It took Amazon over 9 years to generate a profit. Founded in 1994, Amazon funded the losses by going public in 1997 and then when more money was needed, they issued corporate bonds (which tend to offer a slightly higher interest rate than government bonds). Just as recently as June 2020, Amazon sold $10 billion in bonds with maturity dates between three and 40 years, bearing interest between .4% to 2.7%.
Privately held small businesses do not have the ability to raise money like Amazon and can’t survive 9 years of losses, however, they are forced to compete with Amazon. It’s an unfair playing field for small businesses. The game is rigged because Amazon has the ability to decrease their prices below cost (which at times, they do) knowing they can afford to take the loss while many small businesses fail. Once the small businesses fail, Amazon is able to increase prices and gain significant profit. Amazon is the 800 pound gorilla.
The dichotomy between Main Street and Wall Street continues to grow. Main street is dying while Wall Street continues to thrive. Small businesses employ approximately 47.5% of the country’s workforce or 58.9 million. Amazon is Covid-19 for small businesses and now that the “free” money in the form of PPP has been spent, 2021 will be the year that small businesses will begin to experience the true impact of the recession. I’m beginning to see it already.
There have been predictions that as many as 52% of all small businesses will fail due to the impact of Covid -19 as well as the acceleration of shopping habits toward covid friendly internet purchasing sites like Amazon. I don’t expect a 52% failure rate, however, I do expect it to be as high as 30% which means tens of millions of Americans will remain unemployed and underemployed working for low wage, low benefit businesses like Amazon.
Standard Oil Company, owned by John D Rockefeller was the largest oil refinery in the early 1900’s. It dominated the market initially through horizontal integration in the refining sector and as it grew, expanded through vertical integration. Standard Oil became a monopoly, the 800 pound gorilla and performed unfair business practices such as initiating price wars by selling at below cost to weaken competitors and buy them out at depressed prices. Then, with control of the market, prices could be raised to enjoy monopolistic profits. Sound familiar? In 1911, the U.S. Supreme Court ruled that Standard Oil was an illegal monopoly and broke the company up.
Amazon is today’s Standard Oil, practicing monopolistic tendencies and killing small businesses everywhere. As much as I want to say we should get some form of government intervention, anything the government will do would take years and won’t help the millions of small businesses that are failing today.
I’m beginning to see the recession for what it really is. On a weekly basis, I am having conversations with business owners who need help managing their dwindling cash flow. Business owners who need help with making decisions on which employees to layoff or furlough. Business owners who are paralyzed because of all the uncertainty due to the election and Covid 19.
I have never in my 25 years experienced a time where business owners can’t predict next month's sales, let alone next years. Business owners literally can’t get in the door of their own customers which is making it harder than ever to get into the door of potential new customers. Uncertainty on a potential second spike of Covid 19 and the election has left many business owners fearful because so much is out of their control.
My advice is simple and unwavering - focus on what you can control! Rolling weekly cash flow forecasted out at the least 12 weeks, rolling P&L forecasting by month for the next 12 months, offer the best service and quality to your current customers to ensure you don’t lose them and reach out to customers you haven’t performed work for lately, they already know and trust you so you have a greater chance for winning business. To improve your chances to sell, don't forget that during these Covid times, old is new again so any opportunity to meet face to face is more powerful than ever.
One last thing, buy Amazon stock. When Standard Oil was forced to break up, several of the companies it became were ExxonMobil, Marathon Petroleum, Amoco, and Chevron. Just imagine the amazing companies that would come out of Amazon if it were forced to break up!