May 8, 2021

Marketplace Ethics: App Stores and Amazon

There are three types of people in a marketplace; customers, suppliers and the venue. The venue hosts the suppliers, the suppliers get to sell their products, and the customers get what they want…

There are three types of people in a marketplace; customers, suppliers and the venue. The venue hosts the suppliers, the suppliers get to sell their products, and the customers get what they want. Simple. It works because of a fundamental amount of trust placed on the venue. Customers get to browse more products, trusting that the venue vets the suppliers. Suppliers get exposed to more customers, trusting that the venue treats all suppliers fairly. And venues grow as suppliers join up.

A marketplace could be a regular farmers market, a mall/shopping centre, or any of today’s more popular marketplaces, like app stores and Amazon. But with the growth of big tech companies and online marketplaces, the transparency you get at a physical marketplace is gone and the trust is disappearing. We’re moving towards monopolies controlling what we see, what we buy and taking all of the benefits without accountability.

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The marketplace problem

Venues or platforms in the modern world, have a moral and ethical responsibility to their suppliers and customers. Treating suppliers fairly is their responsibility and should be good for business. In theory, it means more choice, better experiences and a more productive economic environment. In practice, this is difficult.

In a shopping centre, you might have space next to the front door, with a big window, looking out onto the street. And space at the back, in a dark corner, with no windows. One is obviously better than the other. The venue should feel a responsibility for correcting this.

Typically this is done by charging suppliers more for the better spot, or less for the worse spot. This goes some way to balancing the scales but ultimately the placement of the supplier in a marketplace has a huge impact on business. In a physical setting, maybe that means holding events or proper signposting. Or why would they stay? They could find another shopping centre or just open a shop somewhere else. In a physical marketplace.

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Online marketplaces

When the world came online the only thing that changed was our perception. Marketplace venues became platforms, the big space at the front of the building became the top of a web page, and paying more for the best spot became paying for ads and in-app payments.

This move was great for anybody who could take advantage of it. Customers had more choice than ever before, suppliers had the opportunity to reach millions of new customers and the platforms could host countless more suppliers for all their supplying needs. Don’t get me wrong, I think this is great.

But there’s a key difference. Soon all the suppliers chose a platform. The more suppliers flocked to the platform, the more customers went there, the better the platform looked and the more suppliers joined in. Eventually you end up with unprecedented customer engagement and more opportunities for suppliers. But you also get disproportionately fewer venues platforms.

On the face of it, this isn’t great, the winning platforms have a monopoly. Competition on the same scale is near impossible and it puts a tremendous amount of power into the hands of the platform. They can bias the market by accident simply by not supporting their suppliers in discoverability. (But we’re not here to talk about monopolies, maybe another time).

These kinds of winning platforms have cropped up across industries. Amazon is the obvious dominant with Amazon staked essential products, and the Google and Apple app stores only co-exist because of the fundamentally different platforms that their platforms run on, even though by the sheer volume of customers/suppliers Google is far ahead (Apple is usually a special case wherever it plays though). Are they far ahead because of their software or because their software is pre-installed when you buy the device and you don’t know about alternatives? I’m sure you can think of more examples.

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A platform’s responsibility

The problem we’re examining here is that these platforms have a tremendous amount of power and no legal responsibility to behave. You could say that’s not their fault, they built their muscle fair and square, they should be allowed to flex. But at the very least they have a moral responsibility to behave. To respect the trust between the customers, suppliers and the platform.

We are starting to see a subtle abuse of this power cropping up across the board. Platforms using their position to push their own products and compete with their suppliers. Rather than respecting their position as a venue and supporting them. Yes, a morally good and productive platform should support their suppliers, help growth, improve discoverability and encourage best practices, not compete.

For example

Let’s look at a bookshop as an example. (The name ‘bookshop’ is actually misleading, it’s a marketplace venue, not what you would typically call a shop). Let’s say I took money from publishers (suppliers) to display their books in my shop. A customer buys a book. Most of that money goes back to the publisher, and a little goes to me, the venue, that’s the model.

Sounds reasonable. So, now I have a responsibility to all of my publishers and customers to display the books fairly. That’s okay, I organise sections by genre, I put the newest stuff in the window, I make sure everything is well lit and categorised. (Online shopping categories, featured products at the top of the page etc). Good. Now I also have a responsibility to support my publishers.

That’s easy, I’ll cycle their books to central tables or in the window. And to make a little extra money because not all parts of the bookshop are made equal I’ll allow publishers to pay me a bit more to get their books in the window more often. Aka ads. (This is capitalism after all). Fine. I also hold events, signings and book clubs completely separate from the publishers to foster a community and bring us all more business. Perfect.

Here’s the problem: What if I then decide to publish my own books? If I move the other publisher’s books to the back and put mine in the window, and on the central table, and stick a big happy sticker on them that says ‘Essential reading!’. Sound familiar?

Or if I am an app store giving developers and tech organisations the opportunity to publish and promote their apps in my store. But then I put my own software on their devices by default and on the front page, and I put theirs behind some clicks and after some scrolling? You can see this is bad form, it’s unethical and it doesn’t foster trust or a positive competitive environment.

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Unethical marketplace consequence

If this were to happen in a physical marketplace, if the folks who owned the market square took a fee and let people come in and set up their stall in the corner, but then flogged their own wares at the front, with a big sign, it would be simple. People would go elsewhere. Suppliers would find another, fairer square and customers would follow. Ultimately the venue would have to change or go out of business.

In a world of algorithms, big data and companies big enough to take on governments, this is not possible. There simply isn’t somewhere else to go. More so than ever, platforms like this have a responsibility to behave, or should be held accountable if they can’t. This breakdown of trust between venues and their suppliers undercuts suppliers and affects the customer. Platforms designed to provide more choice, and more opportunity flip, and are suddenly forcing what we see.

But of course, since this is a marketplace and because these platforms have bigger budgets for the user experience than you can possibly imagine, it feels fine. You still have all of the choices, it’s just further down the page, they’re just pointing you at the best choice. Oh? But when did the best choice become their choice?

Naturally, its a fine line. Recommendations are very helpful. That is recommendations based on reviews, quality checks, or choice filters. But promoting your products or products you have a stake in, in your marketplace, above others, because they’re yours, is not okay.

That is called a shop. Not a marketplace. A company is of course allowed to sell their own products. But then you are not a marketplace, or really a platform, you are a shop. You cannot own the platform and sell your products in your own marketplace. Even if you have all the right intentions, even if you take all the right precautions to make it fair. You have an overwhelmingly unfair advantage and it creates a distrusting environment. Monopolies monopolise, suppliers go under and customers get the wool pulled over their eyes.

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The solution

There is always something you can do, as a customer, a supplier or as a venue. The best resource I’ve found is the Centre for Humane Technology (CHT). They don’t deal with this exact issue as far as I have seen but are doing work to address the much deeper problem within what they call the attention economy. You might know them already from the ‘Social Dilemma’ on Netflix.

I am a customer of numerous marketplaces, big and small. Realistically I can’t challenge them, they have no obligation to do anything and it certainly takes more than a mopey article to change anything. But what I can do is continue to press the issue and raise awareness.

I’ve had a few conversations with real people in the lead up to writing this, and, I’ve written this. That’s a little bit of pressing. For what little difference it will make I try to use smaller marketplace platforms that are actively, obviously, supporting their suppliers. Like these: Bookshop, Medium (platform plug?) hive, Etsy

I am a supplier to this marketplace, Medium, and I intend to be a supplier to others in the future, hopefully to bookshops, hopefully to Airbnb, hopefully to the snapstore, and probably more. Something suppliers can do is raise the question with the platform, what are their policies, where do they stand on anti-competitive behaviour. Suppliers probably have the most to lose here so it’s more of a risk to take action.

Responsibility should lie with the platforms themselves. I am part of the platform that is snapcraft.io’s snap store. The app store for Linux. Whether you know what that is doesn’t matter. What matters is that there are people behind the platform aware of the issue and taking responsibility for creating a fair environment for all our users. It’s easy to say “we should put our newest software at the top of the store” but we shouldn’t.

A platform is a place for customers and suppliers, we are there to support and maintain. On our platform, the only apps we have any amount of stake in are popular third-party applications without third party maintenance (so we do it for them) or apps developed by employees who have no impact on the store itself and are hidden behind a developer account like everyone else. It’s an easy line to cross but it’s important not to.

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In conclusion

With great power comes great responsibility. Healthy/ethical marketplaces are places where trust is fostered between the platform or venue, and their suppliers and customers. As marketplaces came online the transparency that encouraged trust disappeared and we’re starting to see modern marketplaces break faith. These platforms should not be using their position of power to force their agenda, instead, applying the model of supporting existing suppliers and improving customer experience to drive success.

Next time you go to a marketplace, (Amazon, Airbnb, the supermarket, wherever) look around. Are they guilty of competing with their own suppliers? How well hidden is it? You can be sure they know what they’re doing. What can we do?

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