The Dark Side of Amazon

At Jeff Bezos' online retail colossus, "cheap" comes at a very hefty price.

In his classic 1936 comedy, Modern Times, silent filmmaker Charlie Chaplin depicts the trials and tribulations of a harried factory worker trying to cope with the sprockets, cogs, conveyor belts, and “efficiencies” of the new industrial culture. The poor fellow finds himself caught up (almost literally) in the grinding tyranny of the machine. The movie is hilarious, but it’s also a damning portrayal of the dehumanizing consequences of mass industrialization, including monotonous assembly-line work, ruthless bosses demanding more and faster output, mass unemployment, rank inequality, union busting, and the deployment of police to enforce the corporate order.

The ultimate indignity for Chaplin’s everyman character comes when he is put on an assembly line that includes a mechanized contraption that force-feeds workers as they work. Not only does this “innovation” eliminate the need for the factory owner to provide a lunch break, but it also transforms human workers into components of the machine itself.

Of course, worker-feeding machines were a comedic exaggeration by the filmmaker, not anything that actually existed, nothing that would even be considered in our modern times, right? Well … if you work for Amazon.com, you’d swear that Chaplin’s masterpiece depicts Amazon CEO Jeff Bezos’ idea of a properly run workplace.

The Brave New Paradigm

Jeffrey Preston Bezos is the founder and CEO of Amazon, the online retailing colossus that trumpets itself as “Earth’s most customer-centric company.” So why pick on a company that has built a positive reputation with millions of consumers and even has a rather hip vibe going for it?

After all, isn’t it a model of tech wizardry, having totally reinvented retail marketing for our globally linked age? Doesn’t it peddle a cornucopia of goods through a convenient “one-click” ordering system, rapidly delivering them right to your doorstep? And doesn’t it offer steep discounts on nearly everything it sells (which is nearly everything)? Yes, yes, and yes.

However, as an old saying puts it: The higher the monkey climbs, the more you see of its ugly side. Amazon certainly has climbed high in a hurry. Not yet twenty years old, it’s already America’s tenth largest retailer.

Yet, mesmerized by its digital charm and explosive growth in sales, few have looked closely at the Amazon animal. Its media coverage has been more gee-whiz than questioning. The press marvels that Bezos’ obsession with electronic streamlining and systems management allows him to sell everything from books to bicycles, barbecues to Barbies, at cheap-cheap-cheap prices, undercutting all competitors — even Walmart.

But what is the source of those efficiencies and the low prices so greatly admired by Wall Street and so gratefully accepted by customers? Are they achieved strictly by being a virtual store, saving the costs of building, staffing, and maintaining brick-and-mortar outlets? Or is Amazon achieving market dominance the old-fashioned way — by squeezing the life out of its workers and suppliers, by crushing its competitors with monopolistic muscle, and by manipulating our national and state tax laws?

Voilà! There’s the ugly side.

As we’ve learned in recent years from exposés of the business practices of Walmart, “cheap” can come at a very heavy price. That price is no less revolting when it’s offered by a company that has a internet cachet and is based in cosmopolitan Seattle instead of rural Arkansas. Bezos and Amazon scream for scrutiny because Amazon, more than any other single entity, has had the infinite hubris to envision a brave new, computer-driven oligarchic order for our society — and has then proceeded to assemble it.

For some thirty years, large corporations have steadily been enveloping major elements of our society — workplaces, politics, education, media, and more. This encroachment is not the result of some immutable economic force-marching through history — it is the product of corporate money and power being relentlessly asserted by individuals.

No one has imagined corporate domination as expansively nor pushed it harder or further than Bezos, and his Amazon stands today as the most advanced and the most ambitious model of a future under oligarchic control. Bezos isn’t merely remaking commerce with his algorithms, metrics, and a vast network, he’s rebooting America itself, including our concept of a job, our definition of community, and even basic values of fairness and justice. It amounts to a breathtaking aspiration to transform our culture’s democratic paradigm into a corporate imperium led by Amazon.

Walmart, the “Beast of Bentonville,” is now yesterday’s model of how far-reaching and destructive corporate power can be. Amazon is the new model,not just of tomorrow’s corporate beast, but the day after tomorrow’s. Only it’s already here.

Inside the Beast

The establishment media are unabashedly infatuated with Bezos and have crowned him with numerous laurels, from “Person of the Year” to world’s best living CEO. In May, however, Bezos was awarded a less coveted title by the International Trade Union Confederation: “World’s Worst Boss.”

Even high-rankers in the corporation’s hierarchy describe him as a cold, controlling, and often-vengeful boss with little empathy for the people who work for him. As far back as the 1980s, when Bezos was a Wall Street banker, he was perceived as lacking the human touch. “He was not warm,” remembers one who knew him then. “It was like he could be a Martian for all I knew.”

To witness the full Bezonian disregard for workers, however, one must look beyond the relative comfort of Amazon’s expansive campus headquarters and visit any of its forty-some “fulfillment centers” spread across the country. These are gated, guarded, and secretive warehouses where most of the corporation’s 100,000 employees work. The warehouses — Amazon announced earlier this year that it was opening one in the East Bay city of Newark — are dehumanizing hives in which Bezos has produced his own sequel to Modern Times.

Consider the job of “picker.” In each warehouse, hundreds of them are simultaneously scrambling throughout a maze of shelves, grabbing products. This is physically difficult labor. Pickers must speed-walk on concrete an average of a dozen miles a day, because an Amazon warehouse is shockingly big — more than sixteen football fields, or eight city blocks, big — and pickers constantly crisscross the expanse. There are miles of seven-foot-high shelves running along the narrow aisles on each floor of the three-story buildings, requiring pickers to continuously stoop down, crawl along, or stretch way up. They are directed by handheld computers to each target — for example, “Electric Flour Sifters: Dallas sector, section yellow, row H34, bin 22, level D.” Then they must scan the pick and put it on the right track of the seven miles of conveyor belts running through the facility. Immediately after, they’re dispatched by the computer to find the next product.

The pace is hellish. The computers don’t just dictate where to go next, but how many seconds Amazon’s time-motion experts have calculated it should take to get there. The scanners also record the time each worker actually takes — information that is fed directly into a central, all-knowing computer.

When Mac McClelland, a fine investigative reporter, was working for Mother Jones, she took a job as a picker in an Amazon-contracted warehouse named Amalgamated Product Giant Shipping Worldwide, Inc. On her first day, her scanner told her she had twenty seconds to pick up an assigned product. As McClelland reported, she could cover the distance and locate the exact shelving unit in the allotted time only “if I don’t hesitate for one second or get lost or take a drink of water before heading in the right direction as fast as I can walk or even jog.” “Often as not,” she said, “I miss my time target.”

That’s not good, because Amazon has a point system for rating everyone’s performance. Score a few demerits and you get “counseled.” Score a few more, and you’re out the door. And everything workers do is monitored, timed, and scored, beginning the moment they punch-in for their shifts. Be one minute late, you’ll be assessed half a penalty point; an hour late gets you a whole point; missing a shift is 1.5 points — and six points gets you fired.

Then there’s lunch. McClelland was reminded again and again by ever-present time monitors that this feeding break is not 30 minutes and 1 second, but 29 minutes and 59 seconds — if you’re not back at your next picking spot on the dot, you earn penalty points. Never mind that the half-hour lunch period, she pointed out, “includes the time to get through the metal detector and use the disgustingly overcrowded bathroom … and stand in line to clock out and back in.” Should you desire the luxury of a warm meal, there’s another line to use the microwave. Likewise, the two fifteen-minute breaks awarded by the Amazonians entail the mass of co-workers scampering a half-mile or more to the break room and waiting in line to pass through the despised metal detector and another if they need to pee. The fifteen-minute “break” is usually reduced to a harried hiatus of less than seven minutes.

Having managers bark “Zoom, zoom! Pick it up! Picker’s pace, guys!” as workers dart around is dispiriting enough, but the corporation also assumes its employees are thieves. In addition to the metal detectors, Amazon installed five hundred visible cameras — and another five hundred hidden ones — throughout every nook of the warehouse.

Employees endure all this for $10 to $12 an hour, which is less than $25,000 a year gross. But few make even that, because they don’t get year-round work. Rather, Amazon’s warehouse employees are “contingent” hires, meaning they are temporary, seasonal, part-time laborers subject to the employer’s whim. Worker advocates refer to these jobs as “precarious” — when sales slack off, you’re let go; when sales perk up and managers demand you do a twelve-hour shift with no notice, you must do it or be fired. Christmas, Thanksgiving, Black Friday, Cyber Monday (invented by Amazon), Election Day, July 4th, or (for God’s sake) Labor Day? Don’t even think of taking off.

Also, technically, you don’t work for Amazon. You’re hired by temp agencies with Orwellian names like Amalgamated Giant Shipping that do the retailer’s dirty work. This gives Amazon plausible deniability about your treatment — and it means you have no labor rights, for you are an “independent contractor.” No healthcare, no vacation time, no scheduled raises, no promotion track, no route to a full-time or permanent job, no regular schedule, no job protection, and — of course — no union. Bezos has gone all out with intimidation tactics, and has hired a notorious union-busting firm to crush any whisper of worker organization.

In fact, when you toil for the man, don’t even expect air conditioning. Three summers ago, a series of heat waves hit Pennsylvania’s Lehigh Valley, and Amazon’s cement warehouse there literally became a sweatshop. Yet workers not only were expected to endure heat that reportedly rose as high as 114 degrees, but also were prodded to maintain the usual relentless pace dictated by the corporate timers. Many couldn’t make it — so Amazon had to adapt.

Slow the pace? Don’t be ridiculous! Instead, as reported by The Morning Call in Allentown, “Amazon arranged to have paramedics parked in ambulances outside, ready to treat any workers who [became] dehydrated or suffered other forms of heat stress. Those who couldn’t quickly cool off and return to work were sent home or taken out in stretchers and wheelchairs and transported to area hospitals.”

After a wave of customer outrage — and after federal workplace safety inspectors arrived at the warehouse — Bezos had some temporary AC units installed, but the upper levels of the building were still hot. Amazon’s initial fix for this was to hand out popsicles on hot days. On extremely hot afternoons, workers could choose to leave early, but that meant their pay would be docked. Finally, nine months later, permanent air conditioning was installed.

If you asked workers in Amazon’s swarming hives why they put up with the corporation’s demeaning treatment, they might say something like: “Rent, food, clothing — the basics.” Bezos & Co. fully understand that millions of today’s workers are stuck in a jobless depression with no way out, forced by necessity to scramble over each other to take any job that’s offered.

As one of the worker bees in the Lehigh Valley hive told a reporter for the Allentown paper, “I never felt like passing out in a warehouse, and I never felt treated like a piece of crap in any other warehouse but this one. They can do that because there aren’t any jobs in the area.”

Amazon smells today’s mass desperation, preys on it, and thrives on it. That is a big part of the “magic” behind its super-cheap prices and super-efficient delivery system.

The Predator

Even by the anything-goes ethical code of the corporate jungle, Bezos is considered a ruthless predator by businesses that deal with him. As overlord of Amazon, by far the largest online retailer in the world (with more sales than the next nine US online retailers combined), Bezos has the monopoly power to stalk, weaken, and even kill off retail competitors — going after such giants as Barnes & Noble and Walmart and draining the lifeblood from hundreds of smaller Main Street shops. He also goes for the throats of both large and small businesses that supply the millions of products his online behemoth sells. They’re lured into Amazon by its unparalleled database of some 200 million customers — but once in, they face unrelenting pressure to lower what they charge Amazon for their products, compelled by the company to give it much better deals than other retailers can extract.

Lest you think that “predator” is too harsh a term, consider the metaphor that Bezos himself chose when explaining how to get small book publishers to cough up deep discounts as the price of getting their titles listed on the Amazon website. As related by Businessweek reporter Brad Stone, Bezosinstructed his negotiators to stalk them “the way a cheetah would pursue a sickly gazelle.” Bezos’ PR machine tried to claim that this sneering comment was just a little “Jeff joke,” but they couldn’t laugh it off, for a unit dubbed the “Gazelle Project” had actually been set up inside Amazon.

This top-level team focused on doing exactly what Bezos’ metaphor instructed: Pursue vulnerable small publishers and squeeze their wholesaleprices to Amazon down to the point of no profit, thus allowing the online retailer to underprice every other book peddler. When Stone exposed Gazelle last year in his book, The Everything Store, the project was suddenly rebranded with a bloodless name — the “Small Publisher Negotiation Program” — but its mission remains the same.

Today, Amazon sells a stunning 40 percent of all new books, up from 12 percent 5 years ago. It is even more dominant in the digital book market, which is fast catching up to that of physical books and is widely perceived to be the future of publishing. Electronic book sales were nonexistent just seven years ago; today about a third of all books sold are e-books, and Amazon sells two-thirds of those. Of course, Amazon also owns Kindle, the largest-selling device for reading digital books.

With his market clout, deep-pocketed financing, and ferocious price-cutting, Bezos has forced hundreds of America’s independent bookstores to close and has humbled the superstorebook chains that once preyed on the independents and dominated the market. Borders, the second-largest chain, succumbed to bankruptcy in 2011. Now Barnes & Noble, the largest brick-and-mortar bookstore, is stumbling. It has lost millions of dollars, closed dozens of stores, and suffered the embarrassment of its own board chairman frantically dumping big chunks of Barnes & Noble stock.

Bezos’ online empire not only stands alone as the paramount bookseller, but is also the dominant price setter, the arbiter of which titles get the best access (or none) to the biggest number of buyers, the most powerful reviewer of books, the publisher of its own line of books, and the keeper of an in-house stable of writers.

Bezos achieved this the old-fashioned way: via brute force. While it’s true that Amazon is innovative, efficient, and focused on customer satisfaction, such factors alone did not elevate the company to its commanding level of market control. To reach that pinnacle, Bezos followed the path mapped by Rockefeller and other 19th-century robber barons: 1) ruthlessly exploit a vast and vulnerable low-wage workforce; 2) extract billions of dollars in government subsidies; and 3) wield every anti-competitive weapon you can find or invent to get what you want from other businesses.

Through doing all of the above, Bezos has applied his cheetah business model to nearly everything retail. Amazon’s massive book dominion is now dwarfed by its annexation of dozens of other markets — book sales now make up a mere 7 percent of Amazon’s total business. Amazon has already captured more than a third of all online sales with a website that’s a phantasmagoric mall of unimaginable size, containing what amounts to hundreds of virtual superstores.

In the process, and with the same deeply discounted prices they used to conquer the book business, Amazon has poached millions of customers from neighborhood shops. The chase for cheap has been great for Amazon, but it is proving intolerably expensive for your and my hometowns. Our local businesses lose customers and have to close, local workers lose jobs, and local economies lose millions of consumer dollars that Amazon siphons into its faraway coffers. What makes that even more intolerable is that much of Amazon’s competitive advantage has been ill gotten, obtained by dirty deeds.

The Unfair Advantage

Bezos would not have grabbed such market dominance if government had not been subsidizing his sales with special tax breaks for twenty years. In all but a handful of states, merchants are obliged by law to collect city and state sales taxes from everyone who buys stuff from them. But Amazon, as an online merchant, has avoided adding these taxes to the price that its customers pay.

Bezos has emphatically insisted from the start that Amazon’s only facility is its headquarters in Washington state, claiming therefore that Amazon’s sales in the other 49 states are exempt from sales taxes — even though he racks up billions of dollars in sales in those states and even though Amazon has massive warehouses in about half of them. Using this legalistic hocus-pocus, Bezos asserts that the warehouses are independent contractors, not part of Amazon.

In Texas, where I live, the sales tax rate is 8.15 percent. By claiming to be exempt, Amazon gets a price subsidy of more than 8 cents on every dollar of its sales — that’s more than the entire profit margin of most independent shops. The tax subsidy ranges from about 4 to more than 10 percent across the country, meaning Bezos has an advantage of several billion dollars a year — an advantage that has underwritten his fast and vast expansion.

Amazon’s tax ploy has been key to its ability to undercut the prices of local retailers, forcing many of them out of business. And the tax dodge has also shortchanged our communities by eliminating billions in tax revenues that cities and states desperately need for schools, infrastructure, parks, and other public services.

During the past couple of years, 21 states have stopped playing the fool (including California), finally requiring Amazon to collect sales taxes like its competitors do. In a study released earlier this year, the National Bureau of Economic Research analyzed retail data from five of these states and found that Amazon’s sales plummeted by nearly 10 percent after it started charging sales tax. Saving the cost of sales tax — not any Bezos “magic” — is what kept many customers buying from his online mall. Of course, that’s cold comfort to the retailers driven out of business during two decades of Amazon’s government-backed assault.

“But wait,” as they say on late-night TV infomercials, “there’s more!” Amazon’s amazing slice-and-dice tax machine not only avoids paying state taxes, but it also extracts tax money from states to expand its warehouse network. This supremely rich company says that states that want the (low-wage, no-benefit, temporary, and dehumanizing) jobs that come with its warehouses must show Amazon the money, i.e., offer “incentive grants” or tax breaks.

In short, flimflammery and government favoritism help Amazon overwhelm honest competition and extend its monopoly reach.

Shooting to Kill

Having overwhelming market power means never having to say you’re sorry — even to your owners. Bezos can afford to be a voracious predator because his Wall Street investors have allowed him to keep operating without returning a profit. On paper, his revenue-generating machine has lost billions of dollars, yet his major investors, enamored with Amazon’s takeover of one consumer market after another, haven’t pulled the plug. Amazon uses its capital to buy its competitors and to market its own version of competitors’ products, which it then sells at a loss in order to squeeze hapless competitors out of business. That’s the very definition of predatory pricing.

Brad Stone’s book gives a chilling example of such predation. Amazon has its own corporate espionage team called Competitive Intelligence that tracks rivals. In 2009, CIAmazon spotted a fast-rising online seller of one particular baby product: Diapers.com. A Bezos lieutenant was dispatched to inform the diaper gazelles that the cheetah was going into that business, so the firm’s owners should just sell. No thanks, replied the upstart.

Amazon promptly responded to the rebuff by marketing another line of diapers — with a price discount of 30 percent. It kept dropping the price even lower (and included free shipping) when the smaller firm tried to fight back. Diapers.com‘s investors grew antsy, and in September 2010, the two founders of the company met with Bezos himself and surrendered. The final blow was their discovery that Bezos, in his campaign to crush them and control the market of online diaper sales, was on track to lose $100 million in just three months.

Such ruthlessness is standard operating procedure at Amazon, which exerts it against any gazelle it chooses to eliminate. This likely includes some of your town’s Main Street stores. Small retailers everywhere are experiencing an ugly practice dubbed “showrooming.” For example, John Crandall, owner of Old Town Bike Shop in Colorado Springs, has seen a surge of shoppers who come in, checqsk out the bikes he sells, ask a lot of questions, try out some bikes — and leave without buying anything. Then, some days later, they’ll show up at the store with the parts for a new bike and ask Old Town to assemble it for them! These shoppers have used their smartphones to scan the barcode of a product they like in Crandall’s store and then gone online to buy it from Amazon at a discounted price that is lower than what Crandall pays for the item wholesale.

Amazon’s new smartphone, called Fire (apparently meant in the sense of “shoot to kill”), is specifically designed to make showrooming fast and easy. Amazon has even offered $5 rebates to shoppers who scan items at stores, then buy them from the online brute. This is corporate murder. After 38 years in business, Old Town is hanging on, but it’s endangered. Crandall employs 11 people, pays rent and local taxes, supports all sorts of community events, and is fully involved in the community of Colorado Springs — a place Bezos couldn’t care less about.

When a market grows into a virtual monopoly, the monopolist can turn on suppliers with a vengeance. Amazon has done precisely that to book publishers. While Amazon’s fight with international publishing giant Hachette has been well publicized, medium-sized and small publishers who are especially vulnerable. They don’t have splashy marketing budgets, so they’re largely dependent on access to the buyers coming to Amazon’s online market.

“I offered them a 30 percent discount,” the head of a small academic publishing house told The New York Times this year of Amazon. “They demanded 40,” she said. After she acquiesced to that, the cheetah soon came back, demanding 45. “Where do I find that 5 percent?” she asked. “Amazon may be able to operate at a loss, but I’m not in a position to do that.”

She can’t leave, but staying could crush her company: “I wake up every single day knowing Amazon might make new, impossible demands.”

Pulling Back the Curtain

Rather than examine the far-reaching social destructiveness in Amazon’s business model, the Powers That Be blithely hail Bezos as an exemplary corporate leader and point to his company as a model for the New Economy. They smile cluelessly when he says that it’s not Amazon killing off local businesses and turning work intoa low-wage, roboticized nightmare — rather it’s “the future” that is producing these changes.

Bezos has gotten away with this hornswoggle up to now by endlessly reciting his mantra that everything Amazon does is to benefit consumers by relentlessly lowering prices. But I don’t want a price that’s stained with gross worker exploitation, the destruction of local enterprise, and the creation of a corporate oligarch. It’s up to us to reject this way of business.

Stacy Mitchell, an intrepid researcher with the Institute for Local Self-Reliance (ILSR.org ), has been studying Amazon’s impact and rightly says that to avoid a sterile Amazonian future, we must force “a public conversation about their power.”

Unlike Walmart, Amazon is largely invisible to most people. As Mitchell puts it: “All you really see is the website and then the FedEx guy is there.”

More people need to know what’s going on between that jazzy website and “the FedEx guy,” for Amazon is insidious, far more dangerous and destructive to our culture’s essential values than Walmart ever dreamed of being. Remember: price is not value. Exchanging value — and our society’s values — for Amazon’s low prices is a raw deal.

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