Tag: Amazon

By Jan Vermeulen for MyBroadband

Amazon announced in June that it was hiring 3 000 new customer service agents in South Africa. The company was looking for skills ranging from basic computer literacy to technical experts.

These new employees are required to work from home and provide support to Amazon customers in North America and Europe.

This means you needed access to a high-speed ADSL or entry-level fibre connection to your home, and to be willing to work shifts the coincide with North American business hours. Some job listings explicitly state a 10Mbps minimum line speed and that LTE connections are not suitable.

According to Amazon, the addition of these 3,000 permanent and seasonal full-time positions will bring the company’s total permanent workforce in South Africa to 7,000.

MyBroadband recently had the opportunity to interview a successful applicant for one of Amazon’s customer service roles, who spoke to us on condition of anonymity. The interview was conducted in person and we were able to verify the authenticity of the claims made.

Impressive, efficient systems
The first thing our jobseeker noted was that every stage during his application and training process was like clockwork.

Amazon communicated what was required at every step and everything was streamlined for efficiency.

After the application through the Amazon jobs website, there was about a week’s wait before the applicant heard that he had made it through the initial screening stages.

Amazon asked whether he was still interested in the position. If he was still interested, he was informed that he needed to complete an aptitude test.

Aptitude testing
This extensive aptitude test is conducted online and took about two hours to complete.

Amazon tested for fluency in English, and reading and listening comprehension.

It then placed the applicant under pressure by having them listen to a scenario where a customer was complaining about something. The recording may be paused at any moment and they were required to answer questions such as “When was this item meant to arrive?”

As he was listening to the customer complaint, Amazon would also pop up perception questions like “Is this customer happy?”

Gruelling training
Another week after the aptitude test, Amazon responded with a job offer. It contained the conditions of employment, salary, and details on company perks like a medical aid, provident fund, and Internet allowance.

Our customer service associate-in-training said that they were given an allowance of R1 200 which had to be put towards their Internet connection.

His total pay package was around R12 000 per month.

The corporate medical aid was provided through Discovery and the provident fund through Momentum.

After accepting the offer, he received a call from an Amazon manager who congratulated him on his appointment.

Two weeks later, he received an email on a Thursday stating that he would receive everything he needed the following day and that his training would begin that Monday. The email also contained instructions on how to set up his equipment.

On Friday morning, a courier arrived with a Lenovo all-in-one computer, an uninterruptible power supply, and a set of hardware security keys. The computer was configured so it could only be used for Amazon.

On Monday morning at 08:00, our trainee was online with a group of 30 other people, a training officer, and his assistant.

They spent eight hours a day in a rigorous and strict training programme.

“Amazon expects a very high level of self-discipline,” he said. “During training, being absent is just not an option.”

If someone was not online at precisely 08:00 in the morning when training was scheduled to start, it was no small issue. The training officer was immediately on the phone to the absent trainee to find out what was going on.

Long hours, strict self-discipline
Trainees were told that after they completed the programme, their working schedules would be quite rigid.

To serve the North American market, your shift in South Africa would begin between 16:00 and 19:00 in the evening and run for eleven hours until the following morning.

This includes an unpaid lunch hour and two paid 15-minute tea breaks.

When you step away from your workstation to take a break, you must set your status as being on a break. If you couldn’t take your break at the scheduled time because you were finishing up a call, you must note that in the system.

Trainees were also informed that they should prepare for the fact that during the first six months of work they will not be able to swap shifts with other customer service associates.

Performance monitoring
Once you graduate from training and you begin working, Amazon monitors your performance.

However, this is not a fixed number applied to all customer support agents. Amazon makes provision for new recruits to go through a period of improving as they become more familiar with the job.

“Everything is measurable,” the interviewee said. “You set a baseline performance level in that first week.”

As long as you are always improving, Amazon is happy. The company also works hard to try and retain staff, he said.

Exit procedure
The person we interviewed did not end up becoming an Amazon staff member. They bowed out during training for personal reasons, and because they felt they would not be able to multitask at the pace needed to excel at the job.

He explained that during training, he learned that they would be required to look up information related to a customer’s query in the Amazon knowledge base for support agents while on a call, and then proceed based on the guidelines provided.

“It’s extreme multitasking,” he said.

When he informed Amazon that he did not wish to continue, there was genuine concern. They wanted to know if they had done something wrong and whether they could be clearer in explaining what the job entailed so applicants would know exactly what to expect.

He was also caught off-guard when Amazon said they would pay him for the time he spent in training.

“It was truly impressive,” he said. “It would be great if South African companies could operate at this level of efficiency.”

Is the adult colouring book craze dead?

By Adam Rowe for Forbes

In 2015, adult colouring books became the dark horse of the publishing industry, as a surprising surge in sales boosted major players’ revenues. In 2016, there was no end in sight. In 2017, the bottom fell out of the adult colouring book market and, this year, the trend is officially dead.

So it seems, at least. It’s possible that adults still enjoying colouring as much as ever, but independent publishers — whose sales numbers aren’t reported with the same rigour as those of traditional publishers — have cornered the market. Here’s a dive into the timeline of the adult colouring trend, as told through the cottage industry of articles covering the phenomenon.

A July 2015 New Yorker article described the early stage of the adult colouring renaissance, noting a connection to the popularity of other infantilising activities like adult summer camps and adult preschool. The trend was picking up, even if the numbers hadn’t come out yet: Dover decreed August 2, 2015, as the first National Colouring Book Day, and Bantam Books and George R.R. Martin teamed up on a Game of Thrones-themed colouring book. In December, Business Insider profiled a self-publishing colouring book creator who had earned $329,000 in Amazon royalties in 2015 alone, by selling her books via Createspace — noting that colouring books were at the time holding five out of the top 10 spots on Amazon’s hourly-updated bestsellers list.

The colouring book sales spike continued across 2016, to much media attention as numbers came to light: Nielsen Bookscan estimated 12 million colouring books sold in 2015, up from a paltry one million the year before. The hot takes were entertaining: America’s obsession was a cry for help, while studies showed colouring exercises reduced symptoms of depression and anxiety. Retailers doubled down on art supplies and colouring books. The Canadian company Newbourne Media LP released a music CD/colouring book combination product. Adult nonfiction books across the industry sold 12% better in the first half of 2016 than the same period in 2015, and Publishers Weekly credited colouring books.

In 2017 the cracks began to show. Barnes and Nobles’ third-quarter profits, released in March 2017, revealed sales were under expectations, though still strong, and the decline in colouring book (as well as Adele album) sales was responsible for “nearly one-third of the sales decline.” By August, the trend was declared dead.

But did interest in adult colouring books really wane, or was it diverted away from traditional publishers and towards the retailer to rule all retailers, Amazon? The evidence lies in a slide from a 2016 presentation by Author Earnings, one of the more authoritative analysts in the murky world of book data. A chart breaking down online book sales by genre shows that about 60% of crafts/hobbies/games books in 2016 were being sold by non-traditional publishers (indie self-publishers as well as Amazon imprints). That’s a huge percentage, second only to the formidable romance genre, and it indicates that in 2016, the year that Barnes and Noble’s third-quarter colouring book profits began levelling off, most online craft book sales went to Amazon and self-publishers.

In other words, book publishers might have lost their colouring book market share to the same retail giant who endangered their industry in the first place.

Author Earnings hasn’t offered comparable data in 2017 or 2018, and major industry databanks like Bookscan don’t track Amazon’s data, so it’s impossible to say for sure whether the colouring book craze is really over or whether faster-adapting colouring book self-publishers have used Amazon as a channel to scoop up the majority of what was once traditional publishers’ cash cow. But as publishers turn to the digital audiobook as the next popular format (sales are up 32.1% in Q1 2018!), they should be wary of Amazon’s growing interest in audiobooks.

By Jordan Valinsky, CNN Business

Amazon said this year’s Prime Day was “once again the largest shopping event” in its history.The company said sales from its two-day shopping event surpassed its sales for last year’s Black Friday and Cyber Monday combined.

Amazon didn’t reveal specific figures, like revenue. It also doesn’t typically disclose numbers for specific shopping days, with the only glimpse of sales being in its quarterly earnings.

A record number of Prime members in the United States shopped during the extravaganza, according to Amazon. In total, Prime members globally bought more than 175 million items.

Prime Day was also successful for Amazon’s line of deeply discounted gadgets. It was the “biggest event ever” for the electronics, which encompass the Fire TV Stick, Echo smart speakers and Fire tablets, among others.

“Members purchased millions of Alexa-enabled devices, received tens of millions of dollars in savings by shopping from Whole Foods Market and bought more than $2 billion of products from independent small and medium-sized businesses,” CEO Jeff Bezos said in a release. “Huge thank you to Amazonians everywhere who made this day possible for customers.”

In the United States, Instant Pots and DNA kits were the top-selling items. Prime members in the United States also bought more than 100,000 laptops, 200,000 TVs and more than 1 million toys.

Prime Day also had a halo effect on Amazon’s competitors. Large retailers, or companies that generate more than $1 billion in revenue, had sales jump 68% over the two-day period, according to Adobe Analytics. Smaller retailers’ sales also spiked 28% for the same period, a reversal compared to last year when sales declined.

“This suggests that people are comparison shopping more than ever and will open their wallets to those who offer the best deals, regardless of the size of the retailer,” said Jason Woosley, vice president of commerce product and platform at Adobe in a release.

By Andrew Liptak for The Verge

Walmart has introduced an unlimited grocery delivery service called Delivery Unlimited, as spotted by TechCrunch. The service is an expansion of the company’s existing delivery and pickup efforts, and costs $98 a year.

The company already offered a delivery service for online orders: customers could have items shipped to their nearest store for free, or to their home for a $9.95 delivery fee for each order. TechCrunch notes that this new annual subscription will cost $98 for a year, or $12.95 a month, and allows customers to skip the per-order fee. To use it, customers place their order on Walmart’s site or app, and can select a delivery window for when they want their order delivered.

This annual service comes as Walmart has introduced a number of other initiatives to try and entice online shoppers to its stores, including introducing free, one-day shipping for orders over $35, pickup towers a number of its stores, and even an in-home delivery service that will allow employees into your house to place groceries directly into your refrigerator.

Walmart has been stepping up its efforts against other online retailers in recent months, and Amazon’s Prime membership appears to be the target here. Walmart’s annual fee is lower than Amazon’s $119 annual cost, while Target’s new delivery service with Shipt costs $99 a year, as well as Instacart.

By Stephanie Butzer for The Denver Channel

Amazon will expand its Denver Tech Hub, creating 400 new high-tech jobs in fields like software and hardware engineering, cloud computing and advertising, the company announced Tuesday morning.

Amazon plans to open a new office in downtown Denver to accommodate the new positions. This comes in the wake of the company opening a new office in Boulder in the fall of 2018.

Colorado Gov. Jared Polis said he’s excited the company chose to add 400 new jobs here.

“We have a terrific workforce that continues to attract the ideas and businesses that thrive in a knowledge-based economy and we are a great place to do business,” he said. “Amazon’s current Colorado presence spans from distribution centers to robotics, corporate and operations. It’s wonderful to see their continued investment in our community.”

The new office, which will span 98,000 square feet, will be located in Invesco’s 1515 Wynkoop LEED Platinum building in Denver’s LoDo neighborhood.

Currently, Amazon has more than 350 employees in the Denver area and more than 3,500 full-time jobs in the state. It has invested more than $1.5 billion in the state since 2016.

Death by Amazon

By Rebecca Ungarino for Market Insider

A new “Death by Amazon” index released by the investment-research firm CFRA tracks the stocks its analysts believe could be short-seller targets given their vulnerabilities to competition from Amazon.

The index is full of home goods and electronics retailers like Party City and Bed Bath & Beyond, some of which have seen their entire market value wiped out in recent years.

Investors are familiar with the Amazon effect by now.

The e-commerce juggernaut announces that it is preparing to enter into an industry – be it medication, brick-and-mortar grocery, entertainment, or others – and the stocks of companies in the new target market fall as jittery investors are struck with the fear that irreversible disruption is coming.

So the investment-research firm CFRA created a new index, “Death By Amazon,” that tracks the stocks its analysts think are particularly vulnerable to Amazon’s expansion and offerings.

“The equally weighted index serves as a retail performance benchmark and short-selling idea generation tool for our clients,” CFRA analysts Camilla Yanushevsky and Todd Rosenbluth wrote in a report to clients earlier this month.

To pinpoint the 20 constituents the analysts believe are poorly positioned to compete against Amazon’s efforts in various industries, they evaluated the companies’ “Share of Voice” data that comes from web-traffic analytics company Alexa Internet (which is owned by Amazon as its other Alexa-named product).

That measure shows the percentage of searches for a keyword across major search engines in the past six months “that sent organic traffic to the respective site.”

For example, the analysts compared how much traffic was going to a national jewelry retailer’s website when consumers search for the term “jewelry” versus how much traffic was going to Amazon for the same search term.
With this kind of analysis, you get an index full of brick-and-mortar retailers whose products are available on Amazon – and apparently less popular through online searches – from floor tiles to party supplies.

To be fair, it’s not the first Death by Amazon index. Bespoke Investment Group had already created its Death by Amazon index, tracking the same theme.

Here are all the stocks listed, in alphabetical order, with how their “Share of Voice” scores for various products stack up against Amazon:

  1. At Home Group
    1-year performance: -40%
    % below all-time high: -46%
    Share of Voice score for “seasonal decor”: 4.2%
    Amazon’s Share of Voice score for “seasonal decor: 19.6%
  2. Barnes & Noble Education
    1-year performance: -38%
    % below all-time high: -74%
    Share of Voice score for “textbook”: 1.3%
    Amazon’s Share of Voice score for “textbook”: 6.9%
  3. Barnes & Noble
    1-year performance: -0.1%
    % below all-time high: -84%
    Share of Voice score for “books”: 23.2%
    Amazon’s Share of Voice score for “books”: 12.2%
  4. Bed Bath & Beyond
    1-year performance: -16%
    % below all-time high: -80%
    Share of Voice score for “cookware”: 2.4%
    Amazon’s Share of Voice score for “cookware”: 23.3%
  5. Best Buy
    1-year performance: -14%
    % below all-time high: -19%
    Share of Voice score for “electronics”: 1%
    Amazon’s Share of Voice score for “electronics”: 8.1%
  6. Big 5 Sporting Goods
    1-year performance: -71%
    % below all-time high: -88%
    Share of Voice score for “fitness equipment”: 0%
    Amazon’s Share of Voice score for “fitness equipment”: 11%
  7. Big Lots
    1-year performance: -6.5%
    % below all-time high: -41%
    Share of Voice score for “cookware”: 0%
    Amazon’s Share of Voice score for “cookware”: 23.3%
  8. Dick’s Sporting Goods
    1-year performance: +15%
    % below all-time high: -43%
    Share of Voice score for “sports deals”: 18.7%
    Amazon’s Share of Voice score for “sports deals”: 24.5%
  9. GameStop
    1-year performance: -31%
    % below all-time high: -87%
    Share of Voice score for “video games”: 7%
    Amazon’s Share of Voice score for “video games”: 17.1%
  10. Kirkland’s
    1-year performance: -49%
    % below all-time high: -81%
    Share of Voice score for “home decor”: 5.4%
    Amazon’s Share of Voice score for “home decor”: 10.8%
  11. Office Depot
    1-year performance: -19%
    % below all-time high: -95%
    Share of Voice score for “office supplies”: 33.1%
    Amazon’s Share of Voice score for “office supplies”: 9.8%
  12. Overstock.com
    1-year performance: -67%
    % below all-time high: -86%
    Share of Voice score for “dresser”: 1.3%
    Amazon’s Share of Voice score for “dresser”: 9.9%
  13. Party City
    1-year performance: -49%
    % below all-time high: -65%
    Share of Voice score for “party supplies”: 22.5%
    Amazon’s Share of Voice score for “party supplies”: 13.2%
  14. PetMed Express
    1-year performance: -40%
    % below all-time high: -60%
    Share of Voice score for “pet supplies”: 5.1%
    Amazon’s Share of Voice score for “pet supplies”: 13.7%
  15. Pier 1 Imports
    1-year performance: -65%
    % below all-time high: -97%
    Share of Voice score for “home decor”: 8.3%
    Amazon’s Share of Voice score for “home decor”: 10.8%
  16. Signet Jewelers
    1-year performance: -49%
    % below all-time high: -87%
    Share of Voice score for “jewelry”: 3.8% for kay.com, 2.9% for jared.com, and 0.12% for zales.com
    Amazon’s Share of Voice score for “jewelry”: 10.7%
  17. The Michael’s Companies
    1-year performance: -43%
    % below all-time high: -67%
    Share of Voice score for “drawing supplies”: 13.1%
    Amazon’s Share of Voice score for “drawing supplies”: 24.5%
  18. Tiffany & Co.
    1-year performance: -5%
    % below all-time high: -31%
    Share of Voice score for “jewelry”: 6%
    Amazon’s Share of Voice score for “jewelry”: 10.7%
  19. Tile Shop Holdings
    1-year performance: -36%
    % below all-time high: -85%
    Share of Voice score for “tile”: 2.1%
    Amazon’s Share of Voice score for “tile”: 22%
  20. Williams Sonoma
    1-year performance: +7%
    % below all-time high: -42%
    Share of Voice score for “cookware”: 16.7%
    Amazon’s Share of Voice score for “cookware”: 23.3%

Google poured billions into its business in 2018

By Julie Bort for Business Insider US

Google doubled its capital expenditure spending in 2018 to R344-billion, which included spending on offices and tech infrastructure.

Its cloud unit also got the lion’s share of new hires in the quarter, the CFO of parent company Alphabet said.

Google’s cloud computing efforts were a mixed bag in 2018 but the company on Monday said that it invested heavily in 2018, and will continue do so in 2019, albeit maybe not at the same pace.

During its year-end earnings report on Monday, Google revealed that it doubled its capital expenditures in 2018, to R344-billion, up from R168-billion in 2017. The hefty spending went towards everything from new office facilities to accommodate Google’s growing workforce to bolstering its infrastructure such as datacenters and servers.

It’s tough to say exactly who much of that capex went towards Google’s cloud business specifically, but the company has made it clear that investing in the cloud is a priority. Google said it launched its 18th Google Cloud region in the fourth quarter and pointed to plans for continued expansion in the US and abroad.

In comparison, Amazon spent R151-billion cash on capex in 2018, split between fulfillment operations (like warehouses) and AWS, it said. And Microsoft said it spent R214-billion.

Google also hired madly for its cloud unit, with more than 4 000 new hires in the final three months of the year. “The most sizeable increases were in cloud, for both technical and sales roles,” Alphabet CFO Ruth Porat said during the conference call.

Porat noted that spending on talent and equipment will continue in 2029, though the pace will cool off compared to 2018. Capex, she said, will “moderate quite significantly.”

How does Google’s cloud business compare?
Google is spending to catch up. Revenue from its cloud business lags Amazon Web Services and Microsoft, although Google does likely have a multibillion cloud business. It’s a bit tough to tell because Google doesn’t break out cloud revenue. It lumps it in its “other” category which also includes the revenue it makes from its Google play app store and its hardware devices like Google Home.

That “other revenue” category was R8-billion in the fourth quarter of 2018, up from just under R66=billion for the year-ago quarter and a sizeable portion of that is generated by its app store. Google noted on Monday that the number of Google Cloud Platform deals worth more than R13 million more than doubled in 2018 and that it ended the year with more than 5 million paying customers of its cloud productivity tools, but otherwise offered little new information by which to measure the size of its Cloud business.

For comparison, AWS generated R99 billion in net cloud sales for Amazon in the fourth quarter.

Microsoft also doesn’t disclose specific revenue figures for its cloud, Azure, so a direct comparison here is even harder to noodle out. The unit that includes Azure is called “Intelligent Cloud” and it generated R125 billion in the same quarter. However, despite putting “cloud” in the unit’s name, that unit includes a lot of classic software products, including Microsoft’s popular database and Windows Server, its operating system for servers. Those are both older, massive businesses compared to Azure and are not what anyone would consider a cloud service.

Most market experts believe that AWS is way ahead. One researcher, Synergy, puts AWS at 40% market share in cloud.

Keep an eye on the new boss
Of course the big news for Google’s cloud efforts in 2018 was its change of leadership. Near the end of 2018, Google board member Diane Greene left. Google hired Thomas Kurian to replace her. He left Oracle where he helped build Oracle into a database and applications giant during his decades there, and then lead Oracle’s cloud efforts. Oracle’s cloud is growing quickly by internal metrics as it moves its customers from buying its software to renting its software on its cloud. But Oracle’s cloud is not exactly taking the tech industry’s breath away, so his performance at Google Cloud will be a test for him and the company.

There’s been a lot of speculation about whether Kurian will embark on an acquisition spree to help Google’s Cloud catch up with the competition. Google CEO Sundar Pichai kept mum on Monday when asked about any potential big deals or changes in strategy under Kurian. Pichai spoke of “continuity” and focusing on the parts of the business where the company is seeing good returns.

Even with all the shrouding of investment and financial results, the cloud industry is often considered a three-player race, with Amazon in the lead, Microsoft on its heels, Google in third and a variety of players, from Alibaba to IBM to Oracle, in the chase pack.

Amazon loses $250-billion in 8 weeks

By Jake Kanter for Business Insider US

Amazon has lost $250 billion (R3.7 trillion) in market value since it became a trillion dollar company in September.
It took Amazon 18 years to reach a valuation of $250 billion after first going public in 1997, Fortune pointed out.
Amazon’s quarterly results missed analysts’ expectations and ignited worries that the tech company is facing stronger competition.

If the giant scale of America’s first trillion-dollar companies Apple and Amazon can make movements in their stock price seem a little abstract, then Fortune provided some timely context on Monday.

The publication pointed out just how marked Amazon’s share price decline has been in recent weeks, with a little bit of history about the online retailer, which first went public in 1997.

After hitting the heady heights of a $1.02 trillion valuation on September 4, when it closed at $2,039.51 a share, Amazon has since taken a heavy hit. The company’s share price was down to $1,538.88 on Monday, tearing around $250 billion (R3.7 trillion) off its value in an eight-week period.

Amazon first hit a market cap of $253-billion on July 24, 2015 – 18 years after it first went public.

Macrotrends
Amazon’s quarterly results on Thursday missed analysts’ expectations and ignited worries that the tech company is facing stronger competition. Amazon’s stock has fallen 14% since then – its worst two-day decline since 2014, Reuters said. It relinquished its spot as the second-largest US company by stock market valuation to Microsoft.

Some $200-billion has been wiped off the value of FAANG companies – Facebook, Apple, Amazon, Netflix, and Google – since Thursday, as a stream of Q3 earnings trickle in.

Amazon reaches $1trn value

By Bryan Rich for Forbes 

Today, Amazon became the second company (following Apple) to cross the one trillion-dollar valuation threshold.

This stock is up 72% year-to-date. It has doubled in the past year and has nearly tripled since Trump’s election. That’s what happens when you have a pour gasoline (economic growth) on a fire (a monopoly). No one should love Trump more than Jeff Bezos.

But at 161 times earnings, the market seems to be betting on the Amazon monopoly being left to corner all of the world’s industries. That’s a bad bet.

Much like China undercut the competition on price and cornered the world’s export market, Amazon has undercut the retail industry on price, and cornered the world’s retail business. That tipping point (on retail) has well passed. And as sales growth accelerates for Amazon, so does the speed at which competition is being destroyed. But Amazon is now moving aggressively into almost every industry. This company has to be/will be broken up.

The question is, how will the market value an e-commerce business that would no longer be subsidised by the high margin Amazon cloud business (AWS)? A separation of the businesses would put Amazon’s e-commerce margins under the Wall Street microscope (as every other retailer is subjected to) and materially impact a key sales growth driver for Amazon, which is investment in innovation (R&D).

By Rana Foroohar for The Financial Times

As Amazon heads for a $1-trillion valuation, the company usually speaks softly and carries a big stick. CEO Jeff Bezos, the world’s richest man, has remained mostly silent as Donald Trump has accused his company of everything from tax evasion to gutting the US postal service.

But criticism from progressives such as Bernie Sanders is another story. Last week, Sanders said too many of the company’s workers are on public assistance, and he plans to introduce legislation to make big companies such as Amazon pay for offloading the cost of low wages to the state.

Amazon fired back in a blog post, saying the Vermont senator’s comments were “misleading”, and it encouraged employees to share their stories with him.

They should, because it would help open up the black box that is the online retailer.

The company is approaching the first anniversary of its HQ2 search, a highly publicised but opaque bake-off between cities seeking to host its second corporate headquarters. (Seattle, home to the first, cannot accommodate more growth, in part because housing prices have risen so much.)

Amazon says it plans to pick a city on the basis of metrics including the quality of infrastructure, human capital and transport. Yet it has rejected many cities that score well in such areas and required officials to sign nondisclosure agreements about the details of their bids.

The current short list seems to be heavy on locations with high-ranking US senators and those that included billions of dollars in tax credits and other subsidies in their bids.

Meanwhile, Amazon recently secured a very unusual procurement deal with American local governments. It will purchase all the office and classroom supplies for 1 500 public agencies, but will not have to guarantee them fixed prices for the goods. The purchasing will be done through “dynamic pricing”, in which the final charges depend on bids put forward by suppliers on Amazon’s platform.

It is a stunning corporate ju-jitsu, given that the whole point of a bulk purchasing contract is to guarantee the public sector competitive prices by bundling together demand.

While Amazon claims to offer discounts, a study conducted by the nonprofit Institute for Local Self-Reliance concluded that one California school district would have paid 10%-12% more if it had bought from Amazon. And cities that want to keep on using existing suppliers must move that business to Amazon.

This adds up to three things. First, companies such as Amazon, which can leverage data and the network effect to not only play in the market but become the market, are like the house in a Las Vegas casino. They always win.

Communities that offer subsidies to lure big headquarters may see positive headlines and short-term gains but the end result is almost always negative. One recent study found that 70% of such subsidies fall into the category of property tax breaks and job creation tax credits. The big companies pay less for their real estate, but human capital is undermined, because property taxes often fund schools in the US.

State and city business subsidies have tripled since the 1990s, which leads to a snowball effect — employers that demand skilled workers and good infrastructure are degrading the tax base that creates them.

Amazon’s HQ2 competition is taking place at a time when states are less prepared for an economic downturn than they have been in years: it is the wrong moment for local leaders to starve their tax coffers to enrich such a wealthy company.

Second, I see parallels in Amazon’s behaviour to the lending practices of some financial groups before the 2008 crash. They used dynamic pricing, in the form of variable rate subprime mortgage loans, and exploited huge information asymmetries in their sale of mortgage-backed securities and complex debt deals to unwary investors including cities such as Detroit.
Amazon, for its part, has vastly more market data than the suppliers and public sector purchasers it plans to link.

Indeed, I see more and more parallels between online groups and large financial institutions. They each sit in the centre of an hourglass of information and commerce, taking a cut of whatever passes through. Like a big investment bank, Amazon can both make a market and participate in it.

Such companies need systemic regulation to prevent them from unfairly capitalising on those advantages. Senator Mark Warner’s recent white paper on platform technology regulation points to “diseconomies of scale — negative externalities borne by users and society as a result of the size of these platforms”. The comparison reminds me of the moral hazard problem posed by the “too big to fail” banks.

Finally, Amazon’s behaviour suggests that its leaders are living in a cognitive bubble. The company will inevitably reach a deal with a desperate politician in one of the HQ2 bid cities. But old local political machines are dying. There is no guarantee that the new generation of progressive candidates that look likely to win in November’s midterm elections will be as friendly to big business.

Amazon has a big stick. But the one wielded by populists in years ahead may be bigger.

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