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Amazon Denies It Has a Small-Business Problem

Robb Mandelbaum, The New York Times
Monday, 12 Dec 2011 | 1:48 PM ET
Amazon.com
Amazon.com

For years — since its inception — Amazon has been at implicit war with local brick-and-mortar stores.

Last week, the implicit seemingly became explicit when Amazon began a promotion that encouraged customers to check out prices at local retailers and use a specially designed “Price Check” smartphone app to report what they found back to Amazon. Customers who then purchased the same item from Amazon received a 5 percent discount, up to $5. (The deal was available only from Friday night through Saturday, and only for certain kinds of products.)

For its initiative, Amazon has been greeted with a barrage of rotten tomatoes, from the press and from small businesses and their sympathizers. (Gawker, for one, described it as “a Christmas attack on local shops” and a “cheap, sad thing.”) On Thursday, Senator Olympia Snowe of Maine, the top Republican on the Small Business Committee, joined the fray. “Incentivizing consumers to spy on local shops is a bridge too far,” she said in a statement. “During the busiest shopping season of the year, we should remember that our local restaurants, bookshops and hardware stores are the economic engines in our communities.” Ms. Snowe urged Amazon to cancel the promotion.

Of course, stores have long encouraged shoppers to snoop on competitors, and rewarded them for doing so. Amazon has just found an extraordinarily efficient way, one befitting its behemoth status, to do it. And shoppers, for their part, hardly need an app to exploit Main Street businesses; in fact, a recent study found that nearly 40 percent of book buyers on Amazon window-shopped at a bookstore first. (My colleague Jay Goltz recently wrote about consumers who take a shopkeeper’s time and then brag about going home to buy the same item online.)

Still, Amazon’s promotion does seem tone-deaf, considering the mood of the times. The idea that small businesses are both valuable and vulnerable, battered by an economic crisis that was not of their making, seems to have won the public’s sympathy, in theory if not always in practice.

Moreover, Amazon in particular seems to be on the wrong end of public opinion — as measured by editorials and columns in local newspapers across the country — in its battle against states seeking to collect sales tax on online purchases made by their residents. (Under current law, retailers have to collect the tax only in states where they have a substantial presence, known as nexus; otherwise customers are supposed to pay it.) Amazon’s opponents — led, paradoxically, by retail giants like Best Buy and Wal-Mart — have successfully framed the issue as a battle between cyberspace and Main Street.

But an Amazon spokeswoman, Sally Fouts, said in an e-mailed statement that the promotion was not directed toward small competitors. Instead, she said, it was “primarily intended for customers who are comparing prices in major retail chain stores.” She added that Amazon’s third-party sellers — “more than two million individuals and businesses of all sizes that sell on Amazon” — also benefit from the Price Check app.

Meanwhile, Amazon appears to be conceding, gradually, in the sales tax fight, a shift that at least in part may have something to do with the fact that as it expands, it is establishing a physical presence in more and more states. The company will begin collecting sales tax in California next year, instead of fighting a new state law aimed at forcing the company to do just that. In Tennessee, where the retailer is opening two new distribution centers, Amazon has agreed to begin collecting sales tax in 2014. Initially, it had sought an exemption from state tax rules. In South Carolina, where Amazon is building another distribution center, it will collect taxes in 2016. This fall, it came out in support of new bills in Congress that would allow states to collect sales taxes from online sellers that do not have a presence in those states. (Another Amazon spokesman, Ty Rogers, said by e-mail that the company had long supported “a national approach to sales tax.”)

Curiously, Ms. Snowe, who spoke out so forcefully against Amazon’s promotion, has not signed on to the leading Senate sales tax bill, the Marketplace Fairness Act, although Amazon itself has. “I am absolutely committed to protecting small businesses and keeping Main Street positioned to flourish once again, and I am carefully examining these and other legislative proposals on this issue,” Ms. Snowe said in a statement provided by a spokesman. But, she said, “the need for comprehensive tax reform also must be considered, since the current overall tax system is its own source of problems for small businesses.”

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