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Three Things To Remember About Amazon’s Business Model On Cyber Monday

By Alan Pyke

"Three Things To Remember About Amazon’s Business Model On Cyber Monday"

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The Monday after Thanksgiving gives shoppers all the marketing hype of Black Friday with none of the violence, but confining one’s deal hunting to so-called “Cyber Monday” isn’t much of an improvement in terms of what sorts of corporate behavior online shoppers are rewarding with their dollars. The web shopping day was invented by the National Retail Federation in 2005 as a way to boost online sales by tapping into shoppers’ exhaustion with Black Friday crowds.

As the world’s largest internet retailer, the online shopping giant Amazon.com is the primary beneficiary of the industry’s “Cyber Monday” marketing campaign. Amazon saves consumers lots of money, but the business model that makes those prices possible is based on much of the same sorts of worker exploitation and legislative skulduggery that makes old model retailers such common targets for scorn. Here are a few things to remember on Cyber Monday about how Amazon makes its money:

1. Amazon warehouses are the retail equivalent of sweatshops. Amazon’s seemingly miraculous ability to deliver any product to any person in a matter of days or even hours isn’t a miracle. It’s the product of a lot of human sweat, strain, and pain, much of it done in extreme conditions and under constant threat of being laid off. The massive warehouses that Amazon contracts with to fill its orders are notoriously brutal employers. The hours are long, the pace is unremitting, and anyone who complains or gets hurt gets fired. Reports of 100-degree temperatures in warehouses and of wage theft through things like off-the-clock security screenings are common at Amazon warehouses. Mother Jones reporter Mac McClelland worked at one Ohio warehouse that fills Amazon orders and was subjected to mandatory overtime and threatened with termination if she cried on the job or got injured. A BBC investigation found that working conditions in Amazon warehouses significantly raise employees’ odds of both mental and physical illness.

2. After squeezing every moment of productivity it can out of workers, Amazon and its partners fight to keep them from getting unemployment benefits. Most of Amazon’s warehouses are staffed through temp agencies, which make their money by charging the workers a fixed percentage of their paycheck for connecting them with the warehouse. In Pennsylvania, the temp agency that works with Amazon’s warehouse suppliers made headlines last year for its commitment to fighting against unemployment insurance claims made by laid-off Amazon workers. Keeping a jobless person off of unemployment benefits helps the temp agency’s bottom line. Amazon doesn’t have to get its hands dirty with these fights, because its business model shifts the responsibility onto the third-party logistics firms that run the warehouses and the temp agencies that provide the warm bodies those warehouses need.

3. The “Amazon loophole” deprives state and local governments of hundreds of millions of tax dollars they could use to provide public services. Online commerce makes for a murky sense of tax jurisdiction, and retailers like Amazon have traditionally derived some part of their business advantage by avoiding sales taxes. The so-called “Amazon loophole” costs states around $23 billion each year in lost revenue that could go toward schools and other cash-strapped public services. The Senate recently passed a bill that would give states the right to force Amazon and other online sellers to pay the sales taxes they owe. Amazon has made a big show of fighting similar legislation at the state level, although a year after California’s law closing the Amazon loophole went into effect the company is once again expanding its presence in the state. The law brought in $260 million in its first year that would otherwise have gone into the pockets of Amazon and other tax-avoiding online retailers. The company has done an about-face on federal efforts to close the loophole named after it, instead making a show of public support for the Marketplace Fairness Act.

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