To me the real problem isn't the size of Amazon's business, but rather the nature of it.
Amazon is both the owner of the most successful and widely used marketplace, as well as a competitor of the merchants in that marketplace.
Having access to all of the transactional and user data, Amazon has an unarguable advantage over the rest of the merchants in it's market. They can beat anyone on price, placement, or delivery speed.
Barrier to entry into running a competitor market is effectively controlled by network effect. Simply running a competent customer service system and keeping prices within a certain range close to lowest provides an effective license to eternal profit.
Adding competing products when successful volumes are proven by their merchants gives them a very effective way to widen that profit on demand at the expense of their merchants and ultimately to the detriment of their customers who wind up paying more with less available selection.
I'm all for competition. If amazon is the best, then more power to them. However if they stifle competition, that's a problem.
From what I have read and my experience, they are stifling competition. For example, I read a persons blog post who said amazon had a rule that you can't sell your product on amazon and sell it for less on your own site. That's just rotten. Also I have an ebook on amazon and in order to get exposure you have to exclusively sell on amazon. I get why he does these things, but that's just not right.
Amazon isn't a horrible corporation, but I think some of the things they do are anticompetitive and should be changed.
So are they too big? No being big is fine and helps them be more efficient. The real question in my mind is if they are using their size to compete unfairly.
The core problem is that the market owner and operator is also a market competitor. It's just not believable that they wouldn't cheat.
They have sales data from all their competitors on this market- numbers, prices, trends, across many different competing companies in many different sectors. They have priority access to consumer eyes by owning the home page, owning the search results, and owning the customer relationship.
And all of this wouldn't be that big of a problem if Amazon wasn't the absolutely dominant player in the still-growing e-commerce market. Because at that scale, these problems become societal problems that governments have to address.
The thing is that Amazon is emphatically not a small business. Amazon's customers are a pretty captive audience, and have to put up with what they got.
Same with other giants / monopolies; this is why monopolies are bad for customers.
One issue is they run a marketplace platform where they also sell and push their own products on that platform. People sell products on the platform, Amazon gathers data, and eventually undercuts them out. They can exploit their 50% market share on top of control of the platform to make it almost impossible to compete in many product areas. Not a monopoly perhaps in the definition, but extremely suffocating.
Let's think about what it would take to truly take on Amazon.
Marketing: This is actually a pretty even ground, in terms of paid advertising. However, for free advertising, you're at a disadvantage. Amazon has a domain authority of 98. You're not going to rank higher than them. Unfortunately, since marketing is one of the most constant, and highest costs of e-commerce. That puts you at a significant disadvantage.
Pricing: Because Amazon can drive so much traffic to their site, and because they have an efficient website, they can drive sales. This is great leverage to negotiate lower prices from suppliers. This is a 2 part advantage. Now with lower prices, they are more attractive to consumers, and they have more money to drive other parts of their business. This puts you at a significant disadvantage.
Detailed Data: Because Amazon can drive so much traffic to their site, and because they have an efficient website, they can drive sales. With this, they can collect data to help them target areas to make their business more efficient. Assuming no
marketplace customers, they can make precise decisions on what to make investments in. Of course they've grown so big, that competing with them is impossible. So there are marketplace customers. This means they're not only collecting data from their own business but from your business too. They host the marketplace and have no qualms about competing with you if you're successful. This puts you at a significant disadvantage.
Fulfillment: Because of their size, Amazon can afford to have multiple warehouses. This means they can strategically locate inventory across the world, combined with an efficient lead time they can make guarantees about delivery. That drives more sales. This puts you at a significant disadvantage.
Delivery: Because of their size, Amazon can afford to buy whole truckloads with carriers. This means they pay less for delivery. With cheaper delivery, they can offer free delivery. That helps them drive more conversions. This puts you at a disadvantage.
Amazon has economy of scale, it can make deals for more units and therefore drive down the cost. It also has negotiating and brand power to coerce suppliers to give a better price much like Wal-mart. Amazon competing with its own retailers is a stupid idea and will cause many of them to pull away. Say you offer 1,000 products. Do you really want Amazon knowing which ones are popular?
Just like everything else is now the case with Amazon. You can't build your own business on someone else's platform.
Hell if they start stealing data from AWS from their competitors I would run like hell away from their services.
What you are going to do about it is run away from Amazon. That's what.
because amazon owns the marketplace and has access enormous information on what sells well and can use for its own benefits. This creates unfair competition.
Maybe they are only so big because their anti-competitive behaviors have kept alternatives from taking their users. I'd love to be able to stop giving amazon as much money as I do, and I know a lot of people who feel this way.
You touch on something important. Beyond the fact that the term monopoly gets thrown at a company without any further qualification of such a statement, there's no real thought put into how the company is using said alleged monopoly power to raise prices on consumers or create barriers to entry in the market.
Amazon's prices trend downward, constantly. Amazon is also itself a market facilitator, agnostic to which products sell, so long as they sell. High quality and low prices race to the top of customer ratings. Third parties sell on Amazon as well, providing a global market for local brick and mortar shops. Further, Amazon is by far not the only website selling things on the internet. The internet is pretty great at lowering barriers to entry.
Its problematic because Amazon has such large control over online shopping, that setting anti-competitive rules further increases its control to where it becomes almost monopolistic.
Amazon's marketplace provides fast, free shipping for a lot of products. That's definitely a competitive advantage they have invested heavily in. I don't see the point of condemning Amazon because people who aren't in their marketplace can't provide the same fast, free shipping. Of course they can't, they didn't build a distribution network. Is the point of this article that Amazon is to blame because people who try really, really, really hard to do the thing Amazon does can't do it as well as they do?
If you're trying to sell things to people, and it turns out what they care most about is the level of fast, free shipping Amazon marketplace offers, then you have several options: join Amazon marketplace and pay their toll, or create your own marketplace and compete with Amazon, or compete on some other aspect of your product and hope that customers care about that more than shipping.
They were a first mover and have captured the market to the point where no amount of private investment could spawn a true competitor.
You have to have Amazon’s sales volume before owning a delivery and logistics empire makes any financial sense, and you can’t provide Amazon’s level of service and low costs without owning your own global logistics company.
Then you’ve got the fact that Amazon’s technology infrastructure is a profit center. In contrast, any e-commerce competitor has to pay retail rates for cloud computing or run a data center as a cost center. Amazon e-commerce lost money for decades while AWS propped it up.
The anticompetitive practices come from the ways in which they exploit this enviable position, like the issue the FTC is suing them over where they are charging their merchants money to fight over search ranking, and knowingly promoting inferior and/or less relevant products with the result of raising prices for consumers and merchants artificially. Merchants can’t refuse to play the game because if you don’t sell on Amazon you lose most of the addressable customer base.
Amazon has a dominant position in the marketplace and it is leveraging it in a blatantly anti-competitive manner. As a country we have consistently decided that smaller and decentralized is better - there is no compelling reason to allow Amazon to keep borging small businesses.
I have a little different take on the whole Amazon is too big argument. My family has owned small businesses for over 40 years. My dad and I have a vastly different opinion of Amazon. My dad is constantly frustrated by them, because its "cutting into our business". We simply can't compete on price on some items, and people choose not to buy products from us when they can just purchase them and have them shipped home.
Now this isn't a poor us, feel bad for us statement. Like I said my opinion of them is vastly different. I want them around. I need them around. They make logistics for us a 1000 times easier. In 3 clicks I can get items ordered that we need and not have to worry about it. (Need a new storage rack? BAM! Be here on Tuesday? We need a new printer ribbon? Phone camera + Amazon app = I have the exact one I need to replace.)
I hear retailers largely complain about them, because they are taking away business that they have come to rely on. That's not Amazon's fault; that's the business' fault. This is no different than the Walmart's, Barnes and Nobles (remember when there were small bookstores?), etc. of the world. Amazon is different, because it's threatening them too. Amazon is making people realize that they need to be constantly searching for new products and new sources of revenue, but the truth is that they should have been doing this all along. Literally every time I walk into the store, I talk to the manager and ask, "What are we doing to move forward?" Amazon isn't what should be scaring people, it should be the fact that they've been asleep at the wheel not realizing they are driving of the road.
My point is that competing directly with Amazon is stupid, but so is competing with any other large dominant company. They don't have a monopoly on anything, it's just that their presence is more widely felt by a larger number of people at the same time.
Clearly the point is that Amazon is also a global business, and therefore, through economies of scale, is able to dominate businesses that are small or purely local. Moreover arguably it has monopoly power, exacerbating the issue futher. It is clear that you have not thought this through.
This is a ridiculous argument, Amazon clearly has substantial market power which can be used to reduce the exposure of their suppliers [1] (the loss in exposure means there a significant costs associated with suppliers moving to another platform/store - the very definition of market power).
Comparing them to the mom and pop coffee shop is absurd - unlike the coffee shop, there are not hundreds of Amazon competitors that you can sell your product through. You are literally comparing textbook definitions of perfectly competitive markets (e.g. coffee shops - hundreds of competitors and low barriers to entry) to oligopoly markets (e.g. Amazon - very few competitors and high barriers to entry), and somehow reaching the conclusion that they are the same? This is obviously nonsense and goes against the most basic of economic principles.
Amazon is both the owner of the most successful and widely used marketplace, as well as a competitor of the merchants in that marketplace.
Having access to all of the transactional and user data, Amazon has an unarguable advantage over the rest of the merchants in it's market. They can beat anyone on price, placement, or delivery speed.
Barrier to entry into running a competitor market is effectively controlled by network effect. Simply running a competent customer service system and keeping prices within a certain range close to lowest provides an effective license to eternal profit.
Adding competing products when successful volumes are proven by their merchants gives them a very effective way to widen that profit on demand at the expense of their merchants and ultimately to the detriment of their customers who wind up paying more with less available selection.
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