Dr. Robin Gaster is the president of Incumetrics Inc., a consulting company focused on measuring, evaluating, and assessing innovation, and on developing policy for companies, non-profits, regions and national government.
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Robin Gaster: [00:00:00] I think the model that works best for everyone is that Amazon gradually gets out to retail altogether on its own behalf. And then it just specialize in running the world's best e-commerce platform. I think everybody would be happy to give Amazon 15% of the take to do that. If Amazon could get out of the business of actually selling products, I think that will suit everybody best.
Joseph: [00:00:33] You're listening to Ecomonics, a Debutify podcast. Your resource for one of the kind insights into the world of e-commerce and business in the modern age. This is Joseph. I'll be presenting a wealth of industry knowledge from interviews with successful business people and our own state-of-the-art research.
Your time is valuable, so let's go.
No surprise to anyone here, but Amazon is a big player in the industry. How's that for an understatement? My conversation with Dr. Robin Gaster today is all about the relationship to our industry and where it goes from here. What will become of Amazon down the line and is the current model sustainable.
Whether you're listening now in 2021, or come back to see how the assessment here plays out. Thanks for listening and enjoy.
Dr. Gaster, AKA Robin. It is great to have here in Ecomonics. Um, thank you for being here. Uh, this is one of the episodes that, where, um, your people reached out to my people and was always a blast.
It, it really doesn't mean a lot to get the, the intake as well as the, uh, the outtake. So, uh, I, I appreciate having you here. How you doing today? How are you?
Robin Gaster: [00:01:42] Um, I'm doing great. I'm in the beautiful Hudson valley and I'm visiting some friends. And so this is a wonderful day.
Joseph: [00:01:50] Yeah, it's a, it's finally beautiful here too.
Uh, here in Canada, it's, uh, still, still windy, but wherever we'll take whatever we can get at this point. That's right. So, uh, I, I know, uh, what you're up to because I have the distinct privilege of being able to do research and, and be informed, but to our audience, We got to tell them a little about yourself.
So what do you do and what are you up to these days?
Robin Gaster: [00:02:13] So what I've done for the last 34 years really is, uh, look at problems at the intersection of data, politics and economics. And mostly this is to do with programs aimed at improving and accelerating innovation. And that's the sort of the application of new solutions to problems.
And, and as part of that, I have done a lot of work on program evaluation, trying to figure out what works and what doesn't work. So that's sort of my training is to look at things and say, okay, well, what's working and what's not work. And because, uh, I'm interested in the broader economy, I've done work that points to sort of key areas and concerns. So I've done work recently on how to scale innovation, how you get from a startup to a big company and how places like Sacramento and other regions can, can do things like that can help. And I'm also very interested in the transformation of the labor market. I think we're going through a profound transformation.
I wrote a book, uh, which sent me to Amazon. Actually I wrote a book about the gig economy and I was not happy with it, so I didn't publish it, but I spent a year or two really thinking hard about what's happening in terms of the destabilization of our lives and our jobs and how that has pluses and minuses.
A lot of minuses that we don't pay much attention to. So those are the sort of areas that I like to think about.
Joseph: [00:03:46] You know, um, so before we jump into the real meat of this, you know, I was a participatory in the gig economy for quite some time. What I found was I, you know, I, I, I had done a number of sales jobs, um, you know, some other, uh, laborish jobs too.
One of my early jobs was a grocery boy before that. Was a referee for a or game called. It's like lacrosse in bumper cars. Pretty dope if you'd want to look it up. And, and so, um, sometimes I was good at the job, but I would lose it. The district, I rubbed the district manager the wrong way, like just once, and then it set off a chain reaction.
Um, there was times where I was bad at the job. Um, and I, and I was not a good fit. And so I left on my own accord, uh, times that I was, I was just this one job I had, and it was this little kiosk and, uh, one of our, like, you know, mid tier malls and Toronto. And do we pour hot wax into these lip balm containers and sell the balm to people.
Pretty cool business idea. Yeah. It was not the right fit because I was a male and it wasn't until the gig economy that I actually felt like I had a little bit more, um, agency and autonomy, and it actually reshaped a lot of my own view of economics. I think prior to being a freelancer and trying to make my own way, I actually felt bad about taking money even from other companies or even taking the idea of taking money from people because in my 20 year old, um, mindset, I always viewed that because so much money, a siphoning upwards to an elite class, the idea of taking money from my fellow, uh, plebeian was a little hard to reconcile.
So it wasn't until I, you know, I started doing editing and producing for people and I felt like I have control here because I'm trying to provide as much value as I can. So yes, I am taking money from my fellowship. At least I'm taking, I'm giving them the best offer that I could possibly do. And it has, uh, I would say it's certainly paying off, uh, at this point.
So I know this is a chance to kind of like, uh, unload a little bit on that. And I know this is the book didn't come out. So we'll talk to the book that is on its way. I will get to that. But this is what I'm wondering is like, you know, what was, I guess, the, the, the catalyst or like the motivating factor or what were some of the key things that stuck out about the gig economy that you felt were worthy of your attention and time?
Robin Gaster: [00:05:55] You know, I have a long history in, um, in politics of labor and labor economics. I wrote my PhD on white collar unions in England, and why they became militant at a particular time, you know, long time, long time, they'd been very gentlemanly organizations and they became mills. And once that way, so I have this long background, so when I saw the gig economy emerging, I brought some of that to the, to the table. And to me, the gig economy is a classic sort of light side, dark side proposition that, uh, as you say, it gives people agency and, you know, having been a miserably, bad employee, many times in my, in my own career and having decided to found my own company in 1991, I'm very aware of the, of the downsides of being an employee and the benefits of independence that said, you know, it's not the same for you with a set of skills and capabilities and a growing track record.
Uh, and some dude riding an uber. It's, you know, there's just these to stick them all into the gig economy as a mistake. Part of the gig economy, the freelance economy is I think pretty, pretty good. Uh, you know, you can make your way there. It's not easy. If you are living in a country which had universal health care, it would be much easier.
Uh, you know, so maybe it will drive us to revisit what we expect employers to do. Uh, and I think that's quite likely, but that's, you know, that's only a part of the gig economy and the rest of the gig economy is really exploitative. Uh, you know, on mechanical turk, people are earning two bucks an hour. And if you look at an Uber driver, they may be their headline rate may be 20 bucks an hour or $22 an hour.
But the analysis I've seen says, well, then that pay is 10 and it can be lower than that. I think we need to understand that that just like labor unions emerged in the mid 19th century. And we got a new social contract after the new deal in the mid 20th century to, to, to rebalance between employers and workers, we need that same kind of digital new deal.
If you like to rebalance between the platforms and the, and the low end gig workers, you can take care of yourself, but there are many people with no skills or minimal skills who are at a huge disadvantage, all that employment legislation, what is protection for those kinds of people in a world where fundamentally employers are powerful and they are not, and we need to redo that deal so that it protects gig workers.
Joseph: [00:08:55] Okay. Well, I'd like to offer one. I don't know if it's like a full on solution, but one element of it, which I think would actually ease a lot of, uh, the burden here is that. And then, and then, and then we'll move on to the, to the crux of this, which is that, for instance, one of the positions that I had was a, at a, at a home sentence and while yeah.
There's not much to really, um, be proud of, to put on my resume is mostly just labor. There are still soft skills that emerge in halibut, hearses and deals with customers, um, in their, uh, in, in, in their demeanor that maybe they're efficient. Maybe somebody is just like amazing at putting up rugs. So skills can manifest in different ways.
But what I found was the most unfortunate part about all of it. Um, wasn't whether or not I was on, um, you know, like, uh, like an insurance plan or a health plan, it was the lack of tipping, the lack of gratuity. Um, we would carry things out to the cars and we were instructed to refuse tips. So even though we could actually, um, turn this into a more equitable living wage for ourselves due to our own quality of work, the company was actually disallowing this, and I find that very difficult to reconcile because I think if people, there are certain positions or industries that live and die off gratuity in the service industry, especially, and, and it helps make these industries viable so that, you know, people who are running these industry, running these companies, they have all these expenses that need to incur many times that they're purchasing things that are lost to get to, to food.
They can't even sell all the food, you know, they it's, it, it goes into, it goes in the trash. They can't give it away because then it's a liability, right. And somebody gets sick, they get sued. So it survives off gratuity. So that's one little thing that I really think people need to be more lenient on is like, no matter what the job is, if grit and.
Robin Gaster: [00:10:41] See from the employee.
So from the platforms, point of view, the gig economy, gig employer's point of view, uh, all the acuities do is add to the cost of the service and hence reduce demand for it. Right. So it's like getting groceries. You know, it costs a hundred bucks, but then, you know, there's, there's some hidden, uh, delivery fee.
That's another 10 bucks. And now you feel well, you know, now I got to add 15, 20 bucks for a chair, and now you're thinking, well, maybe I'll just go pick it up, you know, so I'm not defending it. I'm explaining it. I agree with you completely. But you know, I would rather say, well, um, let's make, I mean, I think the fight for 15 is the right way to go and then it should apply, especially in the gig economy.
You know, even though they're not employees in the traditional sense, I think we have to find a way to apply existing labor law to some aspects of the gig economy. And if it turns out that these platforms are not viable, if these protections are in place well, too bad, That that's been true in employment for a long time.
If you can't make money, paying people minimum wage, you don't have a business. Okay. Fair enough. You don't have a business, go do something else. So I have no sympathy for the platforms. Zero.
Joseph: [00:12:07] I appreciate your insight. And I think the audience can understand that we can certainly keep going off on this thread.
So we'll, we'll bring you back. I'd love to pick your brain more about this, but we, today we wanted to talk about Amazon. So now that we're all, um, uh, lovingly warmed up, let's, let's get into this. So before we talk about Amazon, so we have talked to other people on this show who are experts within Amazon.
They understand how, you know, how it works and they know how to guide sellers so that they can make the most out of it. And I've said this in the past about our show is that when we face information that perhaps contests or conflicts with prior information we've collected, our job is to run at it headfirst.
And that's what I want to, um, make sure that you're free to express yourself, however you feel. So, you know, don't, don't, don't hold back just because, uh, Amazon happens to be a platform that many, if not, most of our audience, uh, will do or will rely on. So with that, I would like to start by hearing at what point did Amazon's and pure growth have such an influence on you?
You know, so the point of writing and speaking about it and, and, and guessing on, uh, on the podcasts. And so let's go from there.
Robin Gaster: [00:13:16] Let's start that. Well, you know, it grew directly out of the gig economy because I had people delivering stuff from Amazon to me, and I had started talking to them and they told me that they would get work.
Um, and that Amazon was, um, really essentially building a gig workforce to do delivering a huge gig workforce. And I thought, well, this is interesting. I've been watching, you know, read EMA Amazon event. And so I started digging into Amazon or trying to understand, okay, so what's going on here? Is this just gig workers now?
It's surely not. So then I visited, uh, uh, one of the, one of the, I call them factories, but warehouses, uh, and if you haven't been and your audience hasn't been to a warehouse, you absolutely should go. Um, I have a favorite quotation from William Gibson, uh, a Toronto author. I know Vancouver author. He said, um, the future is all around us.
It's just unevenly distributed. And Amazon is where it's distributed. You can go to those warehouses and you can see the future. And it, it has it's functional and it's dysfunctional elements. And so what drew me to Amazon was trying to understand, you know, first of all, just sort of how it works, but then I really got interested in it and its uniqueness.
It is such a strange entity. 25 years ago, only 25 years ago. You know, it was founded after I found it, my consulting business, it twenty-five years ago, it was a tiny bookstore online bookstore. It was nothing, it wasn't even a pinprick on the backside of publishing. And now it's a 400 and odd billion dollar entity, which affects pretty much every person in America directly or indirectly, which grew by a hundred billion dollars last year, astounding. Just the Amazon hired 300,000 people.
Last year. Now you imagine what it's like to hire one person. Amazon has 6 million sellers on its platform. Its catalog has 500 million items for comparison. Walmart carries a hundred thousand. So what the hell?
Joseph: [00:15:41] Well, you know, the first, uh, the first guests that we had, that who was announced an expert, uh, Steve folk, he said, um, which, by the way, I'll, I can hook you up with all these Amazon people, if you want to take it to them.
And he said, you know, Amazon is half the US. Or think he thinks that a U S economy or he might've said rural economy. Um, it's been, it's been.
Robin Gaster: [00:16:00] No, this is all nonsense. Sorry. Amazon is about 30 to 40% of the e-commerce of e-commerce in the US. You just look at us. It's about 40% of e-commerce. Okay.
Joseph: [00:16:14] And it is possible. They said that, and it's just me like splitting it up. So I don't want to put it on him.
Robin Gaster: [00:16:19] E-commerce itself. Even after the pandemic is only 15 to 16% of retail. They are a small piece of the overall retail sector. And the retail sector itself is a small piece of the economy. So they appear massive because they impinge on us so often and we see them.
They're very, very visible, but then even though they growing extremely fast and will be bigger than Walmart soon. And we'll be the biggest employer in the US they're not, they're not. I mean, even I wouldn't claim that. No, but you know, the rate, the rate of growth is extraordinary. It's 20, 25% a year, and it might be less this year because the pandemic bump will ease off, you know, but.
Joseph: [00:17:08] Yeah. I mean, I don't see that. So you have the bump and I don't think it's going to go back to, um, the point that was in 2019, because more people have become accustomed to the, as a customer, to the convenience of it. And so now the floor will have been raised from where it was in 2019, but I can also see not the ceiling that it would have been established in 2020.
And now third of 2021 at this point.
Robin Gaster: [00:17:31] It's useful to think in sort of 10 years cycles. So, you know, I asked myself two questions in the book really. So far as growth is concerned. What is the rate of growth of the, of e-commerce going to be generally. And historically it's been between one and two percentage points annually.
So I I'm, I'm thinking it is now entering the acceleration phase for new technologies. People are getting more and more used to it. It's about to grow faster, but it would be, so it would be surprising if in 10 years it hasn't added 20 percentage points to its current status. So then a third of the retail market will be online.
And the second question is, is Amazon's share of retail going to grow or decline of e-commerce going to grow or decline. I think it's more likely to grow than decline. I Amazon is, is pretty ruthlessly using its pricing power. To eat more and more of the electronic marketplace and using its pricing power in ways, which I think are probably no, they're probably illegal, but whether Amazon ever gets nailed for that is another question entirely.
You can come to that another time, but the, the growth path into the future is one where Amazon at least doubles and probably triples in size over the next 10 years. That's, that's a fairly. Scary proposition to me, it implies a concentration of power and at the current stages, not much responsibility.
Joseph: [00:19:11] Cause you said electronics. And um, one of the issues with anybody say, even in my position, you know, just with a fledgling e-commerce store that is not even live because I'm on the Shopify, uh, uh, work on your store until you're ready to go plan is that electronics are a massive liability. So if somebody were to ship one out, it could break on the way there.
And so, yeah, it's, it's a brief point, but I think it's worth mentioning is, um, the larger a company like Amazon, the more advantage they have in an, in an area like that, because they are assuming that the electronics damaged or, or a defective, which can, which is, uh, an issue to face in that particular industry.
Amazon can absorb the blow of that. Whereas, uh, it would put a small shop if I, or even a drop-shipper it would put them out of business, um, compared to something like, you know, jewelry, which, uh, in addition to having high margins, there is a little bit more of an expectation that, you know, this is fragile.
I gotta be careful with this. So shipping is my problem, but once they get it, it's their problem.
Robin Gaster: [00:20:12] So, you know, Amazon is making it clear that it, it expect it is looking for or hoping for and working for an all FBA world. Right. It w it wants to simplify its life. And once basically everybody to ship through Amazon, it's making it harder and harder to not ship through Amazon.
It's making it easier to just go the FBA route. That's fine for Amazon. It leaves sellers with less choice, uh, and less control. Uh, but you know, you're, you're an exact case for you. If, if the damage, if damaged goods would kill you, then you need to have Amazon be used. Right. Isn't that? Isn't that the reality?
Joseph: [00:20:59] Yeah. I'm afraid. It's worse than that. I mean, I wouldn't even want to get into the, into that niche whatsoever. Right. Just because having to incur the cost of it, let alone the shipping, it would help to have, um, Uh, I shipping nexus such as Amazons to alleviate the burden on that side, but that's one variable, there's a hundred other things that I would worry about as well.
I was very particular about which product that I'm getting into with my own e-commerce and it does not need to be plugged in. So, so.
Well, this is the position that I'm starting to, um, uh, think more carefully about and I expect to be wrong, but that's okay. If I, if I let one of my, um, belief systems is around institutionalization and a way where something can be worked into a collective muscle memory for society. And so one example of this is Google.
It got to a point where somebody would say, oh, just Google it. Google had replaced the term of search. Um, it being the largest, most robust search engine out of all of them, it's clearly. By by many considered to be the best option for searching. At a certain point, I stopped trusting the results. I started to my, my 10 foil have spiked up and I started to feel as if the results were more geared toward one side rather than another.
So I switched to duck, duck go. It was purely an ideological divide between me using a duck, duck go versus using Google. If not for that, Google would become the search engine of all to the point where the competition would be needless. It would be a waste of resources for anybody else to try it because it becomes so worked into our collective society.
Societal conscious that it's basically now public utility.
Robin Gaster: [00:22:52] Exactly. It is a public utility. And the only argument I would have with you is to say it would happen. No, it has happened. I know duck duck go I've used it. But the convenience and scope of, uh, Google is overwhelming. And I don't know what share of internet search in the, in the, in certainly in the US Google has, but I would imagine as well, north of 90% now. This is no longer a mark.
Joseph: [00:23:19] The difference is, is that there are even if it's just a crack, the fact that there are cracks, um, is where things are an issue. Principally, because there are other searches I just talked to go, there are there's being, and there are other ones as well.
Robin Gaster: [00:23:32] Yeah. But I don't, I think, I think, I think that's a mistake.
I mean, that is to say, so I'm pushing back here and that's where I'm no problem. How many here, if, if a market is 90% dominated by Google, the fact that 10% is not, is effectively irrelevant that these people are scrambling around on the margin they are in, in, in reality, their profile, providing a fig leaf for Google's, um, monopoly power.
So the fact that they exist from an economic perspective is irrelevant because Google sets prices, Google sets the terms of engagement with customers, Google controls, almost all the customers. Um, advertisers have to come to Google. That's why Google has the incredible, uh, margins and results. I mean, it can't waste money fast enough on all, its other insane projects, um, to account for the gusher that it's sitting on.
And this has, because it's a monopoly. It may pretend not. I mean, there are economic tests or what is a monopoly and basically that the sort of core test is, do you have pricing power? Can you set your prices? And the answer for Google is absolutely. Yes. You know, so, um, Amazon has been different because of the marketplace.
Uh, and I think Amazon, so, you know, everybody in your audience knows what the marketplace is. Most other people don't really understand that a majority of what's sold on Amazon is not sold by Amazon. And most people really don't understand that Amazon loses an absolute ton of money on its own e-commerce, which it makes up from other sources, including marketplace vendors.
This is not really sustainable. And it seems to me inevitable that Amazon will move quite quickly towards being a marketplace dominant entity. That is the marketplace will become more important and Amazon's one P business will become less important. That's been happening for 20 years. It's going to accelerate.
So, so they're, the monopoly is a different kind of monopoly. Amazon has a monopoly over retail platforms. So if you want to sell something, you got to sell on Amazon. You don't really have much choice.
Joseph: [00:25:47] Right. So what we have, um, so the reason why I was making that institutionalization a relation is because like, like you're saying, the majority of sellers are, are independents who are using the platform and this can be a good thing.
The reason why I don't see it as a good thing right now is because from my understanding is that brands don't really get to have that much presence. So even if I order something and I, I still, to this day, can't remember the brand name of it. But I know us on Amazon brand. And so it seems to me that Amazon is restricting people's ability to grow their brand and have that kind of presence on it.
As long as they're on Amazon, the only brand that matters is Amazon, regardless of what the seller was doing. And therefore they're forced to deal with things on a price basis rather than a story basis.
Robin Gaster: [00:26:36] So this is, I think you are absolutely on the money here. I have a chapter in my book about brands and I think Amazon is, is fundamentally the anti brand.
It's not, it's not that Amazon's own brands, you know, Amazon basics and things like that. They are not real brands. What is it? What is a real brand is a brand where you create an emotional connection to your customer. So the customer is more likely to seek out your product or to pay a premium for it.
Right? That's the point of brands, but on Amazon, everything is driven by search. There is no brand. I think this notion, you know, Amazon has been very clever in persuading brands to pay for storefronts and for video upgrades and whatnot, all in the name of creating their own brand on Amazon. I think this is total bullshit.
I don't think anybody searches on Amazon for a brand. They search for, you know, I headphones or underwear. They don't search for Hanes. They may search for Hanes. I mean, it's possible about 30% of searches are branded searches. So it's not, you know, entirely impossible. All the work that brands do off Amazon leaks into the platform.
So there's a lot of advertising on TV and on radio about particular brands. That's what it's all about. And that leaks into, um, searches on Amazon. That's fine. But in terms of what actually goes on, on a platform, it's all about discovery through search, not discovery through brands. And so if you want to have a brand, you have to have your brand off Amazon.
You may need to use Amazon to sell because that's where all the customers are. We can talk about the importance of prime and a little bit, but if you wanted to actually build a connection to those customers, you can't do it through prime.
Joseph: [00:28:35] I, I agree completely. And, and some have tried to, um, like the going back to the, my mattress example is, you know, we've received a slip.
You know, there was a, there was a brand name in there there w there, because there wasn't any, the, their marketing marketing has to start a lot sooner. Marketing has to start before the purchase is made. People want to agree to the mission first, oftentimes before they agree to support the mission.
So by the time I have received it, I'm in the middle of like a hundred of the things I'm not, I I'm just not mentally investing any time into it.
Robin Gaster: [00:29:03] Right. And, and, and you make a good point there because the other thing is how many mattresses is you going to buy you just going to buy one, right? And the next time you buy a mattress is 10 years.
So any little slip that they might give you after you buy is entirely useless, right? It's as you pointed out, you have to get to the customer before they buy and on Amazon, that's all about features and price.
Joseph: [00:29:30] Yeah. Although, you know, some tangent, but this, this one was a piece of crap. We just needed something to have.
So we didn't sleep on the floor. Okay. Next one, we get though, we'll be a brand mattress because we've done our research and we know who's been marketing to us and we've seen advertisements, you know, I, to a lot of podcasts, too mattresses and podcasts, they, they, their bedfellows. Pardon the expression.
Robin Gaster: [00:29:51] Right. Yeah. Um, so it will be interesting to see because one can imagine, so those there's all that marketing going on from all these brands. Right. But there are some Amazon native mattress brands and their gig is that they offer all the same features as good quality, thousands and thousands of reviews and lower price.
So you'll have that choice to make. When you get your next mattress, you're going to compare the mattress. You heard about offline with a mattress, you see online in the search box because they pay for sponsored ads that will present themselves to you. You know, you'll have to decide whether you're gonna pay more money so that people can send you TV ads and not, not clear.
Joseph: [00:30:37] You know, my, one of my greatest fears is always like, or, you know, running out of questions in the middle of an interview, but this is like the opposite of it. Or I have a such an abundance of things to talk about that I'm actually having a hard time, like figuring out exactly how I want to transition this.
So let's go with, uh, let's go with it. We, we briefly mentioned like the 10 year overton window, but I want to get a very clear picture of like, so it's 10 years, it's 2031. Um, where do you, okay, so worst. Give me your worst case scenario. Give me your ideal case scenario. What would you like to see, uh, happen in a way that's, you know, as fair and as equitable to as many people?
Robin Gaster: [00:31:16] Look, I think Amazon is a brilliant company. I think they are unique. I think they built a unique culture that with some modest modifications could be good for everyone. Um, Amazon's culture is customer obsessed by their own admission. They talk about it as a religious mission. It's like joining the Jesuit, the Marines, right?
It's you have to commit. I mean, I've worked for large companies. You've probably worked for large companies and what they want is compliance. Right. They want you to go along with the mission or whatever they pretend the mission is. I mean, company mission statements are pretty much bullshit, but you know, they, they, they want you to go along.
Amazon has no interest in that. They want belief, they want commitment. They want you to be in the trenches, fighting with them, pretending that it's a startup that's, that's the culture. And so the problem with that kind of culture is that it has no interesting or even recognition of collateral damage.
Right. I have this sort of metaphor image of Amazon originally as this law pipe laying company that used to put fiber optic pipes down the middle of the street. And that was fine. It was great. And it made its pipes and people were happy because they got fiber optic cable, whatever congratulate has gotten bigger and bigger and bigger, and this machine is now huge.
And it's just plowing down the middle of main street and it's running over old ladies and kicking kids out of prams, knocking cars out of the way, knocking buildings over. And it's getting bigger and bigger as it does this. And so what was tolerable as a small company is no longer tolerable. And Amazon has 1.2 million employees.
It's no longer a small scrappy startup. And so pretend that the only thing that matters is the customer is really. They have responsibilities to other stakeholders now. So their employer is employees to the communities they serve, and they, in a certain way, they have important responsibilities to the customer beyond conditioning them to expect their package next day.
Right. And, you know, Amazon touches everything. Now I have a piece in the book about just how many different ways they touch Baltimore. And it's extraordinary. It's all over the place through AWS, through their, their packing, uh, you know, their, their, um, warehouses through their outreach, into the community.
I mean, it's incredible. So what we need, and so that's one thing. And the second thing is Amazon is fundamentally secretive. They take normal corporate secrecy to the extreme and in doing so I think they reveal the flaws in secrecy. You know, this dates back to the 16th century, to the foundation of corporations, the east India company, char Royal charters and the light.
And the idea was these people needed to be private so that they could, could create markets. And I think that our notion that corporations, that everything corporations should do should be private is just out of date. We personally are not private anymore. Our digital overlords know everything about us.
We are walking naked across the digital plane. They can, uh, impose a colonoscopy, a colonoscopy on us at any moment. They care to look at our digital world and we know nothing about them. They're under no obligation to tell us anything. So your friends who sell on Amazon don't even know how the algorithm works, that that defines who wins the buy box.
They know nothing. They don't know how Amazon in aggregate treats its justice system suspensions, reinstatements fees, nothing. This is not tolerable. And we have a different model out there, which is the utility model where utilities are accepted as monopolies and in exchange, they accept certain limitations on what they can do.
And that, and that is not exactly relevant here. But what is relevant is that they have to reveal everything about that business because they're monopoly, the market doesn't do it. So we have to know what are their labor costs? What if they're in the capital costs, how do we get to the right price for them?
I don't want that kind of regulation, that detailed pricing regulation for Amazon, it's not necessary, but I want them to be forced to reveal the inner workings. They are big enough. And monopoly enough that hiding behind secrecy is just untenable. Imagine a world in which Amazon had to tell you everything.
That's a tell you what its turnover rate was in the market. In the warehouses. I think that turnover rate in the warehouses is probably north of a hundred percent a year. That is more, more than their entire workforce leaves. Well, that's different from the picture that Amazon paints, you know, the, the people they trot out to tell us how wonderful life is in the work in the warehouse.
Being forced to reveal what is going on in Amazon, on the platform in the warehouses, and look 10 years from now. Amazon is going to be a huge presence in your personal home in particular, helping to manage your healthcare. Alexa will be the gateway between you and the healthcare system. And if Amazon is allowed to do that entirely in secret and without knowing what they do with that data, that's very worrying.
So that was my rant for the day.
Joseph: [00:37:20] Okay. So the idea of relying on the government, who themselves are, you know, bastions of transparency, it seems like the, maybe the having the government do the reveal is wishful thinking. So what would it take in order to, uh, to expose and to have enough of, um, of, of a collective, um, uh, enough collective pressure to.
Yeah to basically do what your, what yours. Okay, go ahead. Go ahead.
Robin Gaster: [00:37:49] And, and these three things, first, we need a new deal. We need a digital new deal that acts that, that outlines, what is acceptable behavior for a, for a platform. For example, there should, there should be, uh, uh, um, uh, demand that platforms be non-discriminatory that, you know, they should not be allowed to offer different prices to different people.
It's sort of like net neutrality for platforms, right. That, so that kind of regulation that just says, look, you have to be fair. And there are a number of different places where one in the, in, in my book, I have a sort of charter, if you like of what this, what the boundaries of this new digital new deal should look like.
So you need that, then you're right. You need the capacity to enforce. And I think you need a new regulator, honestly. And I think you need a huge new regulator because these companies are huge, you know, a couple of hundred justice department lawyers, most of whom don't know anything about the digital economy is not going to cut it.
You need a digital regulation. I think Europeans understand this though. Probably they will over bureaucratize it because that's what they do. Um, and I think that the digital platforms, the big players should pay for it. That's fine. We don't need taxes. We can just use user fees and they can pay a couple of billion a year between them to run a big smart, fast entity.
And the third thing, uh, comes from Amazon herself. Amazon, as you may know, uh, runs on API APIs, application programming interfaces. Why is that? Because Amazon has thousands of small teams. And it's impossible to have thousands of small teams. If you don't have electronic information exchange, they would just drown in information overload and emails.
Right? I mean, it would be impossible. You couldn't, you couldn't possibly manage it. So very smartly, 20 years ago, they moved to an API model. This is great. It means that those API APIs are available for regulators. The notion that you can do antitrust on Amazon and say, okay, and in the, you know, in the fall of 2020 during the pandemic, you were, um, pricing too high or pricing too low.
And so, you know, the regulators spent a couple of years modeling the over and may say, yes. Okay. There's a case here. Let's do some discovery. So Amazon gives them 10 million or 10 billion documents to go through. Right. There you go through that and, you know, two more years, three more years pass. And finally it starts to reach the courts and eight years in we're finally in track.
Right. But that's the good part because Amazon then turns around and says, well, you know, in the fall of 2020 in, during the Christmas season, and this is, this is actually a fact, we made 10 billion pricing changes. Which ones are you pointing to? I mean, this is ludicrous. This is model is a 19th century model for managing a 21st century problem.
You have to do it in real time. You have to do it electronically. You don't have to have tools that will monitor those price changes just like Amazon does and say, okay, we can see what Amazon's pricing is. Predatory. We can see where it's below cost. And Amazon does price below cost. Well, that, that means that its competitors are under water because in a such driven environment, they have to match prices.
Amazon can kill anybody.
Joseph: [00:41:33] By the way, if you're a current user of Debutify or haven't tried us out yet, Debutify version three has been released and now is a good time to upgrade or get started as any. A streamlined user interface along with an ever increasing array of conversion boosting add ons is waiting for you. So download today for free and start your journey. Who knows, maybe I'll be interviewing you before too long.
I did noticed one of your, um, well, one of your articles, it was a case study on, let me see, actually had, uh, opened up the website to just. It was, oh, did hike, gear flow. You wrote an article about that. So I think this is helpful to touch on. So before we get into that, one thing I also wanted to tell you about was so a previous position that I had held, we were trying to adopt the kind of scaling model that Amazon had adopted, which is, uh, operate business at a loss until enough control is established that competition can no longer work their way in.
It was like the Amazon, but for luxury watches, I didn't work well. I mean, head office is still fine. The, the losses were just ramping up too quickly because you're, you're trying to convince a business who had already had one model. Um, and they were slowly growing from there to now suddenly go 10 X, uh, have a bunch of different locations and you know, oh God, God bless my boss for giving it a try.
Like his, his logic was sound is just that the company just was not willing to like, keep it going for X amount of time. Um, so different companies are trying to do this where they're trying to price out the competition, not on the scale that Amazon is, but at the very least within their, within their, their target market now saying price out, I feel like I'm being a little bit too mean to gear flow.
So let's. Uh, yeah, exactly. But what they are trying to do is have a platform comparable in terms of what kind of level of service people are expecting, where they can go there. They can.
Robin Gaster: [00:43:33] No, they're not expecting comparable. You see, this is a, this is the key to, so two points emerged from what you said. Number one, I think trying to compete with Amazon prices, idiocy, I think you, you cannot underprice Amazon because that's what they do.
That's their model. They come into a new market or a new segment, you know, like what gear flow does, which serves, um, construction, equipment, parts, you know, pieces for bulldozers, that kind of stuff. And they come in and they look and see what bulldozer parts really sell. And they under-priced them. And their model is to not have expertise, not treated as a niche, treated as a mini, um, mass market.
Right. There's nothing special about this. It's not a luxury model. It's just, we're going to compete with you on price and delivery. That's what we do. So if you think you can compete with Amazon price, you're delusional. Because price, Amazon doesn't have to relate it to price to its cost. It just keeps cutting cutting prices until it achieves market share.
That's what it does. So how do you compete with this? You have to rely on non-price characteristics and features, right? So gear flow has deep expertise in these parts. They know exactly what part fits with what model, what precise model. And if you go on Amazon, what you get is the page, right? You get the detailed page of the product and it tells you a bit, but it sure does not tell you this month, this model works with this, this, this, this, and this.
And no, it doesn't work with that, that, that, and then if you want that, you've got to go somewhere else. Is the other part? No, it's not interested in that. It's just come in, buy a product. If it doesn't work, we'll, we'll send it back. Right? No problem with returns, except for gear flow, inflow, serving a market where every day of, of a big construction project that doesn't have the right part is a million bucks, right.
They cannot afford Amazon sale or return. So instead gear flow is offering expertise and service in a fairly deep way. And I think that's a model that has opportunity because Amazon is never going to do that. They're never going to build the expertise. It's not what they do. That's why Amazon's foray into high-end apparel and fashion is hilarious.
I mean, blunt, it's just hilarious. They're there. It's hubris and hilarious. Just like their entry into groceries is hubris. It's ridiculous. Honestly, they're going to stay. This is going to be the biggest failure of Amazon's entire history grocery. They won't cost them a huge amount of money, but it's not going to work.
So, so there are ways to compete with Amazon by building a brand off the platform, by building alternative platforms, I have a piece coming out about how Rockwell and other, um, manufacturing automation companies need to get together to share information so that they can prepare for the transition to a digital world.
Right, right. Now you have these manufacturing, uh, companies that have monitoring equipment and they stick it next to stick it on a machine. It monitors stuff it's not connected. The data isn't connected Amazon is, and they're now entering that market. And it will be much better because they have more data so better prepare.
But not by trying to underprice Amazon it's just few times.
Joseph: [00:47:19] Okay. I mean, it seems like the only viable option is to, well, okay. I'm not going to say over price. Uh, but, um, by, by increasing their prices and then within that people understand that what they're paying for is the service. It is the expertise. It is the quality.
Robin Gaster: [00:47:35] And people will be happy to do that. Professional people, business people, know that lowest price isn't in the end the lowest cost. Right. There, there are other costs associated with getting things wrong and making sure you have the right expertise on a job. Uh, so I do think there are opportunities there, but you know, the Amazon model is extremely difficult to address.
I'm sure people on your platform, you know, who are small sellers find this on all the time though. They also find that Amazon is not unbeatable on its own platform because you know, bluntly managing 20 million supply chains is really, really difficult and they're not that good at it. So there are opportunities you can find.
And Chinese sellers certainly seem to have found that. I mean, there are an awful lot of Chinese manufacturers on Amazon's platform.
Joseph: [00:48:27] Well, I've got you for a, for another 10 minutes. And so I also want to make sure that we touched on the Amazon prime because we did say we're going to get to that. So as soon as this I'm going to sure.
I got the statistic, right. I found this pretty shocking that 82% of us households are Amazon prime members. Did I get that right.
Robin Gaster: [00:48:42] I think it's more than that now. Okay. Um, the, in fact, the latest estimate that I saw, she was hilarious. I cannot decide whether to just not believe any of it or think, yeah, well maybe it's true.
Um, there are 125 million us households, according to the census, about 125 million. And the last estimate that I saw said that there are 140 million us prime members, right? So there's more than one per house, which I suppose as possible because there are increasing number of young people who obviously have Amazon prime and who are roommates housemates.
So one can imagine amongst millennials, that number is quite high. I mean the multiple AMAs in the household, but it's still, it's staggering to think that this, this club has become absolutely ubiquitous across the. It's it's staggering in it is absolutely Amazon's customers superglue. Right? Once you have prime, that basically guarantees that the first place you look is Amazon.
And, you know, I think Walmart's effort to build a competitor is, is it's really mainly an effort to retain its existing customers and to make a bit of extra money out of it. It's not a competitor there there's no, there's no way that that course has gone. The door is bolted it's over. Um, and, and that gives Amazon an unbeatable advantage in e-commerce in the US they have all the customers and whatever your your platform, people may bitch and moan about Amazon.
There's nowhere else to go. You know, I, I talked to a number who said we would like, we tried Walmart plus we would love to be on warmup bias and the new target platform and whatever. It's not where the customers are and you can't avoid Amazon. So, um, you know, prime is the, is, is absolutely the super glue that holds together the whole retail side.
And it's brilliant. I mean, who would have thought you could sell shoes by getting the golden Globes, but what a brilliant idea. And, and they keep adding to it. It's like, you know, it's like that dude who shows up at his girl's place in the middle of the, in the middle of the night with more flowers, obsessively, serving to try and make sure that they don't even think about going somewhere else.
That's Amazon and they treat their customers brilliantly. Brilliantly. Why would you leave Amazon really realistic? Just as a consumer, they give you faster and faster shipping. They make sure that the price is on their platform. If not the lowest possible price are low enough, not worth going to look somewhere else, unless it's a big purchase, it's just not worth it.
And trustworthy customer service matters. So why, why would a customer go anywhere else? I mean, tell me I'mall ears, I don't see it.
Joseph: [00:51:56] Well. Okay. So, so last black Friday, uh, I was, when we decided we were going to get our TV for our apartment, and I said, I'm not going to buy this on Amazon. I have got to support somebody else.
I just got, so I ordered a TV from, from Canada computers and not, you know, not to end on a, a rather bleak, uh, point, uh, so close to our wrap up here. But, um, you know, Canada computers is a fine company. They've been around for a while. And a lot of their similar to gear flow. A lot of their business comes from the expertise of the people who shop with them.
They're looking for a specific computer parts, they need specific computer expertise. And so that's what helps them stay, stay relevant. Um, so that's them, but they're not exactly like mom and pop. They're still a nationwide chain. So the, the depressing, uh, thought about this. Hey, you know, when you have a number of businesses who have either shut down completely or are reduced capacity reduced operation because of the pandemic.
Whereas Amazon is continuing, was continuously gaining, um, uh, uh, uh, revenue, uh, uh, out of that, which again, tinfoil hat, uh, completely upright due to that, it's, it can be very depressing to think, well, I'm going to support a mom and pop business, but, you know, am I, am I just, am I just, um, uh, giving them some water while they drown, you know, so.
Thankfully, one of the things that I take great pride in, in doing this show and trying to, uh, reach out to, to other people and to, and to build my own nexus of understanding is that e-commerce, um, building a brand is the, the seed. It is the beginning of this. It is having a mission, you know, not just selling a product, but really believing in the objective of the product.
And I can say with certainty that the, you know, it took me a while. It took me about like eight months before I started my own, my own brand. Having started this show, uh, because I can't do anything quickly, um, except talk apparently, but I really mean it when I, what I sell and that helps keep me in the right state of mind, which is, I, I believe in my mission.
And if that makes it difficult to, to turn a profit right away, that's fine. My mission isn't good. It doesn't suddenly become like, um, uh, irrelevant because I wasn't able to sell enough drawers. You know, what I believe in, I would have to, I would have to lose on the psychological level before I give up on my bread.
Maybe my product doesn't work. That's okay. I can do affiliate marketing. I can talk about other products I can do promotion while I generate my own, my own authority. So it comes down to that is like, do you, do you believe in your fellow human being and do you want to support someone who's really trying to make a significant difference?
You know, we all, we all have to make a little bit of extra sacrifices on our own too. We also have to, we have to be willing to wait two weeks sometimes to receive something. We have to understand that convenience, um, is it will always come at a cost in one way. And even if it doesn't cost us, it costs, it costs somebody.
I know that we, I, I, I knew this going into the conversation. I know the conditions that people dura when they work there, which is why I can never see myself working there. Even if you know, the sky is falling and I lose everything else. I it's just, it's just unconscionable. So, uh, to me, Amazon is the last resort.
If I can't get anywhere else, but I still need it. I go to Amazon. Right?
Robin Gaster: [00:55:18] Well, I mean, you know, there are people, there are people who believe that there are people who avoid Amazon, but the reality is that Amazon gets new customers every day. And it gets more new customers then customers leave in, in, or, or check out, you know, there's no sign that Anderson is suffering.
It's still, you know, the first or second most trusted company in America. And from a consumer perspective, that's pretty understandable. Uh, so, you know, I think. I think the model that works best for everyone is that Allison gradually gets out of retail altogether on its own behalf. And then it just specialize in running the world's best e-commerce platform.
I think everybody would be happy to give us 15% of the take to do that. I think, you know, it's probably overdoing advertising already and is hurting its brand by doing too much advertising on it. So there are limits to that. If Amazon could get out of the business of actually selling products, I think that would suit everybody best.
Joseph: [00:56:32] Well, I mean, they're continuing to, to, I believe they're continuing to take a loss at it anyways. So.
Robin Gaster: [00:56:37] You know, and it's sort of inevitable. I mean, look in what conceivable world there's Allison to have a competitive advantage in furniture. I mean, you know, IKEA is better at it. They just are, so is Wayfair.
They're specialized. They know what they're doing. Amazon is in there and it's grabbing for revenue because it's whole model is revenue growth. That's how it knows that it is satisfying more customers, right? It's meeting its mission by growing and that's top line growth, but not profit. So it keeps expanding into more and more unprofitable areas.
This is inevitably not going to be sustainable. So eventually I think Amazon will get out of retail. I don't, I don't. Why would you be in retail when you can own the platform? Have no inventory risk. No inventory costs make more profit and have far less grief from all the, all the regulators. I mean, it's a no brainer.
It's just that their own history is against it. And eventually they'll have to overcome that.
Joseph: [00:57:42] Uh, with, with that. I think I'm going to have to let you go. But, um, I certainly certainly learned a lot and give me a, give me a lot to think of. And, uh, and I look forward to revisiting this. It is, yeah. If you have any final words or any parting wisdoms of preferred Chinese proverb, you like, you're welcome to share it and then let the audience know how they can look into more of what you do.
Robin Gaster: [00:58:02] Uh, yeah, so I think, you know, all of us use Amazon and to some degree, all of us need to understand a bit about the costs and benefits for everybody, not just for yourself. So I encourage people to just sort of dig in a little bit and understand a bit more about Amazon and the online economy. Um, they can find me at robingaster.com.
I encourage them to buy the book and learn a lot more about bad habits. And then they probably once a month, and to sort of consider the reality that we're living in a, an increasingly digital world and we don't have digital rules of the road. So that's what I would leave. What are those rules?
Joseph: [00:58:44] Well with that store audience, uh, I don't have to help.
I know you've, uh, been given a lot to think about today. So, uh, uh, let us know if you have anything you want to follow us up with. You can email podcast at dot com and, uh, to my, um, illustrious guest, uh, Dr. Robin Gaster, it is fun to call somebody a doctor not going to lie. It is feel good to call for the doctor to say, uh, it's been, it's been a, it's been a blast having you and I look forward to epic where we left off.
So terrific, and to my audience, all the best take care and we will check in soon.
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