HOW Amazon is Bad for Business

When you think about privacy violations, do you think about 1984 style mass surveillance? Many people do. But there are other large and powerful entities that can commit another form of privacy infraction — that against the business owner. A larger company that provides a service to a smaller one can use its access to the smaller company’s business data as a way to compete with the smaller, dependent business.

This is called “opportunistic behavior” aka ‘screwing partners over’, and happens specifically when two businesses enter into a contract with each other but are both serving customers in the same industry, and one decides to take advantage.

Amazon, the focus of this article, does this through the use of private-labels, where they launch their own brand of a popular product or service. The most known version of this is Amazon Basics, which offers many low-priced, off-brand alternatives to electronics products, aiming “to give customers the ultimate in selection and value”. Launched in 2009, Amazon Basics has come to dominate the online market-share for many electronics products, such as batteries, accessory cables, and speakers. A prime (pun intended) example of this is that, as of 2016 Amazon Basics dominated up to 31% of all online battery sales, and up to 94% of online battery sales. For the first quarter of 2018, Amazon also took home 61% of all private-label sales, most being electronic, compared to other retailers such as Walmart and Target.

What’s the issue? Amazon does not have to expose itself to the risk of launching a new product, responding to customer needs or doing research and development. They can simply use sales data on their platform to know which products are selling well, then ‘low-key’ copy the winning products, in concept, design and features, cleverly avoiding patent issues that may arise concerning design, and aided by a near-infinite budget. Amazon can have its market research done for it, with short-term benefit to the consumer, long-term benefit to Amazon, and an all around disadvantage to the original seller. For sellers, the online channel has become a direct competitor.

I started with Amazon but this issue concerning private-labels, and competition against sellers is not just limited to Amazon or tech products. Supermarkets often also have private-labels, or any retail store that has greater selling power than those that rely on their services. They compete for shelf-space with their sellers and already-established brands. Technology goods and services have a greater potential for innovation however, as there is more room for incremental and new advances in technology-oriented products than non-technology products. Amazon gets its own test market, while innovative sellers are disincentivized from creating useful products. They are disincentivized for fear of despotic competitiveness from the best channels to reach consumers.

And what does this have to do with crypto?

Crypto is built on blockchain technology, built for decentralization. Platforms such as marketplaces can be built on blockchains, which are resistant to centralized power imbalances where only central participants receive benefits. In the case of marketplaces, both the sellers and buyers can own the platform so that the sales channel, Amazon in our example, does not make major decisions that only benefit it.

The key detail that gives sales channels this power to undermine its sellers is ownership and control over sales data. An alternative is to provide a medium for sellers and buyers to transact on, where sales data is not automatically shared because there is no central ‘owner’ of the platform, while there is still a way for over-arching decisions to be made.

I am going to be realistic here, Amazon probably will not go away, and Amazon dominates markets because it is doing a good job of satisfying consumers and shareholders. Amazon does not force sellers to use its platform. The use of private-seller data may not seem like a problem to consumers. But it is a problem for both small and large businesses. And it is a problem for consumers in the long run, since innovation is stifled and competition (on the platform) is rigged. There has to be a trade-off between customer satisfaction coming from lower prices, and customer satisfaction from valued innovation. It is a given that consumers respond to price. Privacy-focused marketplaces may at first be a niche interest for privacy-oriented consumers and producers, but there is room to improve customer satisfaction over time. Eventually platforms will have the convenience and reliability of Amazon while allowing sellers to successfully sell the products that they designed. Privacy-enabling blockchains that are the medium for transactions, give sellers and buyers a novel alternative.

This article is part of an ongoing series on privacy that I’m doing as part of my work with Particl, a crypto-based privacy platform that is creating its first dAPP, a marketplace. See the video version here. All opinions are my own. 

Why Privacy Matters: Creating a trust-less solution

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Photo by Josh Hallet:

Recently, I was browsing the internet when I came across a couple of articles about how Facebook had suspended the account of Cambridge Analytica, a data firm that had been involved in aiding political campaigns by harvesting the online profiles of about fifty million of its users. Even though there were a variety of responses, many users seemed deeply concerned by the thought that their privacy was being robbed.

To begin with, privacy in cyberspace involves the ability to choose what information one would like to share about oneself. It is one of those familiar values that seems unproblematic until we start to think about it. According to Wikipedia, privacy is the ability of an individual or group to seclude themselves or information about themselves and thereby express themselves selectively. The Merriam-Webster dictionary describes privacy as the quality or state of being apart from company or observation; seclusion or solitude.

At the beginning, I mentioned that privacy was being robbed. I would like to focus on the word “robbed” because it came up very quickly when I started contemplating the concept of privacy. When you are being robbed of something, it means that you own it. Your thoughts and expressions that you put out into the world originate and emanate from you as an individual. You might use someone else’s medium to share them with the world, but they are still coming from you. Even though you are using someone else’s property, you are only using it as a channel for a specific purpose and once it falls outside that purpose then there is a violation of your privacy. However, privacy here doesn’t exclusively mean protecting ourselves and our contents from someone else. It also entails trying to protect someone else from something, for example, a small child who might be vulnerable. Sometimes there are things that you know might harm someone in some way, hence, you try to keep that information from them, or provide guidance when and where necessary. So privacy doesn’t have to be all about protecting yourself; it might also mean protecting someone else.

However, privacy doesn’t necessarily have to be about protection at all, it could just be about creation and creating oneself. The way I see the world is that we are all sort of art in motion. What I mean by this is that we are all creating ourselves. It might not be that you fear someone seeing something; it might just be that you wish to present yourself or be perceived in a certain way. If someone takes that ability away from you, they are essentially meddling with how you choose to express yourself into the world.

Modern Day Application of Privacy

Privacy is definitely a fundamental human right. We may not need the UN Human Rights Charter to tell us so, but it does. But different countries have different ideas of what should and should not be protected. Privacy laws protect different types of information and they are not only concerned with the medium that you use to communicate information but also in the storage of your personal information. Some of that kind of information could be medical information. For example when you go to the doctor, you have to share some information with the doctor but you are only sharing such in the context of helping you get well. There are laws that prohibit the doctor or someone else from using that information for a different purpose. There are also financial privacy laws as well as those that are about protecting one’s privacy in their home.

Current Trends

There is increasing institutional interference in the average person’s command of his privacy, through legal and illegal means. Just as in the United States where there exists a Foreign Intelligence Survey Act, and the NSA gets surveillance warrants against foreign spies, countries that have authoritarian regimes tell their citizens what they basically can or cannot do and monitor them to see their activities. However, it’s important to understand that it’s not just the government that wants access to user data. With the continuing emergence of new technologies, we must become more careful and critical with regard to commercial interests for whom personal data is a valuable commodity to be bought and sold. Many vendors of online products have begun to incorporate personalization features into their search-and-retrieval interface, inviting users to create personal profiles and online repositories where they can record their research interests, search strategies, and favorite articles.

It is becoming increasingly difficult to protect user privacy since our understanding of privacy has shifted as our technology has shifted. This is due to the fact that the way we share our personal information has become more complex over time and the laws over time have had to expand and become as complex. The reality now is, even though there are laws that are put in place to protect our human right to privacy, it requires trust.

The real solution would be to create a system that is trust-less, where we do not need to rely on others or technology that is not completely dependable. We may not always need to rely on MasterCard or Visa or the storage of our medical information in databases with compromised security. And that is the next advancement for humans when it comes to our relationship with privacy. Privacy and trust are closely intertwined. If we can decrease the level of trust required for strangers to run our technology efficiently, we can be more sure to protect our privacy while advancing technologically.

In conclusion, privacy is a huge part of our social experience and how we interact with the world. The way we interact with the world is becoming even more complex and so the technology that we use has to match. The best scenario is to have a “trust-less” system where, for example, in the case of what happened with Facebook and Cambridge Analytica, all the users who were giving different responses, are able to decide how much they are willing to share, without having to depend on the words of private companies.

The above article is based on a video I made as I thought about privacy: