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How Europe overtook the US in championing free markets

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The deregulation of major U.S. industries like telecom and energy in the 1970s and 80s sparked competition that lowered consumer prices and drove product innovation between competitors. Europe, on the other hand, lagged behind with more expensive internet, phone plans, airline tickets, and more until around 2000 when a major reversal of this trend began. Strikingly, when the EU strengthened deregulation and antitrust efforts to open its markets to more competition, it was the U.S. that reversed course.

According to a new book by French economist Thomas Philippon, Americans’ view of their country as the world’s beacon of free market competition and Europe as an over-regulated region of lethargic corporate giants is out of date, and may be inhibiting our ability to recognize growing corporatism at home. Philippon, a professor of finance at NYU Stern who earned a Ph.D. in Economics from MIT, was named one of the top 25 economists under age 45 by the International Monetary Fund.

“If you have nothing interesting or relevant to say, you can always take a jab at European bureaucrats. It’s the political equivalent of complaining about the weather…”

Based on Organization for Economic Cooperation and Development (OECD) data, the U.S. now has more regulations for opening a new business than every EU country except Greece and Poland — a complete reversal since 1998, when only the UK had fewer rules than the U.S. Per capita GDP growth in the EU outpaced that of the U.S. over 1999-2017. On a purchasing power parity basis, Americans have experienced a 7% increase in prices (relative to EU residents) for the same goods, due specifically to increased profit margins of companies with reduced competition.

The reason for this divergence? According to Philippon, corporate incumbents in the U.S. gained outsized political influence and have used it to a) smother potential antitrust reviews and b) implement regulations that inhibit startups from competing against them. As a result, the U.S. regulatory system prioritizes the interests of incumbents at the expense of free market competition, he says.

Philippon makes his case in “The Great Reversal: How America Gave Up on Free Markets,” released this past Tuesday by Harvard University Press. The book builds an argument from extensive data and pre-empts likely critiques by investigating numerous potential confounding variables or differences in research methodology. It is a compelling read for those interested in the dynamics of the overall innovation economy or the political debate over antitrust and Big Tech.

Incumbents over startups

Philippon, who was na states upfront that he isn’t claiming Europe is a bigger startup hub. In fact, he writes that “the U.S. has better universities and a stronger ecosystem for innovation from venture capital to technological expertise.”

What he does do is ring the alarm about a systemic shift in market consolidation in the U.S. that results in a small number of large incumbents charging high prices, an economy-wide prioritization of share buybacks over investments in innovation and government policy that inhibits competition from new entrants.

An important take-away for readers: there’s a concerning trend toward more barriers to successful entrepreneurship, higher prices for countless goods and services that startups use, an overall decrease of corporate investment in new technologies and fewer potential startup acquirers.

There are half as many publicly-traded companies in the U.S. as there were in 1997, and turnover within rankings of the top five companies per industry has declined sharply since the late 1990s as well.

Market concentration isn’t due to superstars

“The Great Reversal” considers that increased market concentration could be the result of “superstar” firms whose increased productivity is a win-win for shareholders and consumers alike. This has indeed occurred during the 1990s but the correlation between increased concentration and increased productivity ended around 2000 (with the exception of the retail sector).

Corporate after-tax profits as a percent of U.S. GDP were stationary for decades at 6-7% but increased to 10% in the last two decades, highlighting increased “rent-seeking” that shouldn’t occur if the leaders in most industries were facing the same amount of domestic competition or increased international competition.

From the 1960s through the 1990s, American companies poured an average of 20 cents from each dollar of operating profit into investments (R&D, capital expenditures, etc.). Since 2000, that’s fallen to 10 cents per dollar. With reduced competition, large companies are focusing less on advancing their product offerings and more on extracting profits for shareholders out of existing business operations.

Big tech isn’t exempt

Major tech companies — specifically Alphabet (Google), Amazon, Facebook, Apple, and Microsoft — are the focus of multiple chapters of analysis by Philippon, who rejects the notion that these companies are somehow unprecedented relative to the leading companies of prior decades from an antitrust standpoint. They account for a smaller portion of U.S. GDP and stock market value, and they have similar profit margins. Network effects and accelerating economies of scales are not new concepts in economics — existing antitrust regulations are capable of dealing with these companies.

In our interview, Philippon said that leaders of monopolies typically claim they need to maintain their monopoly in order to have the means to invest in innovation. He calls it bogus — companies innovate when competition pushes them to find ways to offer a better product at lower cost. Admittedly, the tech community has perhaps bought in too much to the narrative that the dominance of Alphabet, Apple, and Facebook has provided more long-term R&D into endeavors that will advance humanity.

These companies’ “moonshot” projects act as effective marketing for this narrative, distracting from the many billions more dollars that would be poured into innovation investments in the economy if the markets they are in were more competitive.

America’s most important industries are among its least competitive

Philippon acknowledges that the heart of America’s problem isn’t its failure to effectively regulate Silicon Valley; it’s the failure to stop increased concentration in the industries that most shape consumer spending: healthcare, energy, transportation and telecommunications.

During our interview, he estimated that this “great reversal” in the U.S. has cost the median household an additional $300 per month in markups on goods and services — reduced competition has allowed incumbents to increase profit margins at the expense of consumers.

The lack of competition in these industries contributes to America’s deteriorating infrastructure. More than 700,000 Californians experienced blackouts in recent weeks due to Pacific Gas & Electric’s failure to make capital expenditures that maintained and improved its assets. Most of the 15 million people who live inside the utility’s service area have no where else to turn.

What makes Europe different

A critical factor in Europe’s relative improvements over the U.S., Philippon argues, is the greater independence of EU regulatory agencies like the Directorate General for Competition from corporate or political influence. In negotiating over the creation of these agencies, European politicians were more fearful of agencies falling under the control of other member countries than they were fearful of lacking influence over the agencies. Regulators have frequently intervened in mergers even when politicians from the companies’ home countries lobbied to permit the deals. In the tech industry, the EU has insisted on consumers retaining ownership of their data and the freedom to take it with them in switching to a competing software service.

Less tied to election cycles and specific political parties, the independence of EU regulators enables them to iterate when new regulations have unintended consequences. Philippon argues that U.S. regulators fail to act in the first place because of concerns that if they don’t craft the perfect policy upfront, there will be political repercussions.

Regulatory influence is for sale in the U.S.

Philippon makes the case that politicians’ survival is the U.S. has become more heavily tied to fundraising and the overwhelming majority of that fundraising comes directly and indirectly from corporate interests. The top 1% of donors account for about 75% of all political contributions (and the top 0.01% for 40% of all political contributions). Business lobbies are by far the dominant source of money in American political campaigns according to statistics he cites from the Center for Responsive Politics.

Benchmarked against antitrust reviews in the EU, Philippon finds that the decline in the number of antitrust actions in the U.S. (by the DOJ and FCC) has largely corresponded to increased lobbying spending that targets the DOJ and FCC. Each doubling of lobbying expenditures in the U.S. by a given industry corresponds with a 9% decrease in antitrust reviews in that industry, and such lobbying spend tripled overall from 1998 to 2008. He also cites a 2008 book by UVA professor Christine Mahoney finding that the majority of lobbying efforts in the U.S. by corporations and trade associations are successful whereas the majority of lobbying efforts by citizen groups and foundations fail.

What we should take away from “The Great Reversal”

I find “The Great Reversal” to be a timely analysis of the weakening of America’s regulatory regime for protecting free market competition. The recent rise of populism as the driving force in American politics has included resounding cries from activists in both parties that capitalism is broken, that free markets have failed us. Tying in the analysis from this book, the more accurate target for this criticism, however, should likely be the country’s embrace of corporatism over free market capitalism.

Citizens’ complaints about large companies abusing their power are often blamed on capitalism in general, when the issue is often regulatory capture that protects those companies from being held accountable by competitors. Companies that treat customers poorly don’t survive in competitive markets.

Within the circles of politicians and media pundits, policies are referred to as generically “pro-business.” The term brushes over the often conflicting interests of the country’s largest companies and the vast landscape of small and medium size businesses who compete with them. America’s political leadership has been pro-corporate at the expense of entrepreneurs.

It’s a case for political reform but also a case for the country’s entrepreneurs and venture capitalists to form a more unified voice in Washington separate from industry trade groups that primarily act on behalf of the largest companies in each industry.

AMAZON

Amazon Listing Optimization for Maximum Conversions (Step by Step)

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shopping cart on amazon site

Amazon is one of the great places brands and individuals sell their products. It’s a marketplace where buyers search for what they want to purchase. 

According to research done by Statista, the site gets traffic in billions. In December alone, the website got 2.9 billion visits from target customers.

Data showing traffic to Amazon website from september 2021 to February 2022

Source: Statista

This shows that more target customers visit the site to search for products. Therefore, if you have a product you want to sell, it is essential to make sure many of your target buyers see it to increase the chance of selling it. 

This short article will teach you how to optimize your Amazon listing to increase visibility, drive more traffic to your product, and increase conversion rates and sales.

What is Amazon Product Listing Optimization

This is a strategy used to optimize your product’s visibility on Amazon. The plan lets more target customers know about your product and how it can solve their pains.

It makes it easy to rank on Amazon search engines, be discovered by target customers, increase your product’s conversion rates, and drive more sales and revenue.

Why Invest in Amazon Listing Optimization

As an individual seller or a business owner, there are important reasons why you should invest and optimize your products on Amazon. This section of the article will highlight some of these reasons and their importance when selling products through Amazon.

Attract More Target Customers to Your Products

When your listing is optimized, more target customers engage with the products you have to offer them on Amazon. Since they’re on Amazon to search for products to solve their pains, they will get to know about your product and how it can help solve their pains. 

Increase Brand Awareness

You could be a business offering products through Amazon, but most of your target customers don’t know about your brand or your products. With Amazon listing optimization and the traffic you drive to the product, more people will learn about the different products you offer. 

They will also know about your brand and engage more with it from the website links, where they get to hear from other customers and build more trust with you and your products.

Drive More Conversions and Sales

When your product is optimized with the right quality images, descriptions, and key features or keywords, your target customer can easily search for the product and engage with it. 

They can see that the products can solve their pains and be convinced to try the product to solve their challenges leading to more sales.

Steps for Amazon Listing Optimization

You want to reach more target customers and drive them to engage with your products on Amazon and even buy them, right? Well, to effectively achieve that, there are steps you can follow for your listing optimization. Here are some of these steps for your Amazon listing optimization

Research Keywords

Target customers’ search for products starts with using the keywords associated with what they want. As part of Amazon optimization, keywords target customers use in their search are essential. 

Do a keyword search to know the best keywords your customers use when searching for what to buy from Amazon. You can use the best Amazon PPC management tools and other keyword research tools to help get the best keywords.

It is also essential to use keywords with high search volume. High search volume makes it easy for many of your audience to know about your product listing.

One way to use the right keywords is to research competitors making more sales from the Amazon website. See the keywords they use and how they connect with their target audience. 

Since you’re in the same market and target the same customers, you can use those keywords for your product optimization and promotion through Amazon. 

You can also read through their product description and key features. See how they write the descriptions and how they use the keywords within the product description and key features sections.

Ensure you don’t copy their description for your products as that can affect your product’s optimization and traffic to your products, affecting your sales.

Use Informative Titles For Your Products

Another essential part of your Amazon listing optimization is your Amazon product titles. Ensure that the headlines of your title are captivating and attractive and use primary keywords in the title. 

Make the titles easy to read and ensure the target audience can get a glimpse and know more about your product from its title even before they read the description. 

Target customers now use mobile devices more than ever for their product search. As you look for the title description of your products, ensure that the title is optimized for mobile search. 

Suppose the target customer is using a mobile device and can’t engage with your product title, description, or any other part of your product optimization. In that case, they will look for other alternative products to buy. As a result, you lose an opportunity to engage and convert a potential customer and make sales.

Remember, you’re optimizing the listing to drive and engage more target customers, increase conversions, and make more sales. So, if you can’t engage target customers on their mobile devices, you lose a big chance to drive them to take action and convert to be customers.

Use Quality Images For Your Products

Your target customers need to see the product you’re promoting on Amazon, even if you have an excellent product description. As part of Amazon optimization, ensure the product pictures have a high resolution and are clear, especially your main pictures.

It will be easy for the target audience to see the images of what they want to buy clearly. You can even drive the target customers to make a purchase easily when they see the main parts of the product you sell on Amazon.

Your target audience should also be able to zoom in on the product images. It will help them see the parts of the products well. For example, here is a picture of a hp laptop from Amazon with the main product image and other zoomable images.

Zoomable images for a laptop on sale from Amazon site

Source: Amazon

When taking the images for the product, use a white background like the above images for the laptop. Your product should be large enough to occupy  85% of the space allocated for the image on the Amazon site. 

Write Optimized Product Descriptions

Your target customers need to know more about the product. So explaining how your product works in detail is essential. Help the customers know how your product solves their pains and convince them that it’s the best they can have.

Let the customers see the benefits of your product. It will help them quickly see the value and connect how the benefits will help them solve their pains.

As you write the description, use the right keywords with high search volume. The target customers mostly use keywords to search for products from the website. 

When writing the description, mention relevant details about the product that your target customers can easily understand and are more linked to the pains they want to solve. In addition, it raises their curiosity and makes them engage more with the product to learn how it will quickly help solve their challenges.

Optimize Product Key Features (Use Bullet Points)

When describing the product value and showing the target customers how it works, use bullet points to make it easy for readers to view the content about your products. 

They can quickly skim through the content and engage with it with ease. Use short sentences when showing target customers the product’s key features.

Highlight key benefits of the products to the customers for them to notice as they read and know more about the features. Don’t forget to add to this section’s primary and secondary keywords.

Add Q&A for Customers and Reviews

You have done your customer search and understand their pains and how to address them. Even if you have given the target customers all the other information and description for the product, they will have questions to ask.

You can identify the possible questions your target customers can ask about the product and then provide the best answers. For example, some customers have questions about a car vacuum cleaner sold on Amazon.

Samples of questions and answers customers asked for a car vaacum clearner on Amazon

Source: Amazon

You can also see the questions addressed by your competitors and add them to your questions collection in this section of the Amazon optimization.

You should also add keywords within this section. They will make it easy for your optimization efforts and can also drive more potential customers to engage more with this section and the others above.

To help build trust and show potential customers that your products have value, add reviews of the product from the past customers. 

Customers trust other customers. Here are the car vacuum cleaner product reviews from the above customer Q&A. Since some sellers want to get customers, it’s essential to use an Amazon review checker to see if the reviews are genuine.

Customer reviews and ratings for the car vaacum cleaner from Amazon site

Source: Amazon

When they hear that other customers with similar problems benefited from the products, they’re more likely to try the product to get equal or far much better results for their pains.

Ready to Improve your Amazon Listing For More Sales on Amazon?

Brands and other sellers are looking for the best channels to drive traffic to their products on Amazon, engage with the target audiences and convert them to make more sales. 

Using Amazon and optimizing your product listings can help you reach those goals and drive more sales for your product.

Suppose your products are not selling on Amazon. In that case, the above steps will help you optimize your product and attract a large target audience who will get to know about your product offers and even convert more customers to your amazon products.

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