Ten hours of taping, three camera malfunctions, two microphone batteries and 19 lighting adjustments later, we’re almost ready for next week’s conference, The Information’s WTF.....
I’m feeling so grateful to Jessica Toonkel, Amy Nichols and our whole team. You can get last-minute tickets here.
Since I was tied up with preparations, I asked Paris Martineau to step in and write the column. I hope you enjoy it, along with our team’s great work this week, including Kate’s feature on Stripe’s VC investments, Alex’s scoop on Apple delaying its controversial mobile ad changes and Cory’s look at startup valuations’ biggest movers.
What’s a Small Business to Do in Amazon’s World?
We’re in the midst of the perfect storm (or perhaps the perfect double hurricane) to cause the mass extinction of small businesses and the consolidation of wide swaths of commerce. The last six months have been punishing for most small businesses, particularly those that catered to the surrounding community, relying primarily on foot traffic and the patronage of regulars to keep the lights on.
Stay-at-home orders and fears of the virus have dramatically changed the shopping habits of many U.S. consumers. Last quarter, e-commerce accounted for 16.1% of all U.S. retail sales, up from 10.8% from the year prior, while brick-and-mortar sales plummeted, according to new data from the U.S. Department of Commerce. But most of those digital dollars are going to a select few corporate behemoths—namely Amazon, Walmart and other established “everything” stores, where customers can buy most of the items they need on just one platform with minimal supply chain and shipping issues.
Most small businesses that set up their own personal e-commerce operations in response to the pandemic aren’t benefiting from the surge in online shopping. It’s just too difficult to compete with an everything store that fits in your pocket. Even the businesses that have pivoted to selling on Amazon are struggling to get a slice of the e-commerce pie. They are now stuck competing against millions of other merchants (and often even Amazon itself).
And then there’s the Kafkaesque nightmare of actually getting an order into the hands of the customer at a reasonable cost and speed amid the current postal service crisis. It’s a struggle even Amazon has faced of late, but unlike the average small business, the tech behemoth has the money and power to tilt the scales in its favor.
As I reported the other week, Amazon has spent the last six months building out its own network of delivery stations—facilities that essentially operate as hyperlocal post offices exclusively for Amazon packages—across the U.S. in order to free itself from the bureaucratic constraints of relying on the U.S. Postal Service and UPS to deliver most of its packages. By late 2021, Amazon’s U.S. distribution and delivery network will be nearly double the size it was before the pandemic, and it’s likely that Amazon’s legions of independent contractors will deliver two out of every three orders.
For Amazon, the move makes perfect sense. For practically everyone else, though, it could end up being the final nail in the coffin.
Small business owners are already beginning to give up, as many realize there may be no end in sight to the crisis. Others are powering through, hoping they can leverage their community and digital know-how to weather the storm. But a select few are taking a very different tack in the face of all of this devastation: They’re trying to be more like Amazon.
One of these businesses recently launched in my borough in New York. It’s called Cinch Market, but it describes itself in flyers and Instagram ads as the Brooklyn “Everything Store.” Many of the signs it tapes to street lamps and storefronts around the neighborhood are more explicit about competing with Amazon, urging residents to “Shop Brooklyn Not Bezos,” with a somewhat unflattering sketch of Amazon CEO Jeff Bezos.
Maya Komerov, an entrepreneur who lives in the Brooklyn neighborhood of Carroll Gardens, launched Cinch Market roughly three months ago. The slickly designed website operates as an Amazon-like centralized online marketplace for more than 20,000 products from small businesses, bodegas and grocery stores throughout Brooklyn.
Brooklyn residents can order a wide variety of goods—including bug spray, toothpaste, fresh sourdough bread and artisanal vases—from local businesses, all through a single omnichannel platform. They then check out with one cart as on Amazon or Walmart, and receive a single package containing their order with free same- or next-day delivery.
Komerov designed Cinch Market with seller profitability and ethical treatment of workers in mind. There are no fees for small businesses to join—though there’s currently a waitlist due to high demand—and Cinch only collects up to 9% of completed sales to cover its operating costs. Delivery staff are paid $20 to $25 an hour (plus tips) and have specific preplanned routes rather than operating on a gig-economy model like Uber drivers.
Komerov said that in the three months Cinch Market has been operating, she has seen skyrocketing demand for the platform from local businesses and customers alike.
“What I’ve found is that people really want to shop local, but it’s not convenient for them, so they go back to the big everything stores,” Komerov told me. Cinch has completed thousands of orders already and is seeing high demand from users for new items and additional shops. The platform’s inventory and number of sellers will double by the end of the month, Komerov said.
She hopes this model could work in many cities, offering residents a viable alternative to Amazon by making use of all of the local inventory and expertise most urban centers already have.
“Amazon is going and building these warehouses everywhere to be really close to customers, but all of these stores already exist that have the inventory and know the customer because they know their community,” said Komerov. “All of these stores can be more than just places people go into; they can become the fulfillment centers of the area, their own local everything store.”
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