The Tech Antitrust Sideshow vs. Small Business Realities

By SBE Council at 24 February, 2021, 11:06 pm

by Raymond J. Keating-

Given what they do for a living, I’m always struck at how tone deaf some politicians can be.

For example, Members of Congress have long played the game of attacking pharmaceutical companies, labeling them “Big Pharma.” Of course, that ignored the fact that small, entrepreneurial firms overwhelmingly populate the industry (for example, 78.7 percent of employer firms in the pharmaceutical and medicine manufacturing sector have fewer than 100 employees, according to the latest Census Bureau data).

Then, we were hit by the COVID-19 pandemic, and the pharmaceutical industry responded in near-miraculous fashion in creating vaccines, along with offering various therapeutics. It has been “Entrepreneurial Pharma,” if you will, to the rescue.

And now we have members of Congress attacking “Big Tech” – specifically, Facebook, Amazon.com, Apple and Google (or parent company Alphabet) – when individuals, families, entrepreneurs, businesses and employees have been experiencing vast upheaval in their lives, enterprises and careers. Of course, though, the critical services provided by these and other tech firms have become ever more apparent to individuals and businesses during the pandemic.

Safety and Social Distancing via Online Shopping

Consider the recent dramatic jump occurring in online retail sales during the COVID-19 pandemic. According to DigitalCommerce360.com:

• “Consumers spent $861.12 billion online with U.S. merchants in 2020, up an incredible 44.0% year over year, according to Digital Commerce 360 estimates. That’s the highest annual U.S. ecommerce growth in at least two decades. It’s also nearly triple the 15.1% jump in 2019.”

• “Online’s share of total retail saleshas steadily been on the rise—with ecommerce penetration hitting 21.3% in 2020, Digital Commerce 360 estimates. That’s up from 15.8% in 2019 and 14.3% in 2018. The more than five-percentage point gain in ecommerce penetration is by far the biggest year-over-year jump for U.S. retail sales ever recorded. No other year has even reached a two percentage-point gain in digital penetration.”

• “COVID-19-related boosts in online shopping resulted in an additional $174.87 billion in ecommerce revenue in 2020, Digital Commerce 360 estimates.”

In turn, keep in mind that retail overwhelmingly is populated by small businesses. For example, according to the latest Census Bureau data, in the retail trade sector, 90.9 percent of employer firms had fewer than 20 employees, and 98.4 percent fewer than 100 employees. And among electronic shopping and mail-order houses, 92.2 percent of employer firms had fewer than 20 employees, and 97.5 percent fewer than 100 employees.

In fact, in good and bad times, leaders in the digital economy have made real differences in daily life. And that most certainly includes offering vital products to entrepreneurs and small businesses.

Online Platforms Power Small Business Growth

Before and especially during the pandemic, market leaders like Amazon.com have been working with entrepreneurs and small businesses in partnerships. That’s exactly how market transactions work, by the way. Value is created when individuals and businesses trade, with each side gaining, otherwise, they would not take part in the transactions.

Consider how small businesses use and partner with Amazon.com, which boosts sales and hiring growth.

• First, of course, small businesses are customers on Amazon.com for a wide array of products, such as mailing and office supplies, laptops, furniture, and so much more.

• Second, Amazon.com serves as a major marketplace for small businesses to offer their products to customers across the nation and around the world.

On February 3, 2021, Amazon.com reported that it supports “more than 1.7 million small and medium-sized businesses (SMBs) around the world that are selling their products in our store.”

Amazon.com went on to point out: “SMBs now makeup close to 60% of the sales in our store, and they have created more than 2.2 million jobs globally as a result of selling on Amazon. In fact, SMBs from all 50 states that sell with Amazon are more than twice as likely to see 25-50% hiring growth compared to those that do not, according to research by IDC.”

More broadly, Amazon.com has noted, “In the U.S., Amazon works with more than 2 million independent sellers, authors, content creators, developers, delivery businesses and IT solution providers.”

It also was noted in the pre-pandemic January 2020 IDC report:

• “Small businesses that sell in Amazon’s stores are 2.5 times more likely (46% versus 18%) to have seen revenue growth of 25% or more in the past year than those not selling in our stores. Only 3% of those selling in Amazon’s stores saw flat or declining sales growth, compared to 20% of those not selling in our stores. As a whole, 94% of SMBs selling in Amazon’s stores said they’d seen some growth in the past year, compared to 66% of businesses who are not selling in our stores.”

• “81% of Amazon sellers sell via other online channels, and generate, on average, 54% of their revenue from offline channels.”

• “U.S.-based sellers represent a majority of third-party businesses and sales in our U.S. store, and we enable these SMBs to reach customers in more than 180 countries around the world, with rapid sales growth in Europe, Canada, Mexico, Japan, and beyond. In 2018, companies based in the U.S. sold more than $2 billion in our international stores.”

And in September 2020, well into the pandemic, Amazon.com reported the following:

• “Despite the impact COVID-19 has had on small businesses, many American SMBs selling through Amazon have experienced continued growth. Third-party sellers continue to account for more than half of all units sold in Amazon’s store, and even during the pandemic, third-party sales continued to grow faster than Amazon’s first-party sales. In the twelve-month period ending in May, American SMB sellers sold more than 3.4 billion products, up from 2.7 billion year-over-year, and averaged $160,000 in sales, up from approximately $100,000 a year prior.”

• Amazon “announced it is on course to invest $18 billion this year to help independent businesses sell to customers, including investments in logistics, tools, services, programs, and people. Since the beginning of the year, Amazon has launched more than 135 free tools and services to help sellers grow their sales in Amazon’s store.”

When Small Businesses Succeed, Big Tech Succeeds

Jeff Wilke, CEO Worldwide Consumer at Amazon, was quoted, “Amazon’s success is directly tied to the success of independent businesses across the U.S. We are passionate about supporting small businesses, investing and inventing on their behalf to help them be resilient through COVID-19 and beyond.”

Amazon.com also has highlighted the following about its cloud computing service: “Amazon Web Services (AWS) is helping hundreds of thousands of SMB startups, customers, and partners launch and scale businesses that enrich their communities and the world.”

Along these lines, an SBE Council June 2020 small business survey found benefits for small businesses thanks to cloud services:

• “Saving time and money (89 percent) is the most widely perceived benefit of cloud services among small businesses, followed by improved employee productivity and collaboration (84 percent). Nearly eight in ten agree that cloud services have helped their business better communicate with or manage customers during COVID-19 (79 percent) and have been critical to the survival and operation of their business amid the outbreak (76 percent).”

• “Saving time and money (89 percent) is the most widely perceived benefit of cloud services among small businesses, followed by improved employee productivity and collaboration (84 percent). Nearly eight in ten agree that cloud services have helped their business better communicate with or manage customers during COVID-19 (79 percent) and have been critical to the survival and operation of their business amid the outbreak (76 percent).”

Small Business Pivots/Accelerates to Tech

In February 2021, the Small Business Roundtable and Facebook released the “U.S. State of Small Business: 2020 – A Challenging Year for SMBs,” and among the findings were:

• “In addition, more businesses started selling online for the first time. The proportion making no sales through digital channels in the past 30 days fell from 35% before COVID-19 to 13% in the 30 days prior to the December survey, and the proportion making 100% of their sales online rose from 13% to 20%.”

• “Entrepreneurial Tech” has been and increasingly is important to the success of millions of entrepreneurs and small businesses. That has accelerated during the COVID-19 pandemic, and will continue long after the pandemic, and its consequences, fade into the past.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.