Editorial | Watching Amazon

Either of two things usually happens when new technologies enter markets.

The discerning and innovative adopt and adapt the technologies to create new businesses, or to give existing firms the best chance of survival. The complacent is either swept away, or succumb to slow, atrophying demise.

This is much of which happened in Jamaica with the global growth of e-commerce and the emergence of giant trading platforms like Amazon and eBay in the United States, and China’s Alibaba and its subsidiary, AliExpress.

As Jamaican consumers moved to buy online, mostly via the American e-commerce platforms, smart entrepreneurs found ways to accommodate them. As American retailers didn’t routinely ship to Jamaica, or would do so only expensively, entrepreneurs established courier companies to transport to the island the goods consumers bought abroad. But with an innovative twist. They established warehouses in the United States, thus providing their customers with addresses to which purchases could be sent, prior to being forwarded to Jamaica.

There was another bit of innovation, too.

Before the significant growth in the island of debit cards linked to international providers, some couriers allowed their clients, for a fee, to make their overseas purchases using the companies’ credit card.

Recent developments may lead to a new shake-up and/or shake out in Jamaica’s and the Caribbean’s still emerging e-commerce model. Indeed, it may be wise for domestic players, if they are to stay ahead of the game, to begin to think about how they might repurpose their businesses, and the kinds of services they offer.

Moreover, Caribbean Community (CARICOM) governments may well have to bring an additional perspective to the review of the region’s telecoms environment, and the community’s intention to create a single, regional telecommunications space.

UNDERSTANDABLE DISQUIET

Amazon is one of the world’s largest companies, ranking second, after Walmart, on the Fortune Global 500 list. The company’s founder, Jeff Bezos, is among the globe’s wealthiest individuals, with an estimated net worth of US$219 billion.

In 2024, Amazon’s income was US$638 billion, which is more than 32 times Jamaica’s GDP. Sixty-three per cent of its revenue was generated on its e-commerce platforms. The company’s net profit was US$59.25 billion, three times the value of goods and services produced in Jamaica.

Last month, Amazon announced that it was offering free shipping to Jamaica for purchases of at least US$35. Free shipping also applies to CARICOM members, The Bahamas, Barbados, Trinidad and Tobago and associate member, the Cayman Islands. But in those cases, the minimum purchase has to be US$49.

There is understandable disquiet among Jamaican retailers and couriers – except perhaps Amazon’s domestic partners – over this development.

Jamaica’s de minimis on imports (the value before which tariffs are imposed) was doubled a year ago to US$100. That is believed to have driven this category of imports, although the exact value of de minimis imports was not immediately available.

However, when he announced the doubling of the new de minimis rate in March, 2024 the former finance minister, Nigel Clarke, estimated that the measure would cost the treasury J$864 million, but said that duties and fees on goods valued up to US$100 yield only half of one per cent of the earnings by Customs but then accounted for 20 per cent of the declarations processed. Total revenue from Customs was estimated at J$63.514 billion in 2023/24.

Dr Clarke expected that the spurt of imports from the policy would benefit the shipping and logistics sub-sectors and be good for the broader economy.

With Amazon’s move, many people are not so sure, especially if other big e-commerce retailers follow Amazon’s example in offering free shipping to Jamaica. Smart people, of course, may see, and grasp, opportunities in any disruption.

EXISTENTIAL THREAT

But there are nonetheless pertinent questions about the presence of Big Techs like Amazon and Alphabet/Google and Meta (Facebook, WhatsApp) in the Caribbean.

The Barbadian prime minister, Mia Mottley, revealed at a regional summit in February, that the hyperscalers vacuum up around US$11.6 billion a year, mostly in advertising income, from Caribbean economies. Yet, “they pay no taxes and contribute in no way to the regional economy”, Ms Mottley lamented.

Which is a point that this newspaper has long made.

CARICOM’s leaders were primarily concerned about the impact of these firms in diverting income from the region’s telecommunications companies, thus limiting their ability to invest in technologies critical to their growth and national development. That ultimately is retrograde for the Caribbean’s small economies.

But the hyperscalers, which maintain no offices or staff in the region, also pose an existential threat to traditional media, and thereby to Caribbean democracy. For not only do they get mostly for free the content produced by regional media, they also suck away most of the income that the region’s press depended on to finance the journalism that allowed them to hold governments and the powerful to account.

These are fraught issues, especially in the context of a United States under Donald Trump. But that doesn’t mean there can’t be a civil, even if robust, debate about them.