Issue 34- On Amazon, Uber for Trucks, and Mobile Money

In today's Finshots brief, we will discuss

• Why the European Commission is pressing antitrust charges against Amazon
• A unique 'Uber for Trucks' startup in China
• The adoption of mobile money in India

European Commission moves against Amazon

The pandemic has forced thousands of customers to turn to online platforms to buy everything from groceries to clothes, leading to massive gains for e-commerce giant Amazon. But even as the platform’s influence with customers and traders grows, critics are contending that it is using untoward means to further its own agenda. And these concerns have culminated in the The European Commission charging Amazon with anti-competitive practices. The claim being Amazon is now using data gathered from third-party sellers to compete against them.

Here’s the thing - Amazon is a marketplace. Its job is to provide a digital platform where sellers and buyers can access each other. And to that end, it’s a boon for sellers who can use its free services to access a huge online market with minimal investment. But the problem is, Amazon also sells goods on its own platform and it’s hardly a fair competitor.

To start with, Amazon has a treasure trove of consumer insights. They know what products customers search for, what features attract them the most, and the best way to target them. This kind of data is invaluable when it comes to making offers people can’t refuse, and small sellers can’t hope to match it.

And then there’s the data that Amazon collects from the sellers themselves. Any merchant that wants to sell on the e-commerce site has to agree to share certain data with them- like what products they are selling, how much the vendor has in stock, etc. European officials have been talking to such sellers for the past year, and they’ve come to the conclusion that Amazon has been using "competitively sensitive information" to choose profitable products and launch similar offerings, without actually having to figure out what customers like to buy. Information like this can help Amazon decide how much to sell an item for, which features to copy, and whether it’s worth entering a product segment at all.

In line with this, many sellers have claimed that whenever a product of theirs does well, Amazon introduces a similar one at a lower price, giving it a more prominent listing on their website.

Of course, Amazon has stoutly refuted this. The company maintains that it uses individual sellers’ data only to support them and deliver better customer experiences.

However, an investigation undertaken by The Wall Street Journal with 20 former employees of Amazon’s private-label business reveals something different. The investigation found that though Amazon does restrict its private-label executives from accessing data from individual sellers, these rules aren’t strictly enforced. And in fact, using such data is a routine practice in the company. And it is definitely anti-competitive.

As Natalie Berg, author of a book about Amazon’s retail practices, said, "At some point, Amazon needs to decide whether it wants to be the retailer or the rails that the sector runs on. They can’t have their cake and eat it too."

Anyway, a verdict on whether Amazon broke competition rules is expected to be reached next year. And if the e-commerce giant is guilty, they might have to change their ways, and pay a fine of 10% of its annual global revenue—based on 2019 numbers, that’s around $28 billion!

Uber for Trucks

As the coronavirus pandemic induces more and more customers to try online shopping, transportation and logistics companies in China are experiencing strong growth. One such company is Full Truck Alliance, a startup providing an app-based platform for hiring trucks. It's sort of similar to Uber. The company started in 2017 with the merger of China’s two biggest truck-hailing companies, and is used by businesses to ship goods in over 300 cities across China.

Full Truck Alliance claims to be the world’s largest road logistics platform, facilitating annual freight transactions worth a whopping  $100 billion! The company makes money by collecting annual membership fees as high as $250 from companies, and also charging a commission on every transaction. Apart from this, Full Truck Alliance also collects fees for services such as insurance, fuel cards and new-truck sales.

Last year, Full Truck Alliance booked losses of some $105 million along with revenues of over $300 million. This year, it is set to turn profitable. And next year, it wants to go for an initial public offering. And to expand its business before that, Full Truck Alliance is now raising financing worth  $1.7 billion!

More Mobile Money

Over the past 5 years, the digital money landscape in India has changed significantly. Ever since demonetization forced lakhs of people to trade in physical cash for digital transactions, technologies like mobile and internet banking, e-wallets, and UPI have become more popular than ever before. In fact, according to the International Monetary Fund, the number of registered mobile money accounts in the country leapfrogged nearly 95-times between 2014 and 2019. In 2014, there were only 13 such accounts per 1,000 adults, while in 2019, there were 1,295. And now that the post-COVID world has brought forth strict ‘no contact’ norms, this number is set to increase further.

It’s no surprise that this switch to safer and more convenient modes of transactions is disrupting traditional banking. The number of ATMs, which had increased to 22 per one lakh people in 2017, has now dropped to 20.95. And the number of commercial bank branches per one lakh adults grew by only 14% over the past 5 years. Also, as NBFCs, micro-finance institutions, and digital lenders have amassed more market share, the number of outstanding loans in commercial banks has fallen from 50.39% of GDP to 48.55% of GDP. All in all, the numbers paint a clear picture. Digital banking is taking off in a massive way.

Google is in Trouble

A couple of months ago, Google removed PayTM from its app store on dubious grounds. Legal experts deemed this incident extremely anti-competitive. And now, India’s competition regulator has found that the tech giant is also abusing its dominant position in the UPI payments market. Know more.

The Most Generous Indian

In 2020, Azim Premji donated ₹7,904 crores to charity. That’s ₹22 crore per day. And with that, the founder-chairman of Wipro has topped the list of philanthropists in India for 2020. Read more.

Express Instructions

Yesterday, Finance Minister Nirmala Sitharaman told bankers to issue only Rupay cards as the first option to customers. She also wants them to seed all bank accounts with Aadhar number and, wherever necessary, with the pan card by December this year. Learn more.

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-Written by Vedika Agarwal and Akshay Tater.