Categories
California Car Services and Livery Cabs Delivery Services Freelancing, Self-Employment and Independent Contracting Labor and Jobs Law and Legislation Lyft Inc Mobile Applications Postmates Inc Suits and Litigation (Civil) Uber Technologies Inc Uncategorized Wages and Salaries

Uber and Postmates File Suit to Block California Freelancer Law

Uber and Postmates filed a lawsuit in federal court in California on Monday, seeking an injunction to prevent the state’s landmark freelancer law from taking effect against them on Jan. 1 as scheduled.

The action underlines how high the stakes are for Uber and Postmates with the new California law, called Assembly Bill 5. The law could potentially threaten their businesses because under it, workers must be classified as employees rather than contractors under certain conditions, such as if a company controls how they do their work or if the work is a regular part of the company’s business.

Most employment experts have said the new law will require Uber and its rival, Lyft, along with delivery services like Postmates, to classify their drivers in California as employees. That could add 20 to 30 percent to Uber’s and Lyft’s labor costs and lead to many hundreds of millions of dollars in additional expenses a year, if not more.

As employees, drivers would be protected by minimum wage and overtime rules and would be eligible for workers’ compensation and unemployment insurance. The companies would have to pay half of their payroll taxes for Medicare and Social Security.

Postmates said it was seeking to delay the law from taking effect to gain time to figure out a compromise so that its workers would not be classified as full-time employees. Postmates and Uber argued in their complaint that California’s State Legislature had exempted certain industries while denying an exemption to what are known as “gig work” companies on essentially irrational grounds.

The suit is unlikely to stop the law from taking effect against workers outside the gig companies. A federal judge will decide whether to grant a preliminary injunction blocking the law from being enforced against the gig companies, which could later turn into a permanent injunction.

Uber said in a statement that it was bringing a legal challenge against the new law “on the basis of lack of equal protection and due process under both federal and state law.” The ride-hailing company declined to comment further.

Postmates said, “This lawsuit is an effort to preserve on-demand work opportunities,” added that it was urging state lawmakers, organized labor and Gov. Gavin Newsom to negotiate a compromise.

But Assemblywoman Lorena Gonzalez of San Diego, the bill’s author, said in a statement that “Uber is in court bizarrely trying to say A.B. 5 is unconstitutional.” She added, “The one clear thing we know about Uber is they will do anything to try to exempt themselves from state regulations that make us all safer and their driver employees self-sufficient.”

Uber and Lyft both said in documents they filed in anticipation of their public offerings in 2019 that having to classify drivers as employees could significantly hurt their financial performance. Both companies’ stocks have dropped since they went public this year.

California legislators passed the new law in September and it was signed into law. Uber, one of the main targets of the legislation, had previously declared that it did not plan to reclassify its drivers as employees and that it thought its drivers could retain their independent status even under the new law. Uber and Lyft have both also announced that they would each kick in $30 million for a state ballot initiative to essentially exempt their drivers from the new law.

In addition to Uber and Postmates, two workers — one who drives using Uber and another who delivers food through the Postmates app — also joined the lawsuit.

Categories
Biobot Analytics Inc Computers and the Internet Corporate Social Responsibility Delivery Services DynamiCare Health Entrepreneurship Food Greenhouse Gas Emissions Lemontree Foods Inc Mobile Applications Nonprofit Organizations OpenAQ Opioids and Opiates Pear Therapeutics Inc Pinterest Propel Inc Social Media Start-ups Two Thousand Nineteen Uncategorized

The 2019 Good Tech Awards

Two years ago, I started what has become one of my favorite annual traditions. Instead of a year-end column rounding up all the dubious and objectionable things technology companies did over the last year — a true fish-in-a-barrel assignment — I highlighted some examples of “good tech.” I wanted to give kudos to the kinds of tech projects that don’t always make headlines but that improve people’s lives in tangible ways.

I’ll admit, handing out awards for good technology in 2019 feels a little like congratulating Godzilla for not destroying all of Tokyo. There was plenty of bad tech news to write about this year: Facebook’s foibles, Amazon’s aggression, SoftBank’s stumbles. But to me, the tech industry’s very public shortfalls make celebrating its quieter successes even more important. The tech industry, after all, is not a monolith, and many engineers and entrepreneurs work on projects that help society. So here, with no further ado, are this year’s winners.

To OpenAQ, for educating us about the air we breathe.

Air pollution is a vastly underestimated problem. Polluted air is linked to one in eight deaths worldwide, and studies have shown that bad air quality can cause cognitive impairment in young people and increase the risk of dementia and Alzheimer’s disease in the elderly. But until recently, there was no good source of air quality data that researchers and activists could rely on.

Christa Hasenkopf, an atmospheric scientist, decided to fix that. She and a software developer started OpenAQ, an open-source platform that collects air quality data from governments and international organizations in a single place and makes it free and accessible. Want to know how the nitrogen dioxide levels in Hyderabad, India, compare with those in Kampala, Uganda? OpenAQ can tell you. Want to build an app that alerts people in your city when air quality dips below a healthy threshold? You can do that, too.

The company says it has processed 188 million air quality measurements this year, making it a powerful weapon for policymakers, environmental groups and concerned citizens trying to clean up the air.

To DynamiCare Health, Biobot Analytics and Pear Therapeutics, for using tech to address the opioid crisis.

Few public health problems in the United States have proved as intractable as the opioid epidemic. But in 2019, three Massachusetts start-ups used technology to chip away at it.

DynamiCare Health, based in Boston, has built a mobile app meant to help keep recovering users of opioids and other drugs on the wagon. The app — already in use in eight addiction treatment systems across the country — allows users to test their breath and saliva remotely, check into group meetings and therapy sessions, and earn money on an electronic debit card by meeting their sobriety goals.

Biobot, a company started by two graduates of the Massachusetts Institute of Technology, analyzes sewage samples to determine the opioid use levels in a given neighborhood. (Opioid use leaves telltale byproducts called metabolites, which can be chemically detected in urine.) Once this data is collected, public health officials can use it to set priorities for treatment programs, detect spikes in use in a neighborhood and monitor the effectiveness of prevention programs over time.

Pear Therapeutics, another Boston outfit, makes “digital therapeutics” — essentially apps that use cognitive behavioral therapy techniques to help recovering addicts stick with their treatment programs. Its anti-opioid program, Reset-O, was cleared by the Food and Drug Administration late last year and can now be prescribed by doctors in conjunction with other treatments.

To Lemontree, Goodr and Propel, for helping feed the hungry.

Lemontree, a nonprofit food-delivery app based in New York, was started by Alex Godin, an entrepreneur who sold a workplace collaboration start-up to Meetup several years ago. The company sells Blue Apron-style meal kits to low-income families for $3 apiece. Meal kits are packed by volunteers, and they can be bought with food stamps.

Goodr, described by its founder, Jasmine Crowe, as a “food delivery app in reverse,” is a platform based in Atlanta that helps save some of the 72 billion pounds of food wasted in the United States every year and give it to people in need. Restaurants sign up on the site to have their excess food picked up and donated to local nonprofits and homeless shelters. Goodr operates in six cities, including Chicago, Miami and Philadelphia, and says it has diverted 2.1 million pounds of food and provided 1.8 million meals since 2017.

Propel, a Brooklyn start-up, is the creator of Fresh EBT, a popular app that helps low-income users manage their food stamps and other benefits. After doing battle with a larger government contractor last year, Propel recovered this year and says more than two million households use it every month.

To Pinterest, for taking a stand against social media toxicity.

When you think of Pinterest, you probably picture mood boards, D.I.Y. hacks and mommy-bloggers. But the social network spent much of 2019 doing the kinds of tough, principled work that its bigger rivals often neglected.

In August, the company announced that users searching for vaccine-related information would be shown results from authoritative sources like the World Health Organization and the Centers for Disease Control and Prevention, rather than being led down rabbit holes filled with misinformation. The company also introduced a “compassionate search” experience, which offers mental health advice and exercises to users whose behavior indicates they might be feeling anxious or depressed, such as people who search for things like “sad quotes” or who look up terms relating to self-harm. And in December, Pinterest joined other wedding websites in announcing that it would limit the promotion of wedding venues that were once slave plantations.

Pinterest hasn’t always operated flawlessly. But while its competitors were giving grandiose speeches and supplicating at the White House, the company’s content-moderation choices stood out as an example of a social network with a moral compass.

To Big Tech’s climate activists, for pressuring executives to walk the walk.

In a year when climate change was the subject of mass global demonstrations, Silicon Valley’s silence could have been deafening. Tech companies like Amazon, Microsoft and Google count fossil fuel companies and anti-environmental groups among their customers — a fact that doesn’t sit well with some employees. Those employees made their dissatisfaction known this year, joining climate strikes and walkouts and publicly calling on their own executives to do more to fight climate change.

In April, more than 4,200 Amazon employees sent an open letter to Jeff Bezos, the company’s chief executive, urging him to end the company’s contracts with oil and gas companies and commit to ambitious carbon-reduction goals. Amazon later announced a plan to become carbon neutral by 2040.

To Gypsy Guide, for enlightening my summer road trip.

If I’m being honest, the best app I used in 2019 wasn’t TikTok or some new A.I.-powered facial recognition app. It was Gypsy Guide, a simple, understated app that gives guided audio tours of national parks and other tourist destinations. The app uses your phone’s GPS to track your route through a park, and it narrates relevant facts as you drive past them. My wife and I drove through Yellowstone and the Grand Tetons this summer, and Gypsy Guide (which could really use a new name) quickly became our car soundtrack.

Gypsy Guide is not the slickest app in the world, and it’s not making anyone a billionaire. But it kept us entertained for hours, and it taught me things I wouldn’t have known. (Did you know that a concave depression in a mountain caused by a glacier’s erosion is called a “cirque”? Me neither.) It was a good reminder that not every tech start-up has to address some deep, existential need to be worthwhile. There are simpler pleasures, too.

Categories
Amazon.com Inc Antitrust Laws and Competition Issues Computers and the Internet Delivery Services e-commerce Federal Trade Commission House Committee on the Judiciary Innovation Online Advertising Prices (Fares, Fees and Rates) Storage Uncategorized

Prime Power: How Amazon Squeezes the Businesses Behind Its Store

Image
Credit…Andrea Chronopoulos

Twenty years ago, Amazon opened its storefront to anyone who wanted to sell something. Then it began demanding more out of them.


SEATTLE — For tens of millions of Americans, it is so routine that they don’t think twice.

They want something — a whisk, diapers, that dog toy — and they turn to Amazon. They type the product’s name into Amazon’s website or app, scan the first few options and click buy. In a day or two, the purchase appears on their doorstep.

Amazon has transformed the small miracle of each delivery into an expectation of modern life. No car, no shopping list — no planning — required.

But to make it all work, Amazon runs a machine that squeezes ever more money out of the hundreds of thousands of companies, from tiny start-ups to giant brands, that put the everything into Amazon’s Everything Store.

In more than 60 interviews, current and former Amazon employees, sellers, suppliers and consultants detailed how Amazon dictates the rules for those businesses, sometimes changing those rules with little warning. Many spoke on the condition of anonymity, for fear of retaliation by Amazon.

Amazon punishes the businesses if their items are available for even a penny less elsewhere. It pushes them to use the company’s warehouses. And it compels them to buy ads on the site to make sure people see their products.

All of that leaves the suppliers more dependent on Amazon, by far the nation’s top online retailer, and scrambling to deal with its whims. For many, Amazon eats into their profits, making it harder to develop new products. Some worry if they can even survive.

“Every year it’s been a ratchet tighter,” said Bernie Thompson, a top seller of computer accessories who Amazon has highlighted in its marketing to other merchants. “Now you are one event away from not functioning.”

Tumi, the luxury bag maker, sold its products at wholesale prices to Amazon for years. But executives said Amazon sometimes misjudged consumer demand, keeping too few bags in stock, and regularly demanded more in marketing and other fees. Last year, Tumi decided to sell its bags to another company, which then listed the items on Amazon. The arrangement gave Tumi more control over inventory and better sales data.

A few months later, Amazon gave Tumi an ultimatum: Stop selling through the middleman, or do not sell to the retailer’s 150 million customers at all.

“Some guy we had never talked to gave us a call and was like, ‘We have changed the rules,’ ” said Charlie Cole, who runs Tumi’s online business. He pushed back, but wasn’t successful.

“It was like talking to a brick wall,” he said. “They want to be able to control everything.”

Companies struggling to navigate Amazon’s growing chaos fill Facebook groups, private message boards and industry conferences. One session at a leading retail meeting next year is called “The Big Question: Is Selling on Amazon Worth the Hassle?” More than 12,000 people signed a petition on Change.org asking Amazon to alter an arcane rule on counterfeit products that they said could “destroy” an entire business.

Many sellers and brands on Amazon are desperate to depend less on the tech giant. But when they look for sales elsewhere online, they come up short. Last year, Americans bought more books, T-shirts and other products on Amazon than eBay, Walmart and its next seven largest online competitors combined, according to eMarketer, a research company.

“The secret of Amazon is we’re happy to help you be very successful,” said David Glick, a former Amazon vice president who left the company last year. “You just have to kiss the ring.”

Amazon says that its operation is so massive, the rules are necessary to give customers a quality experience. The company said the health of sellers was a top priority, and that it had invested billions of dollars to support them. It said that about 200,000 sellers surpassed $100,000 in sales in 2018, roughly a 40 percent increase from the year before.

“If sellers weren’t succeeding,” said Jeff Wilke, the chief executive of Amazon’s consumer business, “they wouldn’t be here.”

Jack Evans, a spokesman for the company, said that Amazon only succeeded when sellers succeed, “and claims to the contrary are wrong.” Merchants can choose the products they sell, how they are priced and how they fulfill the orders, he said.

The policy change that affected Tumi, Mr. Evans said, was to make sure that Amazon had the best prices and availability for popular products. He said that Tumi’s prices were high when it sold through the middleman.

Amazon has faced harsh criticism in the past for displacing Main Street brick-and-mortar retailers. Now, the diverging fortunes of Amazon and many of the companies selling products on its own site are at the heart of the antitrust scrutiny Amazon faces in Washington and Europe. Investigators at the Federal Trade Commission and the House Judiciary Committee are examining whether Amazon abuses its position as the central online connection between people making products and those buying them.

Amazon collects 27 cents of each dollar customers spend buying things its merchants sell, a 42 percent jump from five years ago, according to Instinet, a financial research firm. That does not include what companies pay to place ads on Amazon, a business that Wall Street considers as valuable as Nike.

The pennies add up. Last year, the profit from retail was so high that it surprised even some senior leaders close to the business, according to two of the people involved.

Thanks to the retail success, the company’s profit exceeded its own Wall Street projections by more than $3 billion.

Jeff Bezos, Amazon’s founder and chief executive, lumps the many parts of the company into two buckets, according to the two people close to the business. One bucket is investments, or bets on the future like Alexa, its virtual assistant. The other is contributors, or the profitable businesses that provide money for Amazon’s investments.

To him, the retail operation is a contributor that can be squeezed for cash.

Billions of dollars generated from selling products online go into investments like Alexa, which has 10,000 employees working on it, and the company’s expensive Hollywood productions. And still, Amazon’s consumer businesses, including Alexa and other pricey projects, produced $5 billion in operating profit last year.

The financial success stems from a big strategy shift that was underappreciated when Mr. Bezos made it two decades ago.

From the day the company started shipping orders in 1995, Amazon offered customers products the same way as traditional retailers like Target, buying them at wholesale and reselling them at a higher price. Four years later, Mr. Bezos and his team decided that Amazon would also let companies list items on the site for a cut of the sale, more like eBay and Alibaba. The change allowed Amazon to offer a wider variety of products.

“We want to try and build a place where people can come to find and discover anything that they might want to buy online,” Mr. Bezos said that year.

The decision eventually turned Amazon into the one-stop shop it’s known as today. Shoppers could find not only well-known brands like Tide detergent, but also obscure Christmas ornaments.

Initially, the move empowered sellers and gave them access to millions of customers. They could ship their products however they wanted. And they could set their own price.

Bit by bit, the sellers lost control.

When Amazon opened its doors to sellers, the fulfillment industry — for storing, packing and shipping online orders — was in its infancy. Many top sellers on Amazon ran their own warehouses.

Seeing a competitive advantage in offering faster delivery times, Amazon opened cavernous warehouses near major cities. Inside, workers navigated endless rows to pick products from bins and pack them into boxes.

The expansion left Amazon with extra space to fill, and the company turned to sellers. It pitched them on the idea of paying Amazon to store and ship their products, even those sold on other sites.

James Thomson, a Canadian with a doctorate in marketing, managed a team responsible for signing up sellers, leading them on tours of Amazon’s facilities near Reno, Nev., Phoenix and elsewhere. “Look how vast this is,” he recalled telling sellers. “Look at how we can easily absorb your 10,000 orders a month.”

“You do have a bigger warehouse than mine,” Mr. Thomson remembered them saying, “but I have good rates.”

Several years later, Amazon’s focus changed, and so did its pitch.

In early 2011, only a few million people were Prime members, paying $79 a year for unlimited two-day shipping. But Amazon knew those members spent far more on the site. Executives wanted more people to sign up for Prime, and they wanted to sell those customers even more stuff.

That year, Amazon began adding more perks to Prime. Most notable was unlimited video streaming of TV shows like “Mister Rogers’ Neighborhood” and movies like “The Girl With the Dragon Tattoo.”

As more people became members, products eligible for Prime shipping became more popular. Amazon reminded sellers that if they used the company’s warehouses, their items would be Prime eligible, too.

“That is what we were selling,” Mr. Thomson said.

It worked. The number of sellers using Amazon’s warehouses increased by 65 percent in 2013, according to a letter sent to investors. The company has since spent billions of dollars to continue building out its fulfillment network.

Mr. Bezos noted how intertwined sellers, warehouses and Prime had become in a note to investors in 2015. “At this point, I can’t really think about them separately,” he wrote.

Amazon has since flipped back and forth over whether outside sellers must use Amazon’s warehouses to sell Prime products. But for most types of goods, like pet supplies, cameras and baby gear, more than 85 percent of the top-selling items ship out of Amazon’s warehouses, according to Jungle Scout, which provides data to Amazon sellers.

Amazon handles packing and shipping for the most popular products sold on its site, even for products sold by outside sellers.

The 1,000 top-selling

products in each category

Orders sold and fulfilled

by outside sellers

Kitchen/dining

Pet supplies

Camera/photo

Beauty/personal care

Computers/accessories

Orders sold

and fulfilled

by Amazon

Orders fulfilled

by Amazon

for outside

sellers

Clothing, shoes/jewelry

Video games

Home/kitchen

Toys/games

Musical instruments

Cell phones/accessories

Tools/home improvement

Industrial/scientific

Patio, lawn/garden

Grocery/gourmet food

Sports/outdoors

Automotive

Arts, crafts/sewing

Health/household

Appliances

Electronics

Office products

Percentage of total

sales within each group

The 1,000 top-selling products in each category

Kitchen/dining

Pet supplies

Camera/photo

Beauty/personal care

Computers/accessories

Orders fulfilled

by Amazon

for outside

sellers

Orders

sold and

fulfilled

by outside

sellers

Orders sold

and fulfilled

by Amazon

Clothing, shoes/jewelry

Video games

Home/kitchen

Toys/games

Musical instruments

Cell phones/accessories

Tools/home improvement

Industrial/scientific

Patio, lawn/garden

Grocery/gourmet food

Sports/outdoors

Automotive

Arts, crafts/sewing

Health/household

Appliances

Electronics

Office products

Percentage of total sales within each group

Source: JungleScout

By Karl Russell

Amazon has surpassed DHL to become the largest provider of fulfillment and other logistics services in the world, according to The Journal of Commerce, a trade publication.

Many sellers say that the company charges fair rates to fulfill Amazon orders. But they say Amazon is charging them higher prices for other services. For example, because the warehouses operate near capacity, the company charges several times more than competitors to store items before they ship out.

The costs can be several times higher for sellers who use Amazon to ship orders made on other websites. Amazon charges $13.80 for one-day shipping on a T-shirt bought on a site other than Amazon, versus $3.68 when bought on Amazon.

In addition, Amazon had let sellers pay $1 to ship an order in a plain brown box without the company’s smile logo. But in 2016, the company said it would use only Amazon boxes. Sellers were told they could take their product back from Amazon’s warehouses if they wanted. “Return or disposal fees will apply,” it wrote to sellers.

Amazon says that its logistics services are optional and a great value. Sellers who choose to use it “enjoy high-quality fulfillment services that customers want,” the company told Congress’s investigators this year.

The company says it offers lower costs on Amazon orders because it makes other money from them, including commissions and advertising, that it does not get for sales made on other websites.

Shoppers on other sites turn away when products are not available in two days or less, said Karl Siebrecht, co-founder of Flexe, a start-up that connects retailers with a network of fulfillment centers.

“It’s new browser,” he said. “Amazon.com. Click. Buy. Done.”

This summer, Brandon Fishman, the founder of VitaCup, a start-up that infuses coffee with vitamins and nutrients, saw a promising opportunity.

Zulily, an e-commerce site that offers low prices in exchange for slower shipping, wanted to list VitaCup’s products 30 percent off for a short time. It was a chance for Mr. Fishman, whose 35-employee company gets the majority of its sales through Amazon and its own site, to reach new customers.

But Amazon’s software noticed the lower price and removed the bright “Buy Now” and “Add to Cart” buttons from its site. When those buttons are gone, shoppers get a bland text link that says, “Available from these sellers” and they must make more clicks to purchase an item. Those extra clicks are often the difference between success and failure for a seller.

Mr. Fishman’s Amazon sales tumbled, and he emailed Zulily to quickly take down the listing.

“I have told them about my rage many times,” Mr. Fishman said of Amazon. “It has not changed them.”

Amazon has pushed to keep prices low since the day it opened. That has become trickier as more sales came from outside sellers. According to antitrust law, each seller of goods should determine what to charge on its own. To avoid problems, an in-house lawyer is typically present when internal Amazon teams discuss pricing, according to two former employees.

In 2017, Amazon began reducing prices to match competitors; if the new price was lower than the one requested by the sellers, Amazon paid the difference. The company also alerted companies if their products were cheaper elsewhere.

Still concerned about news reports that prices on Amazon weren’t always the lowest, the company tried another approach, the one that hit VitaCup: removing the Buy Now and Add to Cart buttons when its software detected lower prices. When those buttons disappear, sales tumble as much as 75 percent, sellers say.

Executives at Amazon intended this as a tool to lower prices. The company has told Congress that the buttons amount to an endorsement, saying it only displays them on “offers that it is confident will present a great experience for its customers.”

But many brands raise their prices elsewhere to avoid losing the buttons. Or they decide to list their product only on Amazon. That is what happened to a health care supply company that worked with Jason Boyce, who advises online sellers.

“My client cut off Walmart — Walmart! — because it was hurting their Amazon business,” Mr. Boyce said. “If that’s not monopoly power, I don’t know what is.”

Amazon said in statement that sellers “have full control of their own prices both on and off Amazon,” and that the company helps them maximize sales by advising them how to earn the Buy Now and Add to Cart buttons.

The Zulily experience frustrated Mr. Fishman. But he boiled over after another move by Amazon.

One morning in June, Mr. Fishman opened his Amazon app and typed “VitaCup” into the search bar at the top of the screen. On the results page was an ad for Amazon’s own line of coffee.

He had been paying Amazon almost $200,000 a month for ads. Mr. Fishman posted a screenshot on LinkedIn and raged.

“I have a major problem with this!!!” he wrote.

For years, the question of whether Amazon should push ads on its site generated fierce debate among senior managers and executives inside the company, according to eight current and former Amazon employees. In memos and fiery meetings, they disagreed on what was best for a company that preached obsession with serving customers.

One camp believed that ads would erode customer trust, because shoppers expected Amazon to show them popular products with strong reviews and a good price.

The other camp saw ads as a cash machine Amazon could tap to drive down prices and fund new innovations for customers. The financial potential was obvious. When people shop online, they more often turn to Amazon than Google to start their search, according to multiple studies. And every brand wants to get in front of them.

Workers eventually got word that Mr. Bezos had settled the debate, according to two senior employees. Mr. Bezos said that Amazon had two options: Sell ads, and use the cash for investments. Or shun ads, and get beaten by competitors.

Ads soon appeared at critical locations, in particular on the page that pops up after a customer types a product into Amazon’s search bar. Some ads were rectangular blocks across the top of the page, and the top several products listed in the search results were ads disguised as a regular listing, aside from the word “Sponsored” in light gray. Combined, they have at times filled almost the entire first screen.

Mr. Wilke said the internal hesitation to ads was overcome by the results.

“It turned out they worked,” he said. “And by worked, I mean the ads help customers find what they’re looking for. And the reason we know that is cause they buy more stuff.”

But it added another cost for companies. Ranking high is essential to driving sales on the site. Competitors raced to place ads to ensure a prominent spot.

Out of antitrust concerns, company lawyers prohibit employees and advertising companies it works with from bragging that Amazon is where most people search for products online, according to two people who were warned about this.

Quartile, among the largest of a new breed of companies that help brands navigate Amazon advertising, tested the importance of the ads last year. It stopped running ads for 750 popular products. Immediately, sales shrank by 24 percent.

The effect then cascaded. That’s because the fewer recent sales a product has, including sales driven by ads, the lower it ranks on the site. At the end of 10 weeks, sales of the products without ads had tumbled 55 percent.

“It’s increasingly pay-to-play,” said Melissa Burdick, a 10-year Amazon veteran who now advises major consumer brands.

Amazon said its ads were optional and the majority of sellers built their businesses without them.

John Denny, who ran e-commerce for the drink company Bai, said brands used to believe that if they had a great product, it would show up in the search results, and sales would follow.

“Those days are over,” Mr. Denny said. “There are no lightning strikes on Amazon any more.”

A decade ago, Mr. Thompson, a former Microsoft software developer, recognized a big market for computer accessories like computer docking stations and cables. He started Plugable and betted big that depending on Amazon would turn his idea into a business.

It worked. In 2016, Mr. Bezos highlighted Mr. Thompson when talking about the success of sellers in his annual letter to investors. Amazon posted a video about Plugable on its website to attract new sellers.

“He has a history of good performance metrics, and an absence of things like safety and authenticity complaints,” Chris McCabe, a former Amazon fraud investigator, said in an interview.

But in the last couple of years, as rules shifted and his profit shrank, Mr. Thompson began warning people that working with Amazon had become increasingly difficult.

He took his concerns to Amazon this summer, giving a 20-slide presentation to a senior executive at the company’s Seattle headquarters. On slide No. 6, Mr. Thompson laid out his nightmare: Amazon cutting off sales of his best seller, a laptop docking station that is frequently one of the 100 most popular electronics products on the site.

His plea to the executive was simple. “No surprises,” he said.

He got surprised.

One Sunday in July, he got an email saying that Amazon had removed the docking stations. Amazon said it was because of complaints that Plugable’s products had not matched the condition described on the site.

Other docking stations, including one made by Amazon, filled the void online.

Mr. Thompson scrambled, contacting two high-level managers he knew and his account manager, who Amazon charges him $5,000 a month to have. None of them could fix it.

He and other staff members dug through customer feedback and returns. They found only outstanding reviews, said Gary Zeller, one of Mr. Thompson’s deputies.

“There was nothing borderline about it,” Mr. Zeller said.

After four days and at least $100,000 in lost sales, the listing went back up. Mr. Thompson said he still did not understand what ignited the problem.

Amazon declined to comment on Plugable. Mr. Wilke said that the company’s future depended on policing the site without harming well-meaning merchants.

“We have a strong incentive to be as accurate as possible in identifying bad actors, make very few mistakes when we’re wrong, on giving second chances to people who make an honest mistake,” he said.

Mr. Thompson is now looking for new ways to make money. But Amazon accounts for roughly 90 percent of electronics sales online, according to market research. His business at Walmart and eBay, the next largest online retailers, are less than 5 percent of his revenue.

In September, Plugable hired two people to sell directly to corporations.

“We really built the company on Amazon,” Mr. Thompson said. “We have no regrets about doing that. But today our focus has to be getting diversification off Amazon.”

He said he understood what he was up against.

“We are dealing with a partner,” he said, “who can and will disrupt us for unpredictable reasons at any time.”

Categories
Car Services and Livery Cabs Computers and the Internet Delivery Services India Initial Public Offerings Khosrowshahi, Dara Mergers, Acquisitions and Divestitures Start-ups Uber Eats Uber Technologies Inc Uncategorized Zomato Media Pvt Ltd

Uber in Talks to Sell Its Food-Delivery Business in India

SAN FRANCISCO — Uber is in advanced discussions to sell its food-delivery business in India, according to two people with knowledge of the plans, as the company moves to stem its losses.

The ride-hailing company is nearing a deal to sell its Uber Eats service in India to Zomato, an Indian food-delivery service, said the people, who spoke on condition of anonymity because they were not authorized to do so publicly. The sale could be announced as early as this week, they said.

A spokesman for Uber declined to comment. The talks were earlier reported by TechCrunch, which said a deal would value the India business of Uber Eats at $400 million.

Dara Khosrowshahi, Uber’s chief executive, has been trying to pare back money-losing businesses to prove to investors that the company can turn a profit. Investors have agitated both in public and behind the scenes for Uber to clean up its balance sheet since it went public earlier this year.

Uber’s initial public offering in May was a disappointment, with the company’s shares immediately plunging as investors questioned how much money the ride-hailing service loses. That event marked a turn in sentiment around high-profile-but-unprofitable tech start-ups, many of which had burned cash for years in the pursuit of growth. WeWork, another highly valued start-up, later shelved its plans for an I.P.O. as private investors cut the company’s valuation to a fraction of its former worth.

Investors have recently homed in on several issues at Uber, according to two people briefed on the conversations. Those include continued regulatory challenges around the world — most recently, transportation authorities said they would not extend Uber’s taxi license in London, one of its biggest markets — and ballooning expenditures.

Some investors have privately grumbled that Uber also paid too much for Careem, a Dubai-based ride-hailing and delivery company that Uber announced this spring it would acquire for $3.1 billion.

According to two people familiar with the matter, investors have also privately complained to Mr. Khosrowshahi about the expense of its Advanced Technologies Group, which develops self-driving vehicles. No decisions have been made about the unit, these people said, which has more than 1,000 full-time employees.

While Uber Eats has been a bright spot for revenue growth, the company has offered subsidies and free promotional offerings to gain new users, which has been expensive. In a conference call with investors last month, Mr. Khosrowshahi said his plan for Uber Eats was to take first or second place in every city it operates.

“If we can’t make it to that level, we’ll look to dispose or we’ll get out of the market,” he said at the time.

In India particularly, Uber Eats has struggled to sign up restaurants, diners and delivery agents in a brutally competitive market where Zomato and other delivery start-ups like Swiggy are well established. Uber has had to offer heavy incentives to lure customers there.

In September, Uber also announced that it was pulling its Eats business out of South Korea, where the company faced stiff competition from local start-ups.

Mr. Khosrowshahi has previously retreated in ride-hailing in Southeast Asia, where the company faces difficulties competing. In 2017, under then-chief executive Travis Kalanick, Uber pulled out of China, where the company was burning billions of dollars. That same year, Uber largely withdrew from Russia.

Mike Isaac reported from San Francisco and Katie Benner from Washington. Vindu Goel contributed reporting from India.