 belies its true position. More relevant is its 30.8% growth rate that year, a period when overall the worldwide retail industry experienced a 3.3% growth rate (4.2% in the United States).
A more telling statistic would be the number of national retail chains that went out of business or were bought during Amazon’s rise. A few examples include Circuit City, Tower Records, Musicland. Bespoke even has a “Death by Amazon” index. Chains on life support include Barnes & Noble, Macy’s, and Costco. BestBuy is fighting for its life, and even Wal-Mart is twisting and turning to try to preserve its hold on the retail buyer.
And it’s not just Amazon. Many other firms have benefited from tax protection, among them Netflix, Salesforce, Uber, Airbnb, and Twitter.
Let these whiners stop trying to get us to do their dirty work for them and buckle down to compete on a fair basis with the brick and mortar guys. When I grew up in Cambridge, MA, we had a dozen bookstores, new and used, textbook and foreign, popular and specialty. Almost all of them are gone now. The very fabric of what used to be our unique city center now looks like the ordinary cloth of any mall in the United States. The movie theater that for years showed Bogart films during Harvard’s exam period is barely hanging on.
eCommerce has had its pampered childhood. And in the process of growing up, the little monster has destroyed almost everything around it. The Supreme Court made the right decision in South Dakota v. Wayfair. It’s time to move on. And maybe on a more level playing field, local businesses have at least a chance of reestablishing themselves.