Amazon CEO Jeff Bezos. (GeekWire Photo / Todd Bishop) Amazon is getting trounced by third-party sellers on its platform, has weathered some spectacular failures in the process of building its business, and “remains a small player in global retail.” So says Jeff Bezos, believe it or not. Those are three of the takeaways from the Amazon CEO and founder’s , released Thursday morning along with the . It’s an annual tradition that this year seems directed as much to would-be antitrust regulators as it is to the company’s investors. PREVIOUSLY: Bezos starts the letter with a two-decade chronology showing of the share of physical gross merchandise sales on Amazon by third-party sellers, a.k.a. the Amazon Marketplace business that is one of the targets of . That share of sales has risen from 3 percent in 1999 to 58 percent in 2018, Bezos writes in the letter. “To put it bluntly: Third-party sellers are kicking our first party butt. Badly,” he writes. “And it’s a high bar too because our first-party business has grown dramatically over that period, from $1.6 billion in 1999 to $117 billion this past year.” Over those two decades, he writes, third-party sales on Amazon have grown from $100 million to $160 billion, or a 52 percent compound annual growth rate, while eBay’s gross merchandise sales grew from $2.8 billion to $95 billion, or a 20 percent compound growth rate. He asks, “Why did independent sellers do so much better selling on Amazon than they did on eBay? And why were independent sellers able to grow so much faster than Amazon’s own highly organized first-party sales organization? There isn’t one answer, but we do know one extremely important part of the answer: We helped independent sellers compete against our first-party business by investing in and offering them the very best selling tools we could imagine and build.” The letter comes at a time of growing political scrutiny of big tech companies with strong market positions and large amounts of data at their disposal. Warren’s , part of her bid for the Democratic presidential nomination, would force big tech companies including Amazon to register as “platform utilities” and prevent them from operating as players on those platforms. It would also unwind previous acquisitions by the companies deemed anti-competitive. In the letter, Bezos doesn’t address antitrust threats explicitly, but he repeatedly positions Amazon as the scrappy, innovative underdog — upending the “expensive, proprietary” commercial database market with new Amazon Web Services offerings; emerging from its Fire Phone failure to find success with Echo and Alexa; and taking on physical retail giants with new inventions. “Amazon today remains a small player in global retail,” he writes. “We represent a low single-digit percentage of the retail market, and there are much larger retailers in every country where we operate. And that’s largely because nearly 90% of retail remains offline, in brick and mortar stores.” Here again, Bezos seems to be laying the groundwork for a pre-emptive antitrust defense. The definition of relevant market is a key consideration in any antitrust case. Amazon seems to want to define its market as global retail, not just e-commerce, where it would be a more dominant player. Addressing the issue of failure, Bezos writes, “As a company grows, everything needs to scale, including the size of your failed experiments. If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle. Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures.” He adds, “Of course, we won’t undertake such experiments cavalierly. We will work hard to make them good bets, but not all good bets will ultimately pay out. This kind of large-scale risk taking is part of the service we as a large company can provide to our customers and to society. The good news for shareowners is that a single big winning bet can more than cover the cost of many losers.” As an example, he writes, “While the Fire phone was a failure, we were able to take our learnings (as well as the developers) and accelerate our efforts building Echo and Alexa.” Noting that customers have now purchased more than 100 million Alexa-enabled devices, he cites this as an example of the “power of wandering” to find a solution — guided by “hunch, gut, intuition, curiosity, and powered by a deep conviction that the prize for customers is big enough that it’s worth being a little messy and tangential to find our way there.” “No customer was asking for Echo,” he says. “This was definitely us wandering. Market research doesn’t help. If you had gone to a customer in 2013 and said ‘Would you like a black, always-on cylinder in your kitchen about the size of a Pringles can that you can talk to and ask questions, that also turns on your lights and plays music?’ I guarantee you they’d have looked at you strangely and said ‘No, thank you.’ ” Bezos later touts the company’s decision last year to , part-time, temporary and seasonal employees, and ratchets up the pressure on without calling them out by name. He writes, “Today I challenge our top retail competitors (you know who you are!) to match our employee benefits and our $15 minimum wage. Do it! Better yet, go to $16 and throw the gauntlet back at us. It’s a kind of competition that will benefit everyone.” Bezos concludes the letter with a copy of his first shareholder letter, from 1997, and his traditional confirmation, in case there was any doubt: “It remains Day 1.” Read .
(GeekWire Photo) Amazon made a key policy change on Monday, eliminating a rule that kept U.S.-based third-party merchants from selling identical products for cheaper prices outside of Amazon’s marketplace. first reported the news Monday morning. Amazon declined to comment when contacted by GeekWire about the change. Amazon critics cited the “price parity provisions” as a violation of antitrust laws. This past December, Sen. Richard Blumenthal asked the Department of Justice and the Federal Trade Commission to investigate the policy. “I am deeply concerned that the price parity provisions in Amazon’s contracts with third-party sellers could stifle market competition and artificially inflate prices on consumer goods that millions of Americans are planning to buy this holiday season,” Blumenthal wrote in a to the U.S. assistant attorney general. In 2013, after facing regulatory pressure. The news comes less than a week after Sen. Elizabeth Warren to break up large tech companies including Amazon, Facebook, and Google. Amazon is currently over its treatment of third-party sellers. Last week of Amazon stopping its purchases from wholesale suppliers, who are instead being encouraged to sell directly to consumers via Amazon’s third-party marketplace.