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?

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. 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. 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.

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.

He's the CEO of an educational toy company that does most of his 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.

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.

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.

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They're a sponsor of this program, and we're happy to have them, proud in fact. So if I can just ask a stupid question, how does Amazon know what you're doing 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.

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.

I think they're a good company with great people with 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 going to make public statements about Amazon. You're not going to speak to the press without express written permission from Amazon, right? So those are two reasons for the people 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 like think carefully about, you know, what's that going to do to your career going forward? I'm not saying Amazon does this, but, you know, you may not be able to sell a film or documentary to Amazon in the future. And so, you know, those are the reasons why it's kind of hard to get this information out there.

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. I don't think they're selling weapons quite yet.

aren't we approaching the definition of a monopoly? So 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 that, controls online. Commerce, the pricing.

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. And but they are a good company and they have. 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. 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'd just be better if they ended the bad policies rather than, you know, potentially being broken up or something like that.

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

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

So like for us, right, so we have a. one of our best sellers is Brain Flakes. I got my prop. It's $17, OK, right on Amazon right now. And after all the fees are paid, we get seven out of the $17..

OK, so it's $17 on Amazon. After the fees are paid, we receive seven. With that $7, we have to pay rent, insurance, all employees. And then we also have to pay for the cost of the product.

I mean, I thought they took a vague of some kind, and they should. It's. 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.

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.. Yes, I would love that.

Yeah, let's do it. All right. So $17 first in our category in toys, Amazon charges 15%. OK, so that's.

So let's call that around $2.

50.

. OK, so 15% of $17.. So now I'm down to $14.50.. OK, then we have to pay a fulfillment fee to Amazon. That's around $6.60..

So I think about $4.

50, $14.

50.

. So that gets me to $8, that gets me to $7.90.. OK, so just those two things, the 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. Yeah. And then we have to pay advertising and storage and shipping to Amazon. And that gets us down to around $7.. OK, 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. OK, and then we have to pay for the cost of the product, which is like, let's say, $3.50.. 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 I could walk you through.

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

And of that, 52 percent, the the top sellers are that, of that 52 percent. 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 understand how marketing works here. It's our language. They, 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 it.

So once upon a time, you know, you could buy from an American factory, OK? And the 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.

S. income tax returns, they don't have to worry about estimated taxes like 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, or, 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? That is to like 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.

Yeah, we're going to. for many years, we've tried to reduce that. It used to be 98 percent. Usually, before 98 percent of our sales were on Amazon. We've got it down to 90 percent.

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. 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, help spatial thinking. It's an educational toy. So, yeah, I want to keep doing it.

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. he was conceived in a Hilton hotel in Arizona.

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