Molson Hart makes his living selling toys on Amazon but says the company is taking a large chunk of sales. Is Jeff Bezos fair to small businesses?

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Here's today's episode.

Buying products on Amazon.com is a little bit like masturbation.

Not everybody admits to it, but honestly, you suspect it's pretty common.

It's just so easy.

But what exactly does Amazon.com do?

How did Jeff Bezos get so rich?

The details are unknown to most people, even frequent users of the site.

Well, a new documentary takes a closer look at what Amazon does, at its business practices, and what those practices do to the people who try to make a living selling their products on the site.

The documentary is called Amazon Market Power Monopoly.

So the filmmakers interview Amazon sellers who say they are barely keeping their heads above water because of the company's policies.

And those policies tell them exactly how much they can charge for their own products.

So take a look at this clip from the movie.

It shows a German businessman who makes and sells children's beds and does nearly all of his business on Amazon.com.

He says the company puts pressure on him to keep his prices low, as low as possible, to keep customers from buying that same product on another site such as eBay.

If Amazon finds out that he's selling his products cheaper on another site like eBay, they will punish him by making his products very hard to find on Amazon.

And they do this by taking away what is called his buy box.

The buy box is the area you click on the product page to make a purchase.

If there's no buy box, customers tend to leave and buy it somewhere else.

That sounds confusing.

Watch the man demonstrate exactly how this is done.

His most important online shop window at Amazon, the so-called buy box, the framed box around the shopping cart field.

So this whole box here that's just called the buy box, and you can see the add to cart button here.

And if I click on it now, then I have this in the shopping cart and I can buy the item.

But Marco Schock can also lose the buy box for his beds.

For example, if his prices are not competitive,

it means for me with buy box I can sell.

Without buy box, 95 to 99 percent of the sales are gone.

Who gets the buy box is decided by Amazon alone.

Marco Schock shows us.

I'm going to change the price to 349 euros.

And we will see that in about 15 minutes, the buy box here is gone.

And indeed, after 15 minutes, the buy box has disappeared.

For customers, it now seems as if the item is not available at the moment.

In other words, Amazon decides what you charge for your products, and if you don't obey, they will shut you down, but in the most passive, aggressive, corporate way.

They just remove your buy box.

It's fascinating, and there's a lot like that in this film.

It goes on to follow the business of a man called Molson Hart.

He's the CEO of an educational toy company that does most of its business on Amazon.

The film crew was there when Hart learned that Amazon would once again raise its fees on him.

So, in order to turn a profit, he was forced to jack his prices.

Watch.

We are

probably going to have to raise prices.

Why?

What's going on?

So,

what Amazon did is they increased all the fulfillment fees by about 5%.

So,

if you look over here, we got an email.

Shipping Brain Flakes is going to be 5% more expensive.

Now, the Texan has to recalculate.

In order to keep our profits at the same level, we're going to have to raise the price by you know 50 cents.

So, maybe we're going to go to 17.99,

up from 16.99.

And the problem

if he increases on Amazon, he must also increase the prices of his products on eBay, Walmart, and even in his own web store, although they are not affected by the fee increase.

If he doesn't do that, experience shows that he loses the buy box on Amazon.

Oh,

so it's not really a free market tactic.

If they're forcing you to raise your prices on other platforms, it's a monopoly tactic.

And there's a difference.

That's not the free market you just saw.

That's how monopolies operate.

Molson Hart knows that very well.

He's lived it.

He's the man you just saw in that clip and he joins us now.

Molson Hart, thanks for joining us.

The clip we just played is a fair representation of your life as an Amazon seller.

Yeah, that's absolutely a fair representation of our life as an Amazon seller.

If your products are cheaper off Amazon than they are on Amazon, then you lose all your sales on Amazon, which is a big problem for us because 90% of our sales come from Amazon.

So what you're saying, I think, is that Amazon sets the price market wide, not just on its own site, but on other sites.

So that's, is that correct?

In a way, that's true, right?

So if you look at the statistics, and a lot of people have a different statistics out there, Amazon controls roughly 50% of the whole online e-commerce market, depending on how you calculate it.

And for us, since 90% of our sales come from Amazon, and since Amazon is more expensive to sell on than other platforms like eBay, Walmart, or even our own website, Amazon, in a way, kind of does set the price.

Because if we price our products lower off of Amazon, because those

off Amazon platforms are cheaper than Amazon, we lose 90% of our sales on Amazon.

So we have to constantly keep our prices up off Amazon.

And

we can't lower our prices on amazon to the costs off amazon because then we'll end up losing money because amazon is more expensive to sell on than it is to sell on off amazon it's fascinating thanks for watching the episode with molson heart it gives you a sense of what amazon is really like worse than you thought

So if you don't want to use Amazon, and up till now, you haven't had much of a choice because it's effectively a monopoly.

Well, now you don't have to because there's an option, a new service made for you.

It's called Public Square.

And they're building a brand new way of conducting commerce, selling, and buying that goes back to America's roots.

So far, they have over 75,000 small businesses from this country offering their products and services.

So if you're a small business owner hoping to sell handcrafted goods, guns, ammo, fresh food, household essentials, whatever, Public Square is perfect for you.

It's a great place to do that, to sell what you make.

And it's also a great place to buy what other people make.

And it's easy.

You can add your business in less than 10 minutes for free and sell your products nationwide.

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Proud, in fact.

So if I could just ask a stupid question, how does Amazon know what you're doing off Amazon?

Yeah, that's a great question.

So I think they do it two different ways.

The primary way they do it is basically by using an algorithm that just like scrapes the entire internet, looking at prices on Walmart, looking at prices on eBay.

And in the video that you showed in the documentary, that's how Amazon was able to shut down that person's product so fast within 15 minutes.

So the algorithm is kind of like monitoring the whole internet to see if prices are higher or lower on and off Amazon.

And it might also be possible for there used to be like a button on pages on Amazon where consumers could report like a better price elsewhere.

So there might be like a human component as well.

But it's mainly just an algorithm where they're watching prices on and off Amazon.

But they know when you've been sleeping, they know when you're awake.

I mean,

it's like they're part of the surveillance data.

I mean, you wouldn't imagine because you're selling on Amazon that Amazon would be watching your behavior in other places, right?

Yeah, to my mind, it's totally unnecessary, and there's no need for this policy.

They used to contractually enforce this.

So there used to be a line in the contract that sellers signed with Amazon that would say that you would not sell your products for less off Amazon.

And then there was like kind of like a regulatory kerfuffle in Europe.

And they ended up removing that from their contracts, but then they maintained the policy algorithmically.

And

in 2019, I wrote an article about it.

And I can kind of explain why it's so hard to get these kind of narratives about Amazon.

But I wrote an article about it.

And that article ended up getting wrapped up into some, into like an FTC lawsuit, the state of California versus Amazon.

And that's why we're talking about it today.

Just back up a sentence, if you would.

What do you mean it's so hard to get that story out?

So, like, as I said, right, 90% of our sales come from Amazon.

Right.

And no one in their right mind

wants to bite the hand that feeds them, right?

So the people who know most about Amazon are the sellers who are selling.

on Amazon, like my company, right?

And so when people speak up, you taking you're taking some risk I try to be fair regardless of whether or not I'm being critical of their policies I think they're a good company with great people with some some bad policies right so don't want to bite the hand that feeds you and then the second thing is my company you know all companies that sell on Amazon they sign a contract that says that you know you're not gonna make public statements about Amazon you're not gonna speak to the pest to the press without express written permission from Amazon right so those are two reasons for the people who who know most about Amazon to not speak about Amazon.

And then you also have to remember that Amazon is like really big in the documentary media space because Amazon has its own Netflix, right?

They have Prime Video, they have their own Hulu.

So if you want to make a documentary about Amazon, you have to think carefully about

what's that going to do to your career going forward.

I'm not saying Amazon does this, but you may not be able to sell a film or documentary to Amazon in the future.

And so

those are the reasons why it's kind of hard to get this information out there.

How long do you think before they get their own defense department?

Defense department, like the Department of Defense or like wars.

I mean,

you're describing a company that's a lot, and of course we all sort of know this on some level, but that's a lot more powerful and a lot more willing to flex its power than maybe some of us imagined just 10 years ago.

Well, okay.

So like

I am a witness in, I don't know if I'm technically a witness, but I've been pulled into those two lawsuits, the FTC in a bunch of states versus Amazon and then the state of California versus Amazon.

And like, generally speaking, I can say this about my interaction because I'm bound by confidentiality in terms of what I can say with the lawsuits.

Like it is an attorney's job to discredit someone who

doesn't help

the attorney's case, right?

And

that is, that's pretty much what I have been, well, that is what is often experienced in lawsuits of this kind.

And, you know, I went through 16 hours of depositions, eight hours from the state of California, eight hours from Amazon.

I spent like, you know, 20 or 30 hours collecting documents.

And it's been a very painful, time-consuming, and expensive experience for me.

Amazon does a lot of things, but

I don't know.

I mean, they got the drones, but I don't think they're selling weapons quite yet.

Right.

Well, I didn't think they'd have a movie studio and be able to control coverage of their own company a few years ago.

So, you know, you never know where these things are going, Melson Hart.

But I just wonder, since you obviously you've thought about this in larger terms because you've been involved or a witness to these lawsuits, I mean, isn't this, aren't we approaching the definition of a monopoly?

So a business is something that controls its silo, you know, where it operates.

A monopoly is a business that controls an entire market.

And kind of what you're describing is a company that just controls online commerce, the pricing.

Amazon, with its weight and the way that they keep on jamming fees down sellers' throats.

And this isn't just about me as someone who sells on Amazon complaining about Amazon's fees.

Like these fees end up becoming higher prices for you if you shop on Amazon.

They, I don't want to say that they control pricing on the entire American internet or the countries where they operate, but you know, they're pretty, you know, they have a lot of weight when it comes to where prices are.

In terms of whether or not they're a monopoly, you know, that's not for me to decide.

That's for the courts to decide.

And like I said before, I sincerely, not just saying it because I don't want to get smacked by Amazon.

I mean, I don't.

But they are a good company and

they have great people, but they do have some bad policies.

And I think the best outcome would be for them to, you know, stop with the bad policies.

And I wrote an open letter to Jeff Bezos on Twitter.

It got some play.

I think he read it because he's responded to me on Twitter before, or X, I should say.

And, you know, I think it would just be better if they ended the bad policies rather than

potentially being broken up or something like that.

But again, that's not really for me to decide.

Well, they're not going to, I mean, he owns the Washington Post, which is the main news source in the capital city.

So I don't think they're going to be broken up anytime soon.

And I suspect the Post would editorialize against that if it came down to to it.

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So let me just ask you, since it's your business, since you're in this business, who makes money selling on Amazon?

Amazon?

Yeah.

So,

like,

for us, right?

So, we have a...

One of our best sellers is BrainFlakes.

I got my prop.

It's $17, okay?

Right.

On Amazon right now.

And after all the fees are paid, we get $7 out of the $17.

Okay.

So it's $17 on Amazon.

After the fees are paid, we receive $7.

With that $7, we have to pay rent, insurance,

all employees.

And then we also have to pay for the cost of the product.

Wait, wait, wait.

Wait, so the $10 you're subtracting from the $17 does not include your manufacturing costs or?

Correct.

Yeah.

So you start at $17, $10 of those dollars, and I can run through the fees.

Would you mind?

Well, because that's a crazy number.

Yeah, let's do it.

Yeah.

Yeah.

Do you want me to break down?

Would you mind?

Yes.

I mean, wait, hold on.

I'm a little bit surprised.

I mean, I thought they took a VIG of some kind, and they should.

They're selling your product for you.

That's great.

But the fact that they would take the majority of the retail price is stunning to me.

Well, it's more than the majority.

And you have to remember that we are not selling to Amazon.

We are selling on Amazon.

So, all the risk is with us.

If the product doesn't sell, Amazon has no risk.

They can actually just continue to charge us fees.

Not only that, they'll charge us like extra double fees for having too much inventory at Amazon.

So, yeah, at the risk of embarrassing myself on your show, I will attempt to do some math and I'll tell you how we go from $17 to $7.

Yeah, let's do it.

All right, so $17.

First, in our category, in toys, Amazon charges 15%.

Okay, so that's

80%.

So let's call that around 250.

Okay, so 15% of $17.

So now I'm down to $1,450.

Okay, then we have to pay a fulfillment fee to Amazon.

That's around $6.60.

So I think I'm at

$1,450.

So that gets me to $8.

That gets me to $7.90.

Okay, so just those two things,

the 15% commission and then the $6.60 fulfillment fee that Amazon charges,

I believe, got me down to

nine.

I'm embarrassing myself, but something like the high sevens.

And then we have to pay advertising and storage and shipping to Amazon, and that gets us down to around $7.

Okay, so we receive $7

when one jar of brain flakes is sold.

And with that $7, we have to pay our rent, our employees' salaries, our insurance.

We even have to pay for, we have to insure Amazon as well.

Okay.

And then we have to pay for the cost of the product, which is like, let's say, $350.

So on the $17, we'll make, depending on what our costs are, because costs go up and down, between $3 to $4.

So our profit is about $3 to $4.

out of the $17.

And there are like all sorts of crazy fees that I could walk you through.

It's wild.

That is amazing.

That's not at all what I imagined at all.

So

the strong majority goes to Amazon right off the top.

So then who how could you make a living doing?

I mean, how many brain flakes do you have to sell to like take a week off and go to Disney World in August?

Disney World's pretty expensive.

Yeah, it is.

You know, we're lucky to sell hundreds of thousands of jars of brain flakes and bigger sets.

And so, if we're making three to four dollars

a jar or whatever, you know, and if you sell $100,000,

you do have money to pay salaries and rent and all that stuff.

And you can maybe go to Disneyland once every two years, I would say.

Does anyone get rich selling that you know of get rich selling on Amazon?

Yeah, people, people still do get rich.

I think a lot of Chinese companies have gotten rich as well.

Pretty crazy statistic for you.

Over 50%

of the top sellers on Amazon are not American.

Okay.

So

in the US marketplace, like let's say 52% of the sellers are non-American.

And of that 52%,

the top sellers are...

Of that 52%, they're predominantly Chinese.

And the Chinese sellers, even though we're selling in the United States, even though it's our country, we should should understand how marketing works here.

It's our language.

They just clean up.

They do very well in terms of market share.

They don't all make money, but many of them do.

It's still possible to make money on Amazon.

You're not even describing the source of manufacturing.

I mean, I think the number would be a lot higher than 52% if

you were measuring where the stuff was actually made, but you're talking about the sellers.

Yeah, that's such an excellent point.

So if you go back to like the 1970s, 1980s, we had a lot of manufacturers in our country.

We were making things.

All those factories shifted largely to China, some to Mexico, overseas generally.

What's going on now is that the Chinese and other countries to some extent are kind of vertically integrating and they're taking over the product design and wholesaling and distribution that had traditionally has been in the United States.

So once upon a time, you know, you could buy from an American factory, okay, and the American American factory would sell its product to an American store or whatever.

And then we had this transitional period where Chinese factories were selling to distributors who were selling to stores, or Chinese factories were selling to Target or whatever.

What's happening now is that Chinese factories are selling directly on Amazon to U.S.

consumers.

And the net result of this, because the playing field is in the Chinese favor, and I can kind of explain why, is that the U.S.

like wholesale distribution product

design industry has come under threat from very tough, difficult competition from China.

And so now like we lost our factories, and in my opinion, I think we're going to lose this middle part of our economy

largely to companies in China.

How does China have a structural advantage in this?

So for one, these Chinese sellers, they're selling on Amazon.

They don't have to file U.S.

income tax returns.

They don't have to worry about estimated taxes like we do.

They're close to the factory, so they can iterate on products much faster.

They have lower costs.

And,

you know, that's enough.

They're less susceptible to lawsuits because they're overseas.

And it's just, you know, they may or may not have government subsidies.

They're just like, I mean, think about it.

If you want to design a new product, isn't it a lot easier to go down the street to the factory, talk to the guy, work that out than it is to communicate over video, fly to China, deal potentially with a quarantine, and work that out in order to make something new?

So the Chinese have a lot of advantages when it comes to selling on Amazon.

And what's wild is like, we're sellers on Amazon.

Whenever we get an email from Amazon, like the top part, it's in English, and then like the bottom part, it's all in Chinese because so many sellers are

Chinese on Amazon.

Amazing.

Are you going to continue doing this?

Selling on Amazon?

uh yeah um i'm we're gonna

for many years we've tried to reduce that it used to be 98 usually before 98 of our sales were on amazon we've gotten it down to 90 and then in 2023 we've gotten it down a little bit lower and so we're just continuously trying to reduce our dependence on amazon but it's so difficult in the toy space um it's hard but like i like what i what I'm doing.

I like my team.

And like, it feels really good to like make something and then to make something that's like good for people.

Like, you know, helps spatial thinking.

It's an educational toy.

So, yeah, I want to keep doing it.

Last question.

I can't resist.

Is Molson Hart your real name?

No, it's a fake name.

No, it's, it's real.

So, um, it's like the greatest name ever.

It, my brother's name is Hilton, and the joke is

he's where he was conceived, and I'm why.

My dad used to work for

Molson Breweries up in Montreal, Canada, and he saw it fit to name me after the brewery, even though I'm unrelated.

And my brother was, I can't believe it, he was conceived in a Hilton hotel in Arizona.

Your parents are heroes.

I've never met them, but I like them so much.

There's every sense of humor about your own children.

Molson Hart, thank you for that explanation.

That was absolutely the most interesting thing I've heard today.

I appreciate it.

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