Memo: Where NatSec Meets Commerce

Editor’s Note: this essay was re-published in Newsweek.

There’s one balloon that can’t and won’t be shot down; we are far too reliant on it.

In previous explainers and reports on first-party data, I mostly focused on its advertising benefits. It wasn’t until Amazon began acquisition talks with Roomba, the autonomous robot vacuum, that I began considering data collection for purposes beyond the narrow path of ethics. Here is a snippet from an August 2022 report – keep this in mind while I explain what I believe to be a consequential perspective on the intersection of online retail and national security.

Amazon doesn’t rely on many of the data collection practices prohibited by Apple’s privacy initiatives (ATT). This acquisition means more first-party data collection. […] Amazon now has a presence in the following categories: laptops, streaming television, in-home assistants, smart speakers, Door cameras, fitness monitors, and now vacuum cleaners. Collectively, Amazon knows more about its consumers than any other company on earth.

With the iRobot acquisition, Amazon knows more about its consumers demographics and psychographics. It knows the size of your home, its layout, the location of your home, and its surfaces. From there, Amazon can deduce median income, product preferences, and more.

By the measure explored in this report, Amazon (and Apple) know more about its consumers than any domestic corporation, but Americans tend to trust Amazon enough to avoid revolt and public demonstration. And by the measure explored here, China knows more about Americans than any sovereign nation, perhaps including our own.

First-party data is collected directly from users or customers, typically through their interactions with a company’s website, app, or other digital channels. This data can include information such as browsing behavior, search history, purchase history, and demographic information. First-party data is highly valuable to companies and its ownership because it is directly linked to their customers or users, allowing them to gain insights into their behavior, preferences, and needs.

The debate around the surveillance of Americans by way of a large balloon is a distraction from a more significant form of potential surveillance. We may be overlooking the growing advantage that many outside of the commerce industry have yet to fully grasp.

As of writing this report, four of the top six mobile apps available to iPhone users are owned by Chinese companies. Of them, Temu, Shein, and Bytedance-owned TikTok have developed eCommerce strategies that rival (or exceed) the vast majority of American companies in volume.

The average American lacks an understanding of China’s general strengths beyond manufacturing capacity and low costs. That would be a deep dive in and of itself. For the sake of brevity, this will focus on business-to-business trade and direct-to-consumer commerce. Chinese factories manufacture almost every major technical product that Americans seek. The Executive Branch of the U.S. Government is quite selective in the goods that it chooses to tariff. Originally levied by the Trump administration in March 2018, President Biden maintained the tariffs covering the near-trillion dollars in Chinese goods on the list. But many products without American equivalents were excluded.

While U.S. tariffs cover a long list of Chinese products, they left many popular products untouched. That made it possible for U.S. imports of items such as cellphones, laptops and video game consoles to surge during the pandemic.

For decades, Chinese raw materials and finished goods supplied American retailers. Today, thanks to an executive order, China’s direct-to-consumer business will one day rival B2B sales to American retailers. To understand the impact of that March 2018 decision, consider that direct-to-consumer companies were not only excluded from tariffs – they were actually incentivized to sell to Americans. There still exists an $800 exemption that allows DTC companies like Shein, Temu, Alibaba, and TikTok to ship here without taxation. Instituted in 2016, packages worth less than $800 have been able to enter duty-free. Since Shein and others ship most orders from Chinese warehouses, and since most orders fall under that cost threshold, those companies receive tax benefits.

This alone incentivizes Chinese companies to sell in America, but it doesn’t end there. Additionally, the Chinese Communist Party (CCP) waived export taxes on those same products. Much like TikTok is an altogether different app (with far greater restriction on content and usage time), Shein doesn’t sell goods inside of China. In effect, the CCP traded tax revenue for American market share. Shein has now been in the number one spot on the 2PM Power List for more than 50 weeks.

As China’s DTC businesses continue to maintain top positions in the app store and on power lists, expect U.S.’s trade deficit with China to grow.

But while deficit is a visible marker of retail imbalance, there are other key measures that can indicate dependency on Chinese products. Two short months after the report was written on Amazon’s acquisition of Roomba, this report on TikTok’s eCommerce job listing speculated on the potential power of a TikTok eCommerce operation.

The speed with which TikTok is able to make products sell out in stores and online has shown that it’s not a complete hurdle for customers. But linking commerce directly into its platform opens a new revenue stream for TikTok that’s all the more critical now that Apple has clamped down on third-party advertising data collection. Like Meta, TikTok has been reported to be using in-app browsers to collect key data points that are against to skirt around Apple’s recent iOS privacy practices, which have made it more difficult to target ads.

And just days after highlighting TikTok’s staffing up of eCommerce industrialists, I introduced Temu’s quick rise with this now-understated comparison to Shein and TikTok. While presumptuous at the time, the company’s Super Bowl 2023 ad catapulted it to number one in the app store. Here, I explained the new direct-to-consumer retail, one that I now understand to be buoyed by both China and America’s tax incentives:

Consider it the new direct-to-consumer retail. Shipping orders directly from their origin factories keeps prices low. Shein, the Chinese ultra-fast-fashion giant, has taken the world by storm and continues to grow in magnitude, dwarfing the SKU counts and volume of sales of competitors like Zara, H&M and Boohoo. The clothes are cheap, disposable, and addicting. Temu could fulfill a similar desire for “cheap yet good-enough” products – especially as America’s historic run of inflation continues to tilt consumer prices upward.

A similar business model is in the works at TikTok, which is currently hiring for eCommerce fulfillment and warehousing and logistics jobs in the US as part of a bigger commerce push. We wrote in October about why TikTok is uniquely positioned to actually bridge the gap between content and commerce when so many apps – even Instagram – have failed to make it stick.

At the core of China’s commerce industry is its focus on the value of the data it collects. In short, China has been vigilant about the collection of first party data far longer than America. The South China Morning Post, an English-first publication that is part-owned by the Alibaba Group, began emphasizing first-party data collection in 2019:

Six months ago, South China Morning Post decided to cut itself off from third-party data and switch to a first-party data platform. […] The first-party data platform will allow South China Morning Post to achieve the next phase of growth. On the editorial side, that means turning its vast scale into a loyal readership. On the commercial side, that means giving advertisers more precise targeting capabilities.

It’s been reported that as recently as March 2021, the Chinese government pressured Alibaba to sell SCMP. That sale would place the media property under the influence of the state; it is unclear if that pressure has continued. Two years into China’s emphasis on first-party data collection and it was still weeks before it was reported, in America, that iOS 14.5 would take on Facebook and Google tracking in April 2021. We began our report on the implications with: “Apple’s intentions appear straightforward at first glance. The company wanted to improve the privacy of its end users. This virtuous effort came with a few additional outcomes. By upgrading its privacy practices, Apple will impair large ad networks that have grown with the help of those end users.” Prior to this now-infamous software update, most advertisers relied on third-party data to reach new customers.

According to Google Trends: December 2021 was the inflection point of interest in America’s commerce industry. First-party data was a niche marketing term until then. It was a phrase used by a select few advertising industrialists to denote a shifting model in collecting consumer data. Ever since, it’s been all the talk for American retailers. It just so happens that the easiest way to collect first-party data, in an efficient and cost-effective manner, is to sell cheap goods. China has mastered this. Forbes asks, is Temu the next Shein?

This isn’t the first time a China-backed start-up has disrupted America’s e-commerce world with cheap items. Online fast fashion outlet Shein got a big break during the pandemic as its competitors were hampered by bricks-and-mortar stores which were forced to shut up shop. Buoyed by backing on TikTok, downloads of the Shein’s app surged to 193 million in 2021, up from 67 million in 2019.

How sensitive is China’s ability to collect consumer data to the U.S. government? In 2021, President Biden signed the Secure Equipment Act, preventing the FCC from authorizing “radio frequency devices” that may pose a national security risk. And the Biden-era FCC expelled China Telecom Americas, noting: “Washington is continuing investigations into Chinese technology that began during the previous administration.” According to the Brookings Institute:

The law’s effect is to prevent U.S. technology platforms from being forced to interoperate with or transfer data to suppliers like Huawei or ZTE that may have ties to the Chinese government.

But in the matter of cheap, direct-to-consumer shopping of the cross-border flavor – there is not a concern at all by most (read: all) American policymakers.

What’s Next For China and First-Party Data

The importance of first-party data in China’s tech economy cannot be overstated; it’s impossible to separate that economy from its political allegiances. That being said, with its fast-growing retail infrastructure, China has become a global leader in DTC exports.

First-party data has become a critical component of China’s economy. For example, in the eCommerce sector, companies like Temu, Shein, TikTok, Alibaba and JD.com use first-party data to improve their search algorithms. By analyzing data on customer behavior and preferences, these groups can understand consumers and their larger communities.

Beyond eCommerce, first-party data is also playing a critical role in China’s digital finance industry. Companies like Ant Group, which operates the popular Alipay platform, use first-party data to assess the creditworthiness of borrowers, enabling them to offer loans and other financial services to individuals and small businesses that might not have access to traditional banking channels. By analyzing data on spending patterns, bill payments, and other factors, Ant Group can make more accurate assessments of credit risk and offer more targeted financial products.

The use of first-party data in China’s tech economy has also raised concerns about privacy and data security. With the massive amounts of data being generated and collected by Chinese tech companies, there is a risk that this data could be misused or abused. There have been reports of companies using data to discriminate against certain users or to manipulate consumer behavior. There have also been concerns about the close relationship between some Chinese tech companies and the government, raising questions about whether user data could be used for surveillance or other purposes. Consider GTCOM, a big-data and artificial intelligence company controlled by the China’s “Central Propaganda Department.” A 2020 report by MIT’s Technology Review on how “China Surveills the World” sheds light on GTCOM’s scope:

One of their products claims to collect 10 terabytes of data a day, or two to three petabytes per year, from web pages, forums, Twitter, Facebook, WeChat, and other sources. In terms of size, that’s the equivalent of 20 billion Facebook photos. The company describes its work as contributing directly to China’s national security, including military intelligence and propaganda. GTCOM’s research and development arm has developed algorithms that look for military keywords in the information it collects, which could for instance come from CVs or patents.

TikTok is widely considered one of the most successful apps in history. Shein was the number one shopping app in the app store, only to be unseated by Temu. And Alibaba’s GMV far exceeds Amazon’s. They all share algorithm-driven eCommerce as a core competency. A recent article by Australia’s Power Retail explains:

This trust in the algorithm, and the ability to complete tasks without leaving the app, makes it an ideal platform for in-app ecommerce sales. Currently, when people tap on TikTok ads or links, the app defaults to a TikTok-made in-app browser. This new shop tab however will offer broader opportunities for the platform to keep more of its operations in-house and directly deliver product listings to customer feeds.

TikTok is fueled by first-party data and algorithms that “read your mind,” according to the New York Times deep dive on the subject. That same report noted that “concern about Chinese consumer technology is bipartisan.” The Trump administration asserted that TikTok’s “data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information,” and that its government of origin could “build dossiers of personal information for blackmail, and conduct corporate espionage.” This ban was widely unpopular with Americans; it stalled in Congress.

Based on the above, there’s reason to believe that no country knows more about the United States of America than China. And a pandemic-era tax incentive accelerated this data collection.

A CNN article published in February 2023 explained: “US can’t keep up with China’s warship building, Navy Secretary says.” There is simply little to no overlap between the officials who make such assertions and commerce industrialists who observe their reasons to raise alarm. Art of War is an ancient Chinese treatise consumed by many Americans, from prizefighters to athletes and military leaders. But many more who’ve never read the book can identify one of its most popular proverbs: “If you know the enemy and know yourself, you need not fear the result of a hundred battles.” Art of War is authorized to be kept in every Army unit; it is also listed on the Marine Corps Professional Reading Program. It’s considered instructional material at The United States Military Academy at West Point.

There is not a more capable first-party data collection and mining system in the known world. If U.S. government officials are raising alarms about surveillance balloons or tools required for battle (warships and the like), we should also begin to understand the depth of knowledge known of its assumed opposition. That’s if the 5th Century BC book, attributed to the ancient Chinese general Sun Tsu, is as credible to them as precedent suggests.

By Web Smith | Editor: Hilary Milnes | Art: Christina Williams and Alex Remy 

Memo: Why Nike Needs Air

The year was 1984, and Nike needed a change.

Now a corporation with revenues that exceed the GDP of all but 80 or so of the world’s countries, Nike nearly 39 years ago executed one of the most important business decisions in history. On October 26, 1984, Michael Jordan agreed to a partnership that would alter the sports business for an entire generation. There is something sort of Orwellian about this year, when a shoe brand with $919 million in sales became one of the most powerful corporations on earth. To accomplish this, they signed an unproven NBA rookie to a contract format that had yet to exist in sports.

A New York Times report, eight long months after Jordan’s signing, detailed the company’s distress. It would snap out of it in two years’ time with the help of the NBA rookie.

Nike’s earnings declined 29 percent in the fiscal year 1984, the first drop in 10 years. ”Orwell was right: 1984 was a tough year,” Philip H. Knight, Nike’s co-founder, chairman and chief executive, said in the company’s annual report. Yet 1985 is even tougher. In its two most recent quarters Nike had its first losses ever.

Today, Nike isn’t just a shoe and apparel manufacturer. Its advertising and public relations strategies contribute to the national consensus. The company’s impact extends far beyond sport; it has reached the stratosphere of culture, economics, and even politics. It’s as much a part of the fabric of America as the flag’s fibers themselves.

The year is 2023. And Nike is still more recognizable than the names of many American presidents. But there’s been a seismic shift.

1985: Michael Jordan vs. 2023: Tiffany x Nike Capsule

While sports has never been bigger as a business, it requires more investment by corporations like Nike to match the influence that it once maintained. Today, a Nike swoosh or Michael Jordan logo is on every MLB, NBA, and NFL uniform and countless more within the NCAA’s ecosystem.

The decline in the influence of professional athletes and the waning of Nike’s share of that influence are two interrelated phenomena. When Lebron James broke the all-time NBA scoring record, it should have moved the sales needle for Nike. Instead, his participation in the promotion of Nike’s Tiffany collaboration was more likely to pay dividends than a special “scoring title” edition of Lebron’s shoes. He’s the company’s highest-profile (active) star athlete. But it was just another passing moment; Phil Knight sat on the sideline looking morose and bored by the spectacle before him. He’d seen a lifetime of those moments and they’ve lost relevance over the decades. In fact, he all but created the economy for moments-turned-advertisement. In Nike and Omniversal Brand, I explained:

To many, Michael Jordan is Nike’s greatest athlete. To others, it’s Kobe Bean Bryant, Cristiano Ronaldo, Tiger Woods, or Serena Williams. For me, it’s Steve Prefontaine. Nike’s first athlete set the stage for decades of the brand’s rebellious and counterintuitive thinking. The spirit of Pre lives on.

So let’s explore how the decline of athletes’ influence and Nike’s waning influence are connected and what factors have contributed to these changes.

Founded in 1964 as Blue Ribbon Sports, Nike was inventive from the beginning. Over the years, it’s become one of the biggest and most recognizable brands in the world. However, in recent years, the company has faced declining influence and has struggled to maintain its position as a leader in the athletic apparel industry.

One of the biggest factors contributing to that decline of Nike’s influence is increasing competition from enterprise brands and direct-to-consumer brands, alike. In recent years, new and innovative athletic apparel companies have emerged, offering consumers a wider range of choices and forcing Nike to adapt to changing market demands.

Companies such as Under Armour, Adidas, and Puma have all made significant gains in market share, challenging Nike’s dominance in the industry. These companies have been able to offer consumers high-quality products at more affordable prices. Nike’s response has been to move further up market, leaving the average consumer behind. Additionally, the increasing popularity of athleisure brands like Lululemon has also had an impact on Nike’s influence. But each of the aforementioned still struggle with a similar problem: professional athletes are less of the attention equation than they were just a decade prior.

With the rise of social media, the rise of the commercially-viable musician, and the increasing number of athletes, it has become much easier for talented (and untalented) individuals to become celebrities and gain a large following. This has resulted in a saturation of the market, making it more difficult for individual athletes to stand out and maintain their influence. As momentum has shifted away from athlete influence, their efficacy of has waned. Look no further than the current struggles at Adidas:

The company’s messy split last year with the musician Kanye West, which could knock about €1.2 billion off full-year sales, and €500 million off its operating profit — an even greater loss than Adidas had calculated just four months ago. (NYT)

This explanation would have been unfathomable when Jordan still played. A rapper’s canceled partnership influenced €1.2 billion off full-year sales? While Nike is pivoting to luxury and monopolizing professional sports, smaller companies are beating Goliath with a smoothed stone. We covered this in a recent member brief on the developing phenomenon.

Read More: The Euro DTCs Invade

But perhaps the greatest factor contributing to Nike’s decline is the changing consumer attitudes towards the company itself. In recent years, Nike has faced criticism for its labor practices and its impact on the environment. From using sweatshops in developing countries to producing its products while contributing to environmental degradation; this is no longer a fair tradeoff to the modern consumer. Enes Kanter Freedom, an NBA player, is the personification of this consumer shift:

He calls himself more than an athlete. He calls himself a human rights activist or freedom fighter, so I was just very disappointed in him choosing money and business over his morals, values, and principles. Obviously, he signed with a company like Nike that pretty much use slave labor and sweatshops in China, and he talks about all the problems that are happening around the world, but when it comes to one specific topic, China, he stays silent. And that is hypocrisy, so that’s why I want to expose it.

As such, this has led to a negative perception of the brand among consumers, who are becoming more conscious of the ethical, socio-political, and environmental impact of the products they purchase. Nike is attempting to address some of its issue. Recall the declining interest in star athletes? Pop star Billie Eilish has replaced the gridiron star.

Nike and American singer-songwriter Billie Eilish have come together to unveil the brand-new Air Force 1 Low sneaker, as part of their commitment to sustainability. 

Nike is still one of the largest and most recognizable brands in the world despite the changing world around it. It’s no coincidence that the upcoming biographical film about Phil Knight’s most important business decision is on the horizon.

Nike needs “Air” to remind consumers that sports matter, athletes matter, and that they are a more reliable bellwether than their pop cultural counterparts. It will premiere in 3,000 movie theater screens and then follow with streaming accessibility (on Amazon) in more than 240 countries.

The 1985 New York Times case study on Nike concluded with a sentiment that is still applicable, 38 years later: “The question now is whether management can keep Nike pointed in the right direction. Nike thinks it is ready to run again. But the race will be tougher this time.”

By Web Smith | Edited by Hilary Milnes with art by Alex Remy 

Deep Dive: The Amazon ‘Para-State’

In a laughable attempt at creative writing, some six years ago I co-wrote the beginnings of a science-fiction narrative in which Amazon becomes a nation that supersedes the United States of America and its laws. In that story, every citizen had its own identifying Prime account. Your economic class was determined by how much or little you spent through the Prime program – it served as a proxy for taxes contributed to a central government. Humor me for a moment:

I imagine a dystopian 2024. Robert “Bob” Zhose, Founder and CEO of North America’s largest eCommerce company, lords over a coveted subscription product with over 150 million members. It’s a subscription that determines your economic class and access to basic supplies, medication, security, and national citizenship.

Zhose runs for President and wins the popular vote by leveraging a vast majority of his 150 million members against the two parties’ popular candidates. In 2024, he becomes America’s 46th president after eight years of shifting internet regulation, the consolidation of the federal government, the shuttering of most media, and the establishment of a commerce monopoly.

Of course, “Zhose” went on to change the rules governing a corporation’s power, one of the first American examples of a digital overlay overwhelming a physical landscape.

And then I gave up on the story. Part of it was a lack of time and ability. The other part was that it didn’t seem so science fictional after a while. Amazon’s dominance of the landscape led me to write about its monopolistic practices and its defenses against antitrust litigation. In 2018’s The Age of Conglomeration, I began:

Monopoly is not a suitable term for what Amazon is in the process of accomplishing. A monopoly is defined as the exclusive possession or control of the supply or trade in a commodity or service. There is no term for a corporation becoming the supply or the trade.

The report frequently cited then-professor and academic writer, Lina Khan. She wrote a number of legal scholarship on matters of antitrust – especially in the context of Amazon, Facebook, and Google. Of my favorite are Amazon’s Antitrust Paradox and, specifically, The Chicago School Approach to the Department of Justice’s analysis of antitrust matters. I explained:

After Reagan’s Antitrust Explosion of 1982, elements of the law began to shift from structuralism and toward consumer welfare. […] Amazon built its business around the belief that as long as consumer prices were low, antitrust laws wouldn’t apply. Lina Khan went on to say: “Due to a change in legal thinking and practice in the 1970s and 1980s, antitrust law now assesses competition largely with an eye to the short-term interests of consumers, not producers or the health of the market as a whole; antitrust doctrine views low consumer prices, alone, to be evidence of sound competition.”

Today, Lina Khan is no longer an academic, she’s the feared chairwoman of the Federal Trade Commission (FTC). Shortly after she was appointed to the FTC in 2021, Amazon filed a petition that claimed “she should be recused in investigations of the company, in light of her extensive past criticisms of Amazon.” She wasn’t removed, but despite her wide-ranging influence on such matters, she’s had less of an impact on Amazon’s standing than one might expect.

Amazon, today, is closer than ever to lording over that fictional nation that I envisioned when I journeyed on that creative writing project in 2017.

Screen Shot 2018-07-05 at 10.39.53 PM
The title of the fictional work (2018, Rights of 2PM.inc)

Vice Media’s recent report on Amazon’s economic power is entitled: “Amazon Is Now a ‘Para-State’ Governing Global Commerce, Researcher Says.” With the changes caused by ATT and the iOS 14.5 upgrade, it’s only emboldened Amazon, which currently ranks in the top five advertising companies:

This is not just the result of Amazon’s shifting rules, according to the report, but its total dominance of seller ad data, which it charges sellers access to.

We have covered retail media in depth. Amazon’s use of third-party sellers to fuel this first-party data trove is quite the oversight on our part; I’d never thought of it that way. Amazon is harvesting data by collecting vendors into a system, handling logistics for them (reducing cost of entry), and serving as the outwardly-appearing vertical operation to the customers of Amazon Prime.

Here’s what you may not understand about Amazon’s third-party marketplace system: there may not be a more powerful economic engine on the planet. It spans the globe, including China (40% of marketplace sellers). It has become so powerful that it’s reduced legitimate entrepreneurs to operating like gig workers. In a 51-page report by Data & Society called “Trickle Down Monopoly,” it explained the engine behind Amazon’s shift from traditional marketplace to effective retail dictatorship. On page 15:
Amazon tried to acquire and imitate eBay several times (Stone 2013). And, between 1998 and 2000, it experimented with several live auction features. But the form that marketplace finally took was to merge third-party merchants with Amazon’s first-party retail business. First- and thirdparty goods now appeared in a single catalog. And, crucially, goods had “single listings.” On eBay, a search for, say, a teddy bear could turn up a dozen pages of the same teddy bear, offered by different merchants. On Amazon, a search for that teddy bear would turn up a single page, even if multiple sellers were supplying it behind the scenes. In order to make that possible, Amazon had to develop a single set of standards for tracking goods within the Amazon catalog, its warehouses, and logistics network.
This system was devised by Rebecca Allen, an Amazon engineer that developed the ASIN system or Amazon Standard Identification Numbers. The Amazon Standard Identification Number (ASIN) is a unique identifier assigned to products listed on Amazon’s Marketplace platform. The incorporation of the ASIN numerical system changed Amazon’s marketplace in several ways.
  • Improved product search and discovery: The ASIN system allowed Amazon to create a more organized and efficient product catalog, making it easier for customers to find the products they are looking for. This improved the customer experience and made Amazon a more attractive marketplace for shoppers.
  • Increased visibility for third-party sellers: With the ASIN system, third-party sellers were able to list their products in the Amazon catalog, making them easier to find for potential customers. This increased visibility for third-party sellers and made it easier for them to reach new customers and grow their businesses on Amazon.
  • Improved product data accuracy: The ASIN system ensured that product data, such as product titles and descriptions, was accurate and consistent. This improved the quality of product data in Amazon’s catalog, making it easier for customers to find the information they needed and make informed purchasing decisions.
  • Enhanced product and seller performance tracking: The ASIN system allowed Amazon to track the sales and performance of individual products and sellers, allowing the company to make data-driven decisions about which products and sellers to promote and which to de-prioritize.
  • Streamlined product management: With the ASIN system, Amazon was able to manage its product catalog more efficiently, making it easier for the company to maintain accurate product data and ensure that products were listed correctly.

The incorporation of the ASIN numerical system was a significant change for Amazon’s marketplace. It improved product search and discovery, increased visibility for third-party sellers, improved product data accuracy, enhanced product and seller performance tracking, and streamlined product management. It was a system that made it easier to be a third-party retailer and even easier to enjoy consuming the products sourced by those independent entrepreneurs. According to the report’s citation of Brad Stevens’ 2013 book The Everything Store: Jeff Bezos and the Age of Amazon, the original vision for the Amazon marketplace was more traditional:

When they started, Amazon marketplace functioned mostly like a catalog—an online version of the Sears Roebuck catalog from the 1890s, or of Stewart Brand’s Whole Earth Catalog, where Amazon’s first engineer, Shel Kaphan, had worked as a high school dropout in the late 1960s.

Kaphan, Amazon’s first employee, has become a light advocate of breaking up Amazon’s monopoly. Notably, Amazon discarded his original vision. In the early days of Amazon, the company focused primarily on selling its own products and fulfilling orders through its own warehouse. However, as Amazon grew, it became increasingly difficult for the company to manage its inventory and keep up with the demand for products. This is when Amazon started to explore new business models that would allow the company to sell a wider range of products without having to manage the inventory itself.

In 2000, Amazon launched its Marketplace platform, which allowed third-party sellers to offer their products for sale on the Amazon website. This was a significant moment in Amazon’s history as it marked the beginning of the company’s transformation into a third-party marketplace. The Marketplace platform was a game-changer because it allowed Amazon to offer a much wider range of products to its customers without having to manage the inventory itself.

Over the years, Amazon has continued to refine and improve its Marketplace. In 2005, the company introduced the Fulfillment by Amazon (FBA) program, which allowed third-party sellers to store their products in Amazon’s warehouses and have Amazon handle the shipping and customer service for their products.

Today, Amazon’s Marketplace is a massive operation, with hundreds of thousands of third-party sellers offering millions of products to customers around the world. The Marketplace is a critical part of Amazon’s business, accounting for a significant portion of the company’s total sales.

Amazon has often been compared to its own country due to the size, scale, and influence it has over various aspects of modern life. The company’s Marketplace and the first-party data that is fueling its advertising business have made Amazon’s multi-national power seem more realistic. Its reach knows no bounds, and despite its many frustrations by sellers, it is nearly impossible to thwart. While Amazon has reported diminished growth in its retail business, the advertising business is crashing the duopoly of Meta and Google. It’s also undermining critics’ position that it has become a retail monopoly. Meanwhile, Amazon’s size, scale, and influence continues to grow.

Cambridge Sociologist Dr Montserrat Guibernat once defined a nation as: “a human group conscious of forming a community, sharing a common culture, attached to a clearly demarcated territory, having a common past and a common project for the future and claiming the right to rule itself.” (1996) Well:

Economy: Amazon has a massive economic impact, generating billions of dollars in revenue each year and employing hundreds of thousands of people. It also has a significant impact on the broader economy, with its business dealings affecting the economies of many countries around the world.

Infrastructure: Amazon has built a vast and sophisticated logistics network, with warehouses, delivery centers, and transportation hubs spread out across the globe. This infrastructure is key to the company’s success and makes it possible for Amazon to offer fast and reliable delivery to its customers.

Culture: Amazon has a unique culture and way of doing business, which is centered around innovation, efficiency, and customer obsession. This culture has been instrumental in the company’s success and has helped to shape the company into the behemoth it is today.

Impact: Amazon has a significant social impact, both in the way it operates its business and the impact its business has on society. For example, Amazon’s delivery network has made it possible for people to receive packages within hours of ordering them, which has changed the way people shop and receive goods.

Rules and regulations: Amazon has its own set of rules and regulations for its marketplace, which govern how sellers can list and sell products on the site. These rules and regulations are enforced by Amazon and are designed to ensure a fair and trustworthy marketplace for buyers and sellers.

Vice called it a “para state.” FTC Chairwoman Lina Khan views it as a threat. And media organizations cite its power to impact personal, regional, and national economies. John Herrman, a writer of New York Magazine wrote this in the last week of January 2023:

The company’s decades of aggressive investment and execution have resulted in the creation of a service without credible direct competitors: a commerce platform with more than 150 million subscribers, backed by a singular logistics empire that employs hundreds of thousands of people, with more market share than its next 14 competitors combined.

In fact, the only clear indication that Amazon does not have power above and beyond the typical corporation is ChatGPT’s response to the question at hand: “Amazon is a multinational technology company headquartered in Seattle, United States. It is not a country. The idea of a company becoming a country is not a concept that is recognized or supported by any existing political or legal systems.”

It is not a serious notion to believe that Amazon is seeking nationhood but it begs the question? Does it need to be? So far, Amazon has resisted the offensive by the U.S. Government and its most fervent antitrust agent: Lina Khan. But there was a flaw in ChatGPT’s answer, specifically the part about existing systems.

When a former group of British colonies became its own nation – a united group of states – it relied on existing political and legal systems but also subsequent treaties and diplomatic agreements to establish what hadn’t been done in history. But who needs traditional political power when a multinational monopoly can be had instead.

By Web Smith | Edited by Hilary Milnes with art by Alex Remy and Christina Williams