The Ethics of Online Retailers

Online shopping currently accounts for 16.3% of all UK retail, and is growing fast. Some people have deep fears about the shift online, while others are excited about it. We examine the evidence here. 

The companies 

Amazon holds a 23% market share of all online retail, and its dominance goes on growing. The next biggest is eBay, with about 19%. After that come the Sainsbury’s group (including Argos) (10%), Tesco (8%), John Lewis (4.2%) and Shop Direct Group (Very & Littlewoods) (4%).

The remaining 31.8% is made of smaller players. So how do the major companies involved in online retailing stack up ethically? 
 

PayPal

About 1/5 of online commerce uses PayPal. PayPal started off as a part of eBay but was spun off in 2015. It gets an overall Ethiscore of nine. 

While that doesn’t look too bad, there is a specific issue on which PayPal’s name is mud, which is its refusal to extend its service to Palestinians in the West Bank and Gaza. This is serious because payment issues in Gaza are acute, and a large pool of Palestinian IT professionals say that the inability to use PayPal is preventing them from gaining employment.

What makes the situation worse is that Israelis living in the illegal settlements can use PayPal, because they have Israeli bank accounts, and PayPal works with Israeli banks. The Palestinians, however, cannot generally open accounts with Israeli banks. PayPal also works with most of the other Arab countries in the region, including war-torn Yemen. 

PayPal has mostly refused to engage on the subject, apart from issuing meaningless statements like: “we are in an ongoing dialogue with advocates and key stakeholders on this important issue”. In 2016, 43 Palestinian tech companies and start-ups signed an open letter addressed to PayPal’s CEO Daniel Schulman. They never got a response. 

There isn’t a boycott of PayPal called yet, although there have been rumblings about one. 
 

Amazon 

Amazon just became the second trillion-dollar company in existence, just after Apple became the first. Its CEO, Jeff Bezos, is the richest person in history.

Amazon has paid very little tax since its conception, and in 2012 we started calling for consumers to boycott the company over the issue. Bezos has been actively goading on the subject. He said in an interview in 1996 that he had tried to set the company up on a Native American reservation in order to avoid paying tax.

Amazon’s name is now also synonymous with workers’ rights violations, as the horror stories have mounted: drivers have reported having to break speed limits and urinate into bottles to get through the hundreds of deliveries they are required to do in a day. After deductions such as van hire and insurance, they are often paid far less than the minimum wage.

Things are equally appalling in the warehouses. There have been 600 ambulance calls made to UK Amazon warehouses over the last three years, including ones due to ‘electric shocks’ and ‘major trauma’. Staff report being subject to constant surveillance and bullying, and being too frightened to take time off sick. In response to one survey, 89% of staff said that they felt exploited, and one worker described working in an Amazon warehouse as akin to “living in a prison”.

Amazon gets our worst rating in every single category in which it’s rated. It gets an Ethiscore of zero. See Amazon's company profile where you can tweet or email Amazon to encourage them to improve its ethics. 
 

eBay and the little players

eBay, on the other hand, does better. It gets an Ethiscore rating of 7.5. 

It gets a worst rating for Supply Chain Management and for likely use of tax avoidance strategies, and a middle in Environmental Reporting. It also gets marked down for paying its senior staff obscene amounts of money, making political donations to both Democrats and Republicans, being a member of several free-trade lobby groups, and providing an online e-commerce platform for the US military. 

While this litany may not sound that flattering, plenty of bricks-and-mortar sellers do significantly worse. 

The other companies mentioned we rate as follows: Sainsbury’s group (2.5), Tesco (1), John Lewis (4) and the Shop Direct Group (6.5, but hasn’t been rated since 2014). 
 

Structural issues 

Apart from the actual companies themselves, many people have raised other concerns about online shopping, including whether it has an inherent tendency towards monopoly, whether it might lead to the death of community, further our compartmentalisation into ‘echo chambers’, or be more damaging to the environment. 

Monopoly

On the Internet you can easily die of thirst a dozen yards from a spring. Everything is just a click away, and yet if you can’t find it, it might as well be on the other side of the universe. And as Google search is set up as a popularity contest, it tends to promote those that are already big. 

That has led many to fear that the move to online retailing will lead to market concentration. 

However, the figures are less clear than you might expect. The top four online retail outlets (Amazon, eBay, Sainsbury’s group and Tesco) have 60% of the market. The dominance of the top four in individual sectors in the UK is: 

  1. 56% for supermarkets (Tesco, Sainsbury’s, Asda and Morrisons)
  2. 35% for clothing outlets (Next, M&S, Primark and Sports Direct)
  3. 79% for electrical retail outlets (Dixon’s Carphone, Amazon, Sainsbury and John Lewis. Dixon’s Carphone has 32%, twice the amount of Amazon)

These figures include all sales, both on and offline.

Online retail thus doesn’t appear to be uniquely concentrated compared to individual sectors. 

Greenhouse gas emissions

There are quite a lot of studies comparing greenhouse gas emissions from online and traditional bricks-and-mortar shopping, and the consensus is that online shopping is, on average, significantly better. 

The major reason for this is transport – deliveries going in the same direction can be combined into one load, which is more efficient than lots of people driving individually to the shops. There are also space heating and lighting savings because in a warehouse there is no need to lay the goods out looking nice. 

On the other side, emissions from packaging tend to be greater, as the goods have to be packed to be transported, and there is a small impact from the data centres used to power the internet. But these aren’t sufficient to counteract the savings.
 

The social aspects

Clearly, going out into your local environment involves more physical interaction than having something plop onto your doorstep. Internet shopping may indeed weaken our relationship to our surroundings. However, it is also easy to over-romanticise what we are losing here – let’s face it, buying a shirt in M&S was never a very profound social interaction. 

There are also reasons to fear that buying online will tend to make us less likely to encounter the random and unexpected. It is possible to know too much, and to have too much control. Online companies have so much information about us that it is easy for them to recommend things based on what we previously bought. That has a tendency to push us into echo chambers where we never get exposed to new perspectives. 

Yet things are not clear cut here either. There is empirical evidence that, at least in the US where the research was done, you are actually more likely to encounter and engage with someone with opposing views online than you are offline.

As far as inclusivity goes, you would expect online shopping to be a mixed bag: problematic for the IT illiterate, but helpful to people who are too disabled to get to the shops. But we aren’t aware of empirical research in this area.
 

So, should we stop online shopping?

It isn’t yet clear exactly where the shift towards online shopping is leading us. Yet it is possible that rather than being either liberating or disastrous, it won’t really change that much. It is worth noting that 50% of online sales actually come from the same shops selling on the high street.

Amazon has certainly given online shopping a bad name. But there doesn’t appear to be much reason to view its bad ethics as a consequence of it selling online. There are online sellers like ASOS that are building ethics into what they do, and selling in brick didn’t stop Starbucks avoiding tax, or Sports Direct treating its workers like dirt. Indeed, it could be argued that blaming Amazon’s behaviour on the fact that sells online is letting it off the hook. 

Overall, the most important thing is to tackle Amazon’s abuses, and to promote the virtuous players, whether they are virtual or not. 
 

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