Filed under: Amazon.com, Retail, Internet, Small Business Advice, This Built America
"Amazon.com, the giant online retailer, has too much power, and it uses that power in ways that hurt America," famed New York Times economist Paul Krugman began his Oct. 19 column. Arguing that Amazon is a "monopsonist" -- a business entity so large and powerful that its purchasing power allows it to dictate terms to suppliers -- he compares its tactics to that of Standard Oil before it was broken up by Teddy Roosevelt.
"Don't tell me that Amazon is giving consumers what they want, or that it has earned its position," he continued. "What matters is whether it has too much power, and is abusing that power. Well, it does, and it is."
Most mom and pop businesses would tell you that Krugman is right, that companies like Amazon are making it harder and harder for them to survive. But some are fighting back -- and winning.
The Story of One Bookstore
Steve Peters runs Catholic Books & Gifts, a small, family-owned business that has been in Southern California for 20 years, and he knows what it is like to go head-to-head with Amazon and other online retailers.
He can't compete on brand awareness. "The toughest challenge for us with an Amazon or even a Barnes & Noble (BKS) is that they are well known across the country." Nor price. "Many times they beat us on price," he continued, bolstering Krugman's assertion that purchasing power enables major retailers to artificially drive prices down.
But he can win on service. Being smaller enables him to have a more intimate relationship with his clientele. "We have a big advantage in a couple key areas. Knowledge and selection," Peters said. "Even though Amazon is a million times larger than us, they can't go in and familiarize themselves with each item they carry. That's our No. 1 advantage. Almost daily, people come in and ask for a gift, describing in detail the person the gift is for. Being able to point customers in the right direction in these situations is a major advantage."
Peters has also taken the same tack that many small-business owners battling Amazon have by picking a niche market and becoming a specialist. This enables him to stock a deeper selection than the online giant can. "Barnes & Nobles doesn't carry 10 percent of what we have in stock, and Amazon doesn't even carry half of the books we have," Peters said. "So we have customers who come in and find books here that they can't get anywhere else."
Beyond Books
Taking good care of customers and providing them a wide selection of products has earned the store a loyal following, and smart merchandising choices that reflect its customers' purchasing habits helps to distance it even further from Amazon.
Peters' store carries many items that are outside his core books but relate to customer needs. "When it comes to gifts, most people want to see them it in person, and we have a wide selection," he said. "Also, most people wait till the day before to buy gifts for baptisms, confirmations, first communions, etc, and so it's really a timing thing for them. They can run in and get something nice in five, 10 minutes."
But just because he runs a brick and mortar business, that doesn't keep Peters from mixing it up with Amazon on its own turf. "You can create an account on our website and shop online with us as well," he said. "We deal direct with many small publishers who don't want to sell to Amazon because they know they will squeeze all the mom and pop shops.
Peters' business model echoes the famous words of Hall of Fame slugger Willie Keeler, whose advice to rookies was, "Hit 'em where they ain't."
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