The problem with the online marketplace

Why economies of scale create Amazon-like companies and potential solutions to the negative symptoms

Published 2020-06-01 by Olivia Mackintosh
Updated 2022-02-18

There has long been an argument that so-called “e-commerce” is causing the “death of the high street”. Whilst this may be true in the literal sense, I’m not convinced by its moral insinuation. Time passes and businesses adapt. We have all recently realized the great utility of e-commerce and depend on it greatly for our goods and services. There are however, more pernicious, subtle business tactics that are slowly eroding customer trust and I believe it is precisely these effects that are are symbolic of the “death of the high street” from a moralistic perspective.

In order to understand the moral implications of the e-marketplace, we must step back and think about the philosophy of the enabler: the internet. Many often view the internet as being created in the image of equity and freedom: a distributed communications network where every node is equal. Whether or not this was the original motivation is not relevant. The important factor is the envisioning of its current purpose by its netizens. The text “A Declaration of the Independence of Cyberspace” published in 1996 by John Perry Barlow is an important one. It’s critiques have long created a dichotomy between the self-governing internet and, the regulated internet that serves business. I argue that this dichotomy is a poor framework to shape discussion and we should instead focus on a new pragmatism that involves tangible ideas along with the political activism that is currently so prevalent. How can we create a federated forum of ideas; casting aside political abstractions and focussing instead on objective mechanics that we are are able to restructure.

The dissatisfaction of Amazon and its growing boycott is an archetypical example of the problems with the marketplace. As we realize our dependence on this mainframe, we appreciate the enormity of our challenge. There is a shift from single-market companies to those with propositions across many markets: a horizontal-to-vertical shift. Or in other words: Amazon sell more than books now. Google and Facebook similarly are targeting a larger swath of the market. Online aggregate store-fronts and apps like eBay, Amazon FBA, and Treatwell etc. create an illusive “e-high street” to facilitate competition and to give opportunity to choose the best goods and services for a particular need. This still suffers from “the Amazon problem” of centralization however.

I recently ordered a book from eBay in the believe of dealing with an independent. Upon receiving the book in Amazon packaging I realized the problem with the online marketplace in a real way. This is the surreptitious practice of so-called “drop shopping” whereby retailers hold no stock but instead have goods dispatched directly from a warehouse. It is still a moral grey area. Does the stock belong to the seller or to Amazon? Or in other words: did the seller order the item from Amazon with my shipping details or did they utilise the Fulfilled by Amazon service? Regardless, this is still problematic for many and is a symptom of an economies of scale issue.

Talks of a publicly owned Amazon makes for interesting conversation, but the necessary costs in bootstrapping the distribution warehouses and supply chains mean that this is likely not going to be feasible any time soon. Instead, how might we create publicly-owned aggregate store fronts similar to eBay where small independent businesses can participate? Can we tax large companies to compensate for their economies of scale and to ensure a fair return to society? There have been numerous attempts over the years to create decentralized or unregulated marketplaces free from government control but these come with a large number of unethical consequences and don’t have any social utility. A regulated e-marketplace or directory allowing businesses to advertise goods and services could have positive social consequences whilst not requiring an idealist or radical overhaul of our entire economy.

These are only a couple of ideas from one person. If we come together to ask how we might tackle problems of today, maybe we can advance our understanding of today’s issues and make tangible improvements to all of our lives as well as the health of the systems we rely on - especially in a post COVID-19 world.

* Please note that the author does not necessarily endorse or promote any of the companies listed in this article - they are merely illustrative examples.

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