Jeff Bezos yesterday released his annual letter to Amazon shareholders, and in it dealt with a number of issues and started at least one online fight.

• At one point, Bezos said that the growth of the company’s e-commerce business has slowed, and that in fact its Marketplace business - in which third-party merchants sell on Amazon - has become a greater sales engine, accounting for 58 percent of gross merchandise sales on the site.

Bloomberg observes that this was a “veiled riposte” to calls from Sen. Elizabeth Warren (D-Massachusetts) to break up companies like Amazon, calls that have been central to her campaign for the Democratic presidential nomination.

“Third-party sellers are kicking our first-party butt. Badly,” Bezos wrote in the letter, adding that Amazon aids them in this by offering them “the very best selling tools we could imagine and build,” which then “meaningfully improved the customer experience of buying from independent sellers.”

• Noting that Amazon has pledged to pay all its warehouse employees a minimum of $15 an hour, Bezos wrote, “Today I challenge our top retail competitors (you know who you are!) to match our employee benefits and our $15 minimum wage … Do it! Better yet, go to $16 and throw the gauntlet back at us. It’s a kind of competition that will benefit everyone.”

Bloomberg points out that Amazon made its pledge last October after presidential hopefuls Warren and Sen. Bernie Sanders (I-Vermont) held out Amazon workers on food stamps as an example of the need for living-wage protections.”

CNBC reports that Amazon’s competitors did not take kindly to being lectured.

“Walmart’s executive vice president of corporate affairs, Dan Bartlett, then shared an article Thursday morning on Twitter about Amazon paying $0 in federal taxes on more than $11 billion in profits last year. He wrote: ‘Hey retail competitors out there (you know who you are) how about paying your taxes?’

“The CEO of eBay, Devin Wenig, also snapped back at Amazon on Thursday, writing on Twitter: ‘I’ll dedicate my [shareholders] letter to customers, purpose and strategy’.”

CNBC reports on the response from an Amazon spokesperson:

“Amazon pays all the taxes we are required to pay in the U.S. and every country where we operate, including paying $2.6 billion in corporate tax and reporting $3.4 billion in tax expense over the last three years. Corporate tax is based on profits, not revenues, and our profits remain modest given retail is a highly competitive, low-margin business and our continued heavy investment. We have invested more than $160 billion in the U.S. since 2011, building a network of more than 125 fulfillment and sortation centers, air hubs and delivery stations as well as cloud-computing infrastructure and wind and solar farms. We invest heavily in research and development at our Seattle headquarters and 18 tech hubs across the country. We are creating tens of thousands of quality jobs each year with industry-leading pay for people of all skill levels, bringing our total workforce in the U.S. to more than 250,000.”

• The Associated Press writes that the letter makes clear that Amazon, “well-known for giving low priority to the short-term growth interests of Wall Street, will continue taking big risks if it sees a potential pay-off in the long run.
In his letter Thursday, Bezos said Amazon's Fire phone was a failure, but that its Echo and Alexa smart speakers have been tremendously successful.

“'As a company grows, everything needs to scale, including the size of your failed experiments,’ Bezos wrote. ‘If the size of your failures isn't growing, you're not going to be inventing at a size that can actually move the needle. Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures.’

“Bezos said one ‘big winning bet’ can cover the cost of the clunkers, and that calculus has been playing out at Amazon.”

KC's View: I’ll take them in order.

• I never really took Warren’s proposal seriously. It is a campaign speech, not a policy.

While I think it is entirely appropriate to have a nuanced discussion of income inequality, I don’t think breaking up Amazon does anything other than maybe tamp down on its ability to innovate. And I’m not surprised that the Marketplace is growing … there is a theory out there that Amazon would actually like it to be bigger, because that puts it more firmly in the logistics side of the business, as opposed to retailing, which is more expensive. (Think about that, by the way, when pondering what a new chain of supermarkets run by Amazon, said to be opening later this year, might look like.)

• I’m not sure that sniping at competitors does anybody any good. Just do your business, and if you think warehouse employees ought to b e paid more, pay them more … don’t wait for the competition to raise the stakes. This is all disingenuous.

• No surprise that Bezos and Amazon will continue to take big swings. he’s said it before - that as the size of the company grows, the size of the failures has to grow as well. Which also establishes that people should’t crow too much at Amazon missteps … they’ve always had them, but now they’re just more public.