Amazon confuses people. It is the most ambitious company in America and the least profitable major tech company in America, and these things are true for the same reason.
Jeff Bezos' everything-store takes in a massive pile of cash and spends every dollar (sometimes more) on an endless global infrastructure project to compete in the savage arena of online retail. Savagery begets savagery, and Amazon, in its quest to take over the world, is known for the brutality it exacts on everyone but its customers. It is a consumer-friendly company that is the opposite of friendly to its competitors, suppliers, and even employees.
When Franklin Foer, the editor of The New Republic, looks at Amazon, he sees a monopoly. If he broadened his lens, he would see a behemoth fighting for its life in a world of giants: Walmart's market cap is $100 billion more than Amazon, and Alibaba, China's version of eBay-mixed-with-Amazon, just enjoyed the biggest global IPO ever. There are no monopolies to be found here.
Amazon's dominance in the publishing space is one thing. Foer says it commands about 40 percent of the market for books.
But if Amazon is a retail monopoly, then the word monopoly has no meaning. E-commerce is less than 10 percent of American retail, even after you take out gas, food, drinks, and building supplies. Amazon is less than 20 percent of American e-commerce. Put it together, and you are talking about a profitless company that commands less than 1 percent of its market.
This Is Not What a Monopoly Looks Like
If 1 percent of total sales qualifies as a monopoly, there are a lot of surprising monopolies out there. With 2.5 percent of smartphone sales, Windows Phone is flirting with a monopoly. With 2.9 percent of soda sales, National Beverage, the makers of Shasta and Mr. Pure, is working on its own monopoly in the U.S. soft drink industry. If Amazon Must Be Stopped, then Shasta Soda really, really must be stopped.
It's a perfect bit of irony that the same day The New Republic published its Amazon cover story, the Wall Street Journal reported that Bezos is opening a brick-and-mortar store in Manhattan to compete with the brick-and-mortar industry that it is supposedly destroying.
Why is Amazon opening a store? Because that's where people buy things. For all the convenience of e-commerce, retail is still dominated by ambulatory humans browsing shelves and sales racks, passing merchandise over a counter, and walking out of doors with bags (graph via Kevin Roose).
Shoppers Like Stores
In the most interesting part of Foer's essay, he acknowledges that to whatever extent Amazon is a monopoly (it's not) or a major force in U.S. retail (it is), consumers are responsible for feeding the beast.
In confronting what to do about Amazon, first we have to realize our own complicity. We’ve all been seduced by the deep discounts, the monthly automatic diaper delivery, the free Prime movies, the gift wrapping, the free two-day shipping, the ability to buy shoes or books or pinto beans or a toilet all from the same place. But it has gone beyond seduction, really. We expect these kinds of conveniences now, as if they were birthrights. They’ve become baked into our ideas about how consumers should be treated.
This scratches at a deeper itch, that there is something devilishly seductive to the conveniences of digital capitalism that makes life better for us as consumers and worse for us as workers. Does buying diapers once from Amazon makes one morally complicit in the working conditions of its warehouse employees? What about subscribing to Amazon Prime? Having an Amazon credit card?
These are harder questions, but they have nothing to do with Amazon's mythical status as a monopolist. If the government thinks warehouse workers deserve higher wages and better conditions, we don't have to go through the Justice Department's anti-trust squad to improve their lot. We can just pass new laws. Don't ask consumers to boycott a good deal.
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