COVID-19 is surging again. European health officials are ordering more lockdowns, quarantines and travel restrictions. This is the time when small business owners, facing a financial tsunami of locked-down customers and economic headwinds, should invest in Digital Safety Net tools and services that can help them survive. But in a classic case of bad timing and missing the raging pandemic forest fire because they are focusing too much on the competition policy trees, the European Commission, which should be helping small businesses, is instead attacking Amazon and foreshadowing a broader assault on large digital companies that are so vital to small business survival.
In its Amazon investigation, the Commission is targeting a marketplace that helps 800,000 European businesses reach more consumers, generate more revenue, and operate more efficiently. Our recent study concluded that online marketplaces deliver $145 billion in value to U.S. small businesses, and that is likely to exceed $300 billion in 2020. Certainly European small businesses benefit similarly from marketplaces.
Let’s cut to the heart of the matter — there is vibrant competition in the online marketplace sector and online marketplaces are only a very small segment of European retail. In addition to Amazon, European product sellers can choose from many strong global marketplaces, including eBay, Wish, Etsy and Shopify. Strong European-focused marketplaces include Allegro, Zalando and bol.com. Moreover, the Commission’s own e-commerce report found that only 4% of Europe’s retailers sell solely through marketplaces, while more than 90% primarily sell through their own branded web stores. Thus, the Commission’s own data undermine its premise that “online marketplaces” or “online marketplace service providers” are substantial markets that Amazon dominates.
The Commission also claims that Amazon uses its sellers’ data to understand markets so it can nefariously produce competitively-priced private label products. This perspective is perplexing, as across Europe private label market share is generally above 30% and growing. In 2019, Nielsen Research found that Spain, Switzerland, and the United Kingdom have the highest private label market shares, at or above 50%. In Germany, Europe’s largest economy, private label market share has been above 40% for several years. It’s not realistic to claim that private label market leaders across the continent are operating without collecting and utilizing data on their customers’ purchasing preferences.
Is the Commission also suggesting that the rules for online marketplaces should differ from the rules for department stores or supermarkets? Surely, all the brick-and-mortar stores use purchasing data to develop, market, and price their private label goods. Having two sets of rules for online marketplaces and traditional retail will only depress innovation and make marketplaces less valuable to small businesses.
As COVID-19 continues to threaten the small business economy, business owners need every survival tool to be freely and flexibly available. The Digital Safety Net is an important arsenal as it includes so many online platforms and tools that accelerate customer acquisition, drive revenue growth, and make small businesses more efficient and profitable. Instead of using flawed anecdotal data to undermine important small business tools at the worst possible time, the European Commission should work to expand digital opportunities for small businesses and help job creators survive until there is a COVID-19 vaccine and the economy recovers.