Saturday, February 3, 2018

Why I Don't Trust Amazon

Is Amazon our savior or our nemesis?  How they treat us is the key.

The financial press likes to talk about Amazon an awful lot.  Of course, Amazon now owns one of the largest newspapers in the country which bootstraps this sort of talk.  At the present time, the country is agog for this long drawn-out process where by Amazon is selecting a new headquarters in one of a number of  selected cities.  The build-up to the selection for the next Olympic city didn't have as much hoopla as this.  And Amazon is milking it for all it worth - along with the tax concessions.

Amazon is finally making profits, but the way they are doing this is a little disingenuous.  Now that they have achieved a certain critical mass of customers, they are slowly and incrementally raising prices across the board and using various schemes to extract more money from their existing customer base.  Amazon is no longer the bargain-basement online shopping center, it is just a place with OK prices - sometimes very high prices.

The prices of goods on Amazon I have found is usually not the best price in the marketplace.  If you're looking for a particular product, you can google the name and product number and usually find a better price online either from some obscure website or from eBay.  Almost inevitably, Amazon has the highest price or at least a price that is not very competitive.  And of course, Amazon has been known to use algorithms to change prices in real-time, based on how often you search for that item.

But what really annoys me about Amazon is their check-out trickery.   A reader recently alerted me to a new type of squirrel trap and suggested I buy one.  I went to the Amazon app which offered the squirrel trap with free shipping.  I clicked on the "one click buy" button, and was chagrined to see that $10 was added for shipping.  The default mode for the one-click purchase option is of course to add "standard" shipping which costs extra, rather than the free shipping.  This is nothing short of chicanery.

Then there is the Amazon Prime trick.  Many products are advertised as having free shipping which is available to you even if you are not an Amazon Prime member.  However, during the checkout process they ask you if you want free shipping and if you click on "YES" you sign yourself up for Amazon Prime by mistake.  You have to read the fine print to realize this is not a request for free shipping but request to join Amazon Prime.  You have to understand that the shipping selection is later on in the process.

I've said it before and I'll say it again, when you enter into any business relationship based upon a deception - no matter how trivial - the relationship only go downhill from there. The people at Amazon are telegraphing exactly what sort of lowlife scumbags they are by using deceptive practices in their check-out routine.  They're hoping that you'll be too busy and not check the details, much as I did, and end up being charged an additional $10 for shipping.  Fortunately, I was able to cancel the transaction and go back through and reorder the item, this time not using their convenient 1-click checkout which adds additional shipping charges to the checkout price.

Most others would simply shrug and say, "It's only $10 - better luck next time!" - which is exactly what Amazon is hoping.  Their checkout system was not designed by accident.

Of course what I should have done is use this opportunity to search for the product online and perhaps find somewhere cheaper.  In this case, however, Amazon did have the best price, compared to eBay and other retailers.  So I re-ordered it on Amazon, this time, without the "standard" shipping but free shipping.  The squirrels can wait.

But there is more evil to Amazon than just their deceptive checkout routine.   This battle-of-the-cities is being viewed by many economists as a really bad idea.   If you ran a factory or business in Atlanta or Newark, I think you'd be a little pissed-off right now.  After all, you've already invested your life savings in a business in that town and what do you get as an "incentive"?   Bubkis.   Yet the town fathers are falling all over themselves to take turns blowing Jeff Bezos, hoping he anoints them as an Amazon city.  After all, this new online merchant site is the wave of the future, right?   It's like having AOL move to your town!

Amazon is not a contributor to your local economy, but a parasite of it.   Your property taxes will go up to pay for infrastructure that benefits a few venture capitalists and to a far lesser extent, ordinary shareholders.  Meanwhile, local businesses who have struggled for years paying high taxes and dealing with crumbling infrastructure are wondering, what did we do wrong?

Of course, that was the classic model of the relationship between cities and industries back in the day.  When I worked at a GM plant in Bristol, Connecticut, you would have thought the company had pissed all over the local politicians, they way they hated us so much.   The GM plant was viewed as a fat hog to be slaughtered and cut up into little pieces, with each local political fiefdom getting its share of the pie.  "They'll never close this plant!" people cried in 1980 - "GM has too much invested!"  They also said, "GM will never go bankrupt!  It's the largest car maker in the world!"

But eventually GM got tired of the shakedowns from local pols and the local mafia, who wanted a "taste" of every contract the plant let out - and that included the union contract.  22 acres under one roof, now a warehouse for Chinese-made consumer goods.  The big employer today is ESPN, which apparently is some sort of talk-show channel, from what I can make out - a channel that is in deep financial doo-doo, and no doubt the city fathers of Bristol haven't learned a damn thing and are trying to screw ESPN as well.   Connecticut - the nutmeg State - a beautiful place with more State parks than any other State (I am told) is now a place people run away from.  The State has a negative population growth.  And I wonder why.

There has to be a happy medium between giving away the store to a new business and milking existing businesses like an old cow.   Because, as economists note, if this pattern keeps up, your existing businesses will leave town for greener pastures - getting other cities to bid on the rights to host them.   It also unfairly favors larger businesses, and as Sarah Palin taught us, the government shouldn't be in the business of "picking winners" should it?

It begs the question, once Amazon has fulfilled its obligations to Newark (or wherever) where will they move to next?  Or will the chosen city have to offer perpetual concessions to keep businesses in town, and raise taxes on citizens as a result?

It sounds ludicrous, but ask anyone who lives in a college town.   Places like Ithaca, New York have to tax the snot out of homeowners, as the largest landowner in town - Cornell University - is tax-exempt.   And once you make an enterprise tax-exempt, it damn hard to undo it.  A similar pattern could occur if large, trendy tech companies are treated like colleges and universities.   It could become a race to the bottom in short order.

We saw the same thing go down a few decades back (and even today) with stadium construction and sports teams.  No mayor or city council member wanted to be the one who "let the sports team leave town" so many cities offered sweetheart deals, including paying for stadiums, infrastructure improvements, floating bonds, and whatnot.  Often the team owner ended up with a free stadium and the ability to run the concession stand with pure profits - they even got the parking concessions for free.   A huge government giveaway to one individual, with the only "jobs" being created are those of the team members, staff, and maintenance crews.

To some extent, the hoopla about stadium construction died down, particularly when the effects of these deals were felt later on.  Long after the mayor and city council retired, the bonds for the stadium construction come due, often straining city finances, if not in fact contributing to the bankruptcy of the city.  Today, many cities are taking a pass on offers to host teams - not if they mean the city has to pay for it.   And many cities are shrugging their shoulders when teams threaten to leave.   Better off to be teamless than penniless!

Whether the same holds true for tax-incentives and the like for businesses remains to be seen.  One reason the South has attracted so many new factories is that Southern States have been offering tax relief and other incentives to new businesses.   But the big incentive is one that is already extant - low tax rates, low wages, and a plethora of non-union workers ready and willing to work.   The problem for Northern States is that their tax rates are staggering, and there is corruption and unions to deal with, and since public assistance is more generous, people are less willing to work at low-wage jobs.

Amazon may locate its factory in Newark, but may live to regret it.  Even with no taxes and a free factory built for them, they would find it difficult to deal with local unions and the local organized crime (I am, of course, being redundant).  Once they got established, everyone would want a "taste" of what is going on, which is why places like Newark are such shitholes to begin with (take that, Dominican Republic!).

So part of me is rooting for Newark.   Amazon would get exactly what it deserved if it moved there.