Banning SMBs from Online Marketplaces Limits Opportunity, Raises Barriers, and Harms Competition

By at 22 June, 2021, 8:14 am

By Karen Kerrigan –

POLICY ALERT: Impact of House Antitrust Bills Would be Far-Reaching for the Economy, Harm Small Businesses

As the wave of lockdowns closed much of the country around this time last year, Americans felt real anxieties about leaving their homes to shop for even the most basic necessities. The economic upheaval hit small businesses hard as government mandates deemed their stores and restaurants “nonessential.”  In response, small businesses and consumers turned to online tools and services to sell and purchase their products and goods. Small businesses accelerated offerings such as home deliveries, curbside pickup, and buy online and pick up in store (BOPIS). The solutions adopted by small businesses kept their doors open, expanded their digital footprints, helped them innovate, and kept workers employed during the pandemic.

But unfortunately, some are using this dynamic to argue that small businesses are blocked by big companies from competing and reaching customers.

Competition and Entrepreneurship are Thriving, Especially in Retail: In 2020, 822,000 applications were filed to launch retail businesses — an increase of 58.2% over 2019.

Nothing could be further from the truth.

Some groups representing small business are pushing for the federal government to break up the very companies that have provided solutions for Main Street businesses during the pandemic lockdowns. They also want to ban America’s biggest online retailer from offering their own branded goods that compete with small sellers.  The upshot could be that many small businesses would be banned from accessing the very consumers they need to reach in this mass marketplace.

Many Democrats and a few free-market” Republicans have bought into an archaic notion of competition and market power. If these interests succeed in their radical agenda (which goes well beyond breaking up “Big Tech”) they will unduly harm the very small businesses they profess they are fighting for.

A Dangerous Economic Game of Government Picking Winners and Losers

Consumers and small business owners should be very skeptical of proposed policies or laws that cherry pick who or which company, or sector, a rule or law would apply to, versus an entire industry. For example, a proposed law being advanced by House antitrust committee leaders would apply only to Amazon for selling its company-branded products on the marketplace it created (and then opened up to millions of small business sellers.) Yet, most traditional retailers including Target, Costco, Walmart, Central Market, CVS, and many others supplement their inventory, from food to clothing, with generic products.

Small businesses today sell their products on various online marketplaces that process customer sales and deliveries, allowing their offerings to compete on the same playing field as major corporations such as Amazon. It hasn’t always been this easy: “big box” stores certainly didn’t offer these services to most small businesses (until recently, but the opportunities are limited). Yet, small business retailers continued to innovate, compete and provide value, goods and experiences that their larger competitors did not. And that competitive spirit and innovation continues to this day.

Online marketplaces have dramatically lowered barriers for small businesses, resulting in even more competition that has benefitted consumers. The number of American small and medium sized business (SMBs) selling on Amazon that have surpassed $1 million in sales has grown by more than 20 percent! Nearly 3,700 American SMBs have now surpassed the $1 million mark.

In total, more than 500,000 American SMBs currently sell on Amazon, which support 1.1 million jobs nationwide. Walmart Marketplace grew to an estimated 70,000 sellers in 2020, and is expected to rise 146% by the end of 2022, according to Marketplace Pulse. Access to the mass consumer marketplace through big companies and platforms has not only been a positive for small businesses and consumers, the opportunity – and movement to digital – is fueling higher levels of entrepreneurship.

Competition, Innovation and Entrepreneurship are Thriving, ESPECIALLY in Retail

Despite the economic upheaval brought on by COVID-19, 2020 was the biggest year yet for new business applications – more than 4.3 million applications were filed in 2020 (+843,000 more than in 2019) with retail being the fastest growing sector. In 2020, 822,000 applications were filed to launch retail businesses — an increase of 58.2% over 2019.

Meanwhile, Congressional action is being pursued under the fictitious notion of limited competition and “market power” – a myopic and insulated view that flouts economic reality, the facts and the consumer experience. Again, entrepreneurs see opportunity in the marketplace, particularly with the acceleration to digital. And again, small businesses are increasingly choosing to partner with major corporations and big online marketplace to leverage their innovations, efficiencies and services to benefit their business and customers.

The past year has demonstrated (once again) that customers want innovative, efficient experiences while shopping – retailers of all sizes must work tirelessly to continue meeting those demands. Small sellers offering digital services and options are helping to meet this demand, and many transformed and adapted their business models in the face of sudden, severe, and unexpected economic challenges that otherwise would have put them out of business.

Entrenched interests want to keep retail in the 20th century when consumers demand 21st century thinking and efficient models for how they shop.  Government actions during the pandemic have punished small businesses enough. Potentially banning them from an online marketplace – or disrupting the tools they use to operate – market and grow, would be an absurd move when millions are succeeding and thriving through this access.

The House antitrust subcommittee is poised to massively disrupt the digital marketplace through intrusive government regulation and dictates. These measures go far beyond reining in “Big Tech.” Millions of small businesses and consumers will also be negatively impacted. Before hastily voting on these five recently unveiled bills, members of the House antitrust subcommittee and Judiciary Committee need to explore both the intended and unintended consequences of their radical and selective actions. Our recovering economy, and small business community, deserve at least that.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.


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