24 Sep 2014

From Amazon to Zola

Iris G. writes:*

In the past week, Amazon, the online warehouse, was in the Dutch news since it might finally come to the Netherlands. For the past years, persistent rumours of this possibility have sparked debates about what this would mean for Dutch retail stores, particularly those specializing in books or home office supplies. There are concerns that the introduction of Amazon in the Netherlands could not only form some serious competition to its Dutch equivalents, but might also lead to the downfall of many small, local businesses since they would not be able to compete with Amazon's low prices. On top of that, the Amazon working environment is questionable at the very least, according to many articles and stories describing the experiences of employees, which certainly does not win the company any sympathy votes. The question is whether Amazon, with all its pros and cons, would truly pose that much of a threat to small, local or specialised businesses.

"Au Bon Marché": the inspiration for Zola's novel
This discussion is, of course, nothing new. In fact, it is already over a century old. A great early example is given by Émile Zola, the famous French writer, in his book 'The Ladies' Paradise' ('Au Bonheur des Dames') which was originally published in 1883.** The book describes the rise of a large department store, revolutionary at the time, in which all kinds of goods are sold: fabric and clothing, but also accessories and furniture. The customers are seduced by the great wealth of choice, the discount-deals, the convenience of having everything under the same roof and the option of home-delivery. At the same time, the employees have to work long hours under harsh conditions, and there is an outrage amongst the local retailers, who see their sales dwindling and fear for their business since competing with the mighty warehouse is almost impossible. Sounds familiar?

Even though the story is fictional, it was modelled after existing organisations and captures the concerns of that time. As it turns out, those concerns are still very relevant. However, it is obvious that the rise of large organisations did not lead to the absolute end of the individual, small-scale retailers, who still exist in the Netherlands (and elsewhere) after decades of competition with large companies. They may not dominate the Dutch streets like they did in the time of Zola's writing, but that is only to be expected since the population of the Netherlands tripled since that time and demand has grown with it.

It is true that large Dutch online retailers and Amazon look-a-likes (such as bol.com, or wehkamp.nl) would have to step up their game in order to survive, but competition in itself is not a bad thing. Amazon is the revolutionary department store of our time, and while there are unpleasant sides to the company, as mentioned above, it has been a game changer to the market of online retail to which aspiring competitors will have no choice but to adapt. The beautiful, fun, quirky and original stores, on the other hand, will persist exactly because they differentiate themselves from this market and do not aim to reach the largest audience possible.

Bottom Line: By catering to a specialised customer base, providing personalised service, or simply offering an unique experience, small retailers have withstood large, cheap and profit-maximizing organisations for over a century. They will survive Amazon, too.

* Please comment on these posts from my microeconomics students, to help them with unclear analysis, other perspectives, data sources, etc.

** Zola's book is an easy read and a timeless classic -- and available on Amazon.

1 comment:

Menno said...

I agree with the general sentiments of this blogpost. However, I am not sure if I buy into your characterisation of Amazon as a good corporate citizen, competing by providing better services for lower prices.

Bezos has used Amazon's fortunes to kill small and upstart competitors. A well-documented example of this is that it drove Diapers.com out of the market by selling diapers at a loss: http://www.slate.com/blogs/future_tense/2013/10/10/amazon_book_how_jeff_bezos_went_thermonuclear_on_diapers_com.html

Oh, and the working conditions that make the low prices possible may not be compatible with Dutch values: http://www.radiolab.org/story/brown-box/

While Amazon has revolutionised online retail and offers great services, I am worried about it acting an aggressive monopolist.

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