Amazon Vs. Local Business in 2024: Is Amazon Actually Hurting or Helping Small Businesses?

Amazon has earned a complicated reputation when it comes to supporting small and local businesses. Critics condemn its ruthless expansion and competitive practices as crushing smaller competitors and retailers. Yet the data reveals a more nuanced situation, with both adversarial effects alongside some counterintuitive benefits Amazon has brought smaller players.

Let‘s analyze the key statistics, threats, and opportunities shaping the Amazon SMB relationship today.

Amazon‘s Increasing Share of All Retail Sales Over Time

There’s no understating Amazon‘s massive, still-growing footprint. The "Everything Store" accounts for nearly 40% of U.S. ecommerce sales according to multiple 2022 estimates by eMarketer and Marketplace Pulse.

Equally eye-popping – ecommerce itself represents over 20% of total retail trade in America, per U.S. Census Bureau data. Cross-referencing these figures suggests nearly 9% of all U.S. retail sales flow through Amazon channels.

That dominance comes at the cost of traditional brick-and-mortar stores, many unable to match Amazon‘s pricing power, selection and convenience as more spending moves online.

Is Amazon Responsible for Retail Apocalypse Closures?

Critics argue Amazon‘s rise contributes greatly to the so-called "retail apocalypse" that has seen record store closures and bankruptcies. However, closer analysis suggests online competition including Amazon is not the most significant factor.

According to the Institute of Local Self-Reliance (ISLR), who tracks physical retail closures:

The number one reason for closures – cited by 31 percent of respondents – was high rent or property taxes. Just 5 percent named online competition – including from Amazon – as the key factor.

While no definitive attribution exists, actual closure data suggest only a fraction of recent years‘ record retail shutdowns tie directly to Amazon or online shopping substitution. Other macroeconomic and property market forces appear bigger drivers.

Critically however, that 5% likely understates Amazon‘s indirect pressures exacerbating other challenges like tighter margins and changing consumer preferences – even without direct ecommerce competition. Their platforms shape nearly all modern retail whether online or off.

Over Half of Amazon Sellers Are Still Small to Mid-Sized Businesses

Despite Amazon‘s own growth into a retail behemoth, independent SMBs still make up a majority of its third-party seller ecosystem.

Per Amazon’s 2022 small business impact report:

• 50% of units sold on Amazon globally originate from SMB merchants on Marketplace
• 900,000 small- and medium-sized businesses exceeded $200,000 in sales on Amazon in 2021

Critically however, that remaining 50% of sales NOT from independent SMBs means Amazon itself along with larger vendors still account for half the marketplace – an imbalance that grows yearly to Amazon‘s benefit as their first-party retail dominance expands.

For Every Small Business Crushed, Others Earn Life-Changing Incomes Through Amazon

Talk to 100 independent SMB sellers, and you‘ll hear two sides. Many report enormously positive experiences they attribute their success to. But others describe Amazon‘s platform risks or policies devastating their companies literally overnight due to elements outside of their control.

“We went from doing $60,000 a month on Amazon to less than $2,000 overnight. It was all due to an automated algorithm. I had no idea what happened or any ability to appeal it.” ~ Christy Johnson, Founder of Arkansas-based skincare company [Source]

However, for every horror story, many SMBs consistently earn improbable incomes through Amazon impossible in traditional retail.

Data Source: JungleScout.com

As just one benchmark, over 25,000 merchants exceeded $1 million in sales on Amazon as of 2021 – a life-changing income for former 9-to-5 workers now running real businesses fueled through the marketplace.

Opinions remain mixed on whether Amazon does more harm than help. But these two conflicting realities persist in parallel.

Amazon Continues Updating Policies to Better Support SMB Sellers

Facing escalating antitrust scrutiny, Amazon responds by touting its support for small businesses and implementing policy changes that better serve SMBs on Marketplace.

Recent examples include:

1. Suspending restrictions around sellers using non-Amazon fulfillment and logistics providers – Although Amazon benefitted enormously from strong-arming merchants into their own FBA shipping ecosystem with better visibility, ranks and Prime eligibility, they‘ve loosened these once rigid stances under regulatory pressure. Sellers now have more room to maintain independence even off-platform.

2. Creating an appeals process for unfair account suspensions – Automated software historically switched off accounts instantly, with almost no recourse, burying businesses unexpectedly. But updated review processes help mitigate these previously uncontestable issues.

3. Launching the Amazon Lending program to offer SMB loans and grants up to $1 million – For those FBA sellers dependent on Amazon‘s infrastructure, this capital can fuel inventory and product launches otherwise unattainable.

While serious concerns remain around privacy, sustainability, working conditions and monopoly abuse, Amazon‘s sheer scale and strategic power put them in a unique position to keep evolving marketplaces for the betterment of small ventures. Policy decisions over Amazon’s next decades will determine just how symbiotic or parasitic that relationship ultimately becomes.

Conclusion: A Defining Relationship for Both Retail Past and Future

Summarizing all perspectives, Amazon sits at the center of two conflicting retail realities growing only more extreme and intertwined yearly:

1. Amazon‘s endless disruption wrecks many established local players unable to adjust for the future. Its competitive ruthlessness and customer obsession fuel market domination at all costs.

2. Yet that same disruption provides once-impossible opportunities at unmatched scale for aware entrepreneurs who skillfully leverage Amazon‘s tools, audiences and ecosystems to their advantage.

Amazon‘s retail paradigm bends towards big winners and losers. So small businesses face risky but rewarding choices on whether and how to fit within the ecosystems they mold or risk being left behind entirely.

How are you strategizing your venture’s future relationship with Amazon? I welcome your thoughts and questions in the comments below!