Former Walmart U.S. CEO raises prospect of breaking up Amazon


Bill Simon, the former CEO of Walmart U.S., thinks it may be time for Congress to take action and split Amazon.com up.
In an interview with CNBC, Mr. Simon made similar arguments to others who have taken issue with Amazon’s business practices. In short, Amazon makes money on non-retail businesses, particularly Amazon Web Services (AWS), and uses the profits to subsidize its e-tail efforts. Amazon has used those subsidies to undercut a wide variety of retail rivals and gain share in one category after another that it targets.
“It’s anti-competitive, it’s predatory, and it’s not right,” said Mr. Simon.
Those who know something of the retailing industry’s history may find some irony in Mr. Simon’s remarks.
For years, Walmart’s smaller rivals have complained that the Bentonville behemoth sells products at prices at or below what it costs them to purchase the very same items. To gain share, Walmart systematically targeted key categories and sold products at prices its competitors couldn’t match.
Buyers at smaller retailers have (sarcastically) wondered how Walmart could have shelves filled with products when the vendors of those very same items had notified them of short supplies due to one manufacturing issue or another. For years, stories have been written about the power of Walmart and how it has put rivals, particularly independents, out of business.
Mr. Simon’s comments follow reporting earlier in the week by Axios that President Donald Trump is “obsessed with Amazon” and has expressed interest in targeting the company for violations of “antitrust or competition law.”
I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!
— Donald J. Trump (@realDonaldTrump) March 29, 2018
Mr. Trump tweeted on Twitter, “Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!”
The Axios report points out that Mr. Trump’s views on Amazon are not always grounded in fact. One of five sources who spoke to the news organization said, “The whole post office thing, that’s very much a perception he has. It’s been explained to him in multiple meetings that his perception is inaccurate and that the post office actually makes a ton of money from Amazon.”
Another motivating factor for Mr. Trump’s recent public criticism of Amazon may be that its CEO and founder, Jeff Bezos, owns The Washington Post. The paper, which is separate from Amazon, has broken news reports and published opinion pieces largely critical of the president’s behavior, his policies and the performance of his administration.
- Former Walmart US CEO says Congress should consider splitting up Amazon – CNBC
- Trump hates Amazon, not Facebook – Axios
DISCUSSION QUESTIONS: Do you agree that Amazon is an anti-competitive force in the retail marketplace? Has its position risen to the point where it needs to be broken up?
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25 Comments on "Former Walmart U.S. CEO raises prospect of breaking up Amazon"
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President/CEO, The Retail Doctor
It’s too late to try to break up Amazon and it would be a dangerous precedent for other larger companies as well. Breaking up AT&T didn’t provide choice as much as higher prices and I doubt this administration is interested in being seen as harsh on business — politics notwithstanding.
Principal, Retailing In Focus LLC
A little retail history is in order: Back in the heyday of Sears, it owned Allstate and other financial services brands that doubtless ran bigger profit margins than its retail operations — and they probably subsidized Sears’ growing market share and expansion plans. The role of AWS is not that different — and to pile on some irony, there are reports in today’s Wall Street Journal that Walmart is interested in acquiring Humana. Is the world’s largest retailer interested in buying a health insurer because of the low margins?
Until Amazon came along (and became the bête noire of unsuccessful brick-and-mortar retailers), Walmart filled that role for many years. It’s unfitting for Mr. Simon to propose some sort of governmental intervention, as if the goods and services Amazon provides represent some kind of monopoly. Let’s face it: President Trump’s griping has nothing to do with Amazon’s business practices, and everything to do with Jeff Bezos’s ownership of the Washington Post.
Retail Influencer, Speaker and Consultant
I don’t agree with this at all. Amazon has been instrumental in helping retail break free and drive towards being a consumer-focused industry again. The last 30 years weren’t consumer focused — it was a series of Fortune 100 businesses working together to maximize profit. Mr. Simon just probably isn’t used to seeing what real consumer-focused activity looks like.
When I look around the marketplace, I see exciting digitally native brands and new retailers that are thriving. Yes, there’s always someone like Amazon or Walmart that is lurking around trying to own every corner of the market, but businesses have figured out how to manage around them.
If we’re really looking at this — the one that needs to get broken up is Facebook. Between Instagram and Facebook, they own almost all of the digital media outlets and seem to have no regard for our digital identities.
Advisor, MyAlerts
No to the notion of a break-up! Amazon does not snuff out innovation among its competitors, it pushes them to innovate and improve. Much of this noise from Simon and DJT has more to do with their own insecurities than with what these markets need to continue the shift to customer focus and service.
Senior Vice President, Dechert-Hampe (retired)
Principal, Anne Howe Associates
In a free market the shopper gets the decision, not big businesses seeking a “win” by trouncing on each other. Power to the shoppers!
President, Max Goldberg & Associates
It’s ironic that Walmart, the mom-and-pop buster from Bentonville, wants to break up Amazon. I doubt we would hear a peep from them if Amazon was not a major competitor. Retailers come and retailers go. Leave Amazon alone.
Consultant, Strategist, Tech Innovator, UX Evangelist
President, b2b Solutions, LLC
Retailers may not like Amazon’s business strategy of using one part of the corporation to subsidize another, but is that terribly different than the use of zone pricing and using the profit from one zone to support another? Other retailers have employed similar strategies of owning non-retail business and using that income to support their retail operations.
Founder and CEO, CrunchGrowth Revenue Acceleration Agency
I think it is very dangerous to have political agendas dictate business issues. Walmart is certainly no angel when it comes to business practices. Why go after Amazon who is not damaging the consumer at all? They are good for both businesses and the consumer. There are other businesses, like CVS, whose practices have come to light as actually harming smaller rivals and the consumer.
This is skating on thin ice …
Founder & Chairman, International TCG Retail Summit
There is nothing wrong in subsidizing one business unit with capital from another within the same group. This is happening everywhere. What is anti-competitive are the huge tax advantages Amazon has created in comparison to more traditional retailers with physical stores. Here government must intervene and create equal (tax) or at least fair conditions for brick-and-mortar, brick and click and pure e-commerce players. Every form needs to be judged on the same basis.
Principal, Cathy Hotka & Associates
Wow, what a simplistic approach to a very complicated issue. Americans have embraced Amazon and I can’t imagine they have an appetite for chopping it up. Mr. Simon’s proposal is going nowhere.
Managing Director, StoreStream Metrics, LLC
… The sky is falling, the sky is falling … Amazon is certainly a disruptor but they have been creative, innovative and have reacted to and delivered the digital consumer experience. To suggest government regulation is petty and Victorian. Retailers should learn from Amazon and embrace being digital. Walmart, Target and The Home Depot all had the same opportunity. As a consultant, I was preaching this inevitability back in 2006. While people listened, they were not experiencing the pain to change. The future is now today and now everyone is in the “hurt locker.” Retail is not going away but it requires massive remodeling. Being digital requires not just change but scrapping traditional paradigms. In the new world order of retail, Amazon and Google are the gorillas — who will be the chimps and monkeys? The store needs to transform from a place to transact to a community to share and embrace.
Co-founder, RSR Research
Why is Amazon an anti-competitive force and Walmart not? I think an activist investor would have proposed a breakup for other reasons, but Mr. Bezos owns too much of the stock for that to happen.
I agree with Dick Seesel. It’s a bad precedent, based on likely political motives and ignores the elephant in the room – Walmart buying Humana.
Retail Strategy - UST Global
Amazon’s “guilt” has been to have a solid vision of how the customer wants to shop and to execute relentlessly against that vision through constant innovation and a long-term investment strategy. They have not been subsidized, have not practiced predatory pricing or anti-competitive behavior and, to the best of my knowledge (which is limited on this one), have not used their size and power to unduly pressure suppliers. On what basis does a government (well, a normally-run one) intervene because a company has been smart and successful?
Principal, Cassarco Strategy & Analytic Consultants
Trump’s attacks on Amazon are entirely about Jeff Bezos’ ownership of the Washington Post. He is flat out wrong when he says that Amazon isn’t paying sales tax. He is flat out wrong in saying that Amazon has anything other than a positive impact on the USPS’ bottom line. But we should all share Bill Simon’s concern that Amazon’s “market share sans margins” approach is a long-term danger not just to competitors, but to the consumer. I consider myself a good capitalist, but I do believe that the ultimate outcome of unregulated competition is monopoly, which is only to the advantage of the monopolist.
Professor of Food Marketing, Haub School of Business, Saint Joseph's University
No. Amazon has been a positive disruptor to an antiquated form of shopping and should not be penalized for doing so. It is the complacent competitors who have hoped that Amazon would crash and burn or otherwise go away who need to hold up the mirror and see that their lack of innovation has permitted Amazon to grow to its current levels of dominance. Keep the government out of this debate. Make changes as necessary to compete more efficiently and effectively.
Scientific Advisor Kantar Retail; Adjunct Ehrenberg-Bass; Shopper Scientist LLC
Editor-in-Chief, CPGmatters
A sidebar issue is Jeff Bezos. Does he have too much power to affect or change so many things in the country? When in history has this proven to be a good thing?
Chief Amazement Officer, Shepard Presentations, LLC
Break up what? It’s not like Amazon has dozens and dozens of subsidiaries that are a result of acquisition. Yes there are a few, and the big ones are Whole Foods and Zappos. Check out this list if you want to see more.
I don’t see Amazon buying up competitors to grow their core business. They are making strategic acquisition, such as Abebooks, acquired by Amazon in 2008, which is a site focused on finding rare books. Or Audible, also acquired in 2008, that provides audio versions of the books they sell.
Independent Board Member, Investor and Startup Advisor
Managing Director, GlobalData
This is all total baloney! Amazon is nowhere near a monopoly, nor is it anti-competitive. It is a disrupter that has found new ways to service consumer demand. Companies like Amazon deserve our respect and praise, not absurd and illogical criticism!
CFO, Weisner Steel
Retail Transformation Thought Leader, Advisor, & Strategist
Nonsense! Talk about the pot calling the kettle black! The primary sniff test for determining if a business has monopoly power is that it shows harm being done to consumers. How has Amazon harmed consumers? All they’ve done is force an entire industry to rethink how they serve their customers. I recall Walmart being in this position once upon a time, so it’s hard to accept the accusation.
Now, a better question may be: does Amazon have an unfair advantage as a retailer given their other business areas? That could be debated. Although you could make an analogous argument that any consumer goods manufacturer that opens their own stores has an unfair advantage by cutting out middleman distribution. No, at the end of the day, the accusations are mostly false (especially the USPS ones) and are purely politically motivated.
CEO, President- American Retail Consultants
Breaking up Amazon is a poor idea based in ignorance and largely an uncompetitive understanding of the facts. It is Amazon who is forcing the retail market place to become more efficient, effective and to adapt to a new model. There is no “rule” for how a retailer must make their money, and if the Amazon model works that is great. We could say the same for the club stores, where Costco makes its money from membership fees instead of product pricing. That Amazon makes more money on its cloud-based services and advertising than its retail sales doesn’t matter. More importantly, it is how Amazon disrupts the current models in the marketplace and forces change. Soon this will apply to healthcare and the world cannot wait!