AMAZON HAS A market share of more than 30% of the UK’s
e-commerce market. In comparison, the next closest is eBay coming in at 9.8%,
followed by Sainsbury’s at 4.6%. To put
this into perspective, e-commerce’s share of chain retail was 21% by the end of
2019, with the vast majority of all retail sales in the UK coming from physical
stores.
The creation of Amazon Market place put Amazon in the
relatively unique position of being both a retailer and a platform for other
retailers. Essentially, small retailers pay a fee to host their products on
Amazon’s platform. The small retailer can access the Amazon customer and in
return, Amazon can expand into new areas with very little knowledge about them.
The individual retailers don’t get access to the rich data about their own
customers beyond simple figures. This is the very data that made Amazon thrive.
In this way, Amazon defeated some of their smaller retail competition by
incorporating them into the business, giving them very little personal control
over their product.
Amazon’s success with third-party sellers comes
largely from its careful control of the supply chain. Through its
Fulfilled-by-Amazon service, Amazon can branch out into new products but also
keep the supply chain tightly controlled by warehousing and shipping items for
third-party sellers. This gives Amazon an edge over one of its main
competitors: eBay has no fulfillment option, so has to cope with the
non-uniformity of quality and delivery standards on its platform. This has
partly contributed to eBay’s unsteady and slow growth recently. Facebook
Marketplace has filled the niche for local sellers, and Amazon has provided a
better option for online shopping with quicker shipping and more reliability,
deterring some potential eBay customers away.
Due to Amazon operating in many retail areas, it has
competition on many different fronts. Globally, Walmart offers some solid
competition. Walmart has a dominant physical presence with traditional stores
but has also been successful branching out into e-commerce. A company press
release has shown that online sales are growing at 40% year over year. Walmart
doesn’t shy away from innovation either – testing out a scheme to deliver
groceries straight to customer’s fridges and introducing more robots to the manufacturing
process. They still lag behind Amazon in terms of their share in the e-commerce
market but are showing a very promising increase. Another global contender is
Alibaba. This company was responsible for 58% of all online retail sales in
China in 2019. As China, along with the UK and the US, is one of the three big
players in the e-commerce sector, this is not to be taken lightly.
The Alphabet Company (The Parent Company of Google) is
not generally considered the biggest player in the e-commerce industry. However, as
Adam Levy points out, it has the potential to become an essential partner to
any retailer trying to compete with Amazon. When consumers don’t have Amazon
Prime, they are just as likely to start their shopping search on Google as they
are Amazon. Amazon’s key attribute which sets it apart from competitors is the
sheer amount of data it has on consumers. This data can be used for an
impressive range of things. The data can be used to predict patterns of what
certain people will buy in the future and create targeted advertising. Google
has amassed this data as well, in addition to payment information through
Google Wallet. It’s still hypothetical but a partnership with another retailer
could create a strong rival to Amazon by toppling its data monopoly.
Amazon has been facing critique for alleged
anti-competitive practices for some time now. It has so far avoided real action
in the UK because anti-competition law is more geared towards protecting the
consumer against business rather than smaller businesses against more powerful
businesses. However, in the US, the idea that Amazon should be broken up
because its monopoly is unfairly preventing small businesses from thriving
online is gaining traction. Elizabeth Warren is promoting the idea of more
stringent regulation of the competition practices of big US companies on the
campaign trail. The Department of Justice similarly is launching a broad
antitrust review of big companies. The EU Commission has also launched several
investigations into big company monopolies recently. This could be something to
watch out for in the future.
