In recent months, talk of regulating or even breaking up Amazon.com, Inc. has moved from the political fringes to the mainstream. In early March, in a widely discussed Medium post, Democratic presidential candidate Senator Elizabeth Warren made the case that Amazon (plus Google and Facebook) have amassed an alarming concentration of power, arguing for structural change to the tech industry.
Even if the Massachusetts senator’s call to break up Amazon is mostly aspirational right now, it’s not hard to see why Warren felt justified in putting the Seattle leviathan on her list of targets. Perhaps more than any other U.S. technology company, Amazon has come to resemble a conglomerate, with a growing presence in multiple markets.
Amazon’s Reach in 2018 Across Various Markets
...in dollar sales
ONLINE
APPAREL
GROCERIES
E-COMMERCE
$24.6B
SALES
$25.4B
SALES
$234.6B
SALES
CONSUMABLES
$23.6B
SALES
...in revenue
CLOUD
COMPUTING
DIGITAL
ADVERTISING
$25.6B
REVENUE
$7.4B
REVENUE
...in units sold
SMART
SPEAKERS
TABLETS
12M
WW UNIT SALES
24M
WW UNIT SALES
...in number of visitors and users
U.S. WEB TRAFFIC
PRIME MEMBERS
100M
PAID
SUBSCRIBERS
199M
AVERAGE MONTHLY UNIQUE
VISITORS
...in all of retail
RETAIL
7.7% SALES
...including, but not limited to,
E-BOOKS
88.9% UNIT SALES
E-READERS
83.6% UNIT SALES
PHYSICAL BOOKS
42% UNIT SALES
STREAMING SERVICES
34% BROADBAND USERS WITH AMAZON PRIME
STREAMING DEVICES
33% BROADBAND USERS WITH AMAZON
FIRE TV SERVICES
AMAZON-BRAND CONSUMER ELECTRONICS
7.5% UNIT SALES
...in dollar sales
ONLINE
APPAREL
GROCERIES
E-COMMERCE
$25.4B
SALES
$24.6B
SALES
$234.61B
SALES
CONSUMABLES
$23.6B
SALES
...in revenue
...in units sold
SMART
SPEAKERS
CLOUD
COMPUTING
DIGITAL
ADVERTISING
TABLETS
24M
WW UNIT
SALES
12M
WW UNIT
SALES
$7.4B
REVENUE
$25.6B
REVENUE
...in number of visitors and users
U.S. WEB TRAFFIC
PRIME MEMBERS
199M
AVERAGE MONTHLY UNIQUE
VISITORS
100M
PAID SUBSCRIBERS
...in all of retail
RETAIL
7.7% SALES
...including, but not limited to,
E-BOOKS
88.9% UNIT SALES
E-READERS
83.6% UNIT SALES
PHYSICAL BOOKS
42% UNIT SALES
STREAMING SERVICES
34% BROADBAND USERS WITH AMAZON PRIME
STREAMING DEVICES
33% BROADBAND USERS WITH AMAZON FIRE TV SERVICES
AMAZON-BRAND CONSUMER ELECTRONICS
7.5% UNIT SALES
...in dollar sales
E-COMMERCE
ONLINE APPAREL
GROCERIES
$24.61B
SALES
$25.4B
SALES
$234.61B
SALES
CONSUMABLES
$23.6B
SALES
...in units sold
...in revenue
CLOUD
COMPUTING
DIGITAL
ADVERTISING
SMART
SPEAKERS
TABLETS
24M
WW UNIT
SALES
12M
WW UNIT
SALES
$7.4B
REVENUE
$25.6B
REVENUE
...in number of visitors and users
U.S. WEB TRAFFIC
PRIME MEMBERS
199M
AVERAGE MONTHLY UNIQUE
VISITORS
100M
PAID SUBSCRIBERS
...in all of retail
RETAIL
7.7% SALES
...including, but not limited to,
E-BOOKS
88.9% UNIT SALES
E-READERS
83.6% UNIT SALES
PHYSICAL BOOKS
42% UNIT SALES
STREAMING SERVICES
34% BROADBAND USERS WITH AMAZON PRIME
STREAMING DEVICES
33% BROADBAND USERS WITH AMAZON FIRE TV SERVICES
AMAZON-BRAND CONSUMER ELECTRONICS
7.5% UNIT SALES
...in revenue
...in dollar sales
CLOUD
COMPUTING
GROCERIES
ONLINE APPAREL
E-COMMERCE
$24.61B
SALES
$25.6B
REVENUE
$25.4B
SALES
$234.61B
SALES
DIGITAL
ADVERTISING
CONSUMABLES
$23.6B
SALES
$7.4B
REVENUE
...in units sold
...in number of visitors and users
SMART
SPEAKERS
U.S. WEB TRAFFIC
PRIME MEMBERS
TABLETS
199M
AVERAGE MONTHLY UNIQUE
VISITORS
100M
PAID
SUBSCRIBERS
24M
WW UNIT
SALES
12M
WW UNIT
SALES
...in all of retail
RETAIL
7.7% SALES
...including, but not limited to,
E-BOOKS
88.9% UNIT SALES
E-READERS
83.6% UNIT SALES
PHYSICAL BOOKS
42% UNIT SALES
STREAMING SERVICES
34% BROADBAND USERS WITH AMAZON PRIME
STREAMING DEVICES
33% BROADBAND USERS WITH AMAZON FIRE TV SERVICES
AMAZON-BRAND CONSUMER ELECTRONICS
7.5% UNIT SALES
The company is best known as the world’s largest online store. But of course Amazon is much more than that. It sells advertising on its website, making the company a small but growing rival to Facebook and Google. Amazon is a hardware maker, with an expanding line of smart speakers and video streaming gadgets. Amazon Studios makes original television shows and movies and is starting to steal awards from Netflix and HBO. With its acquisition of Whole Foods Market and a growing fleet of cashierless convenience stores, Amazon has sowed fear among traditional grocers. And in perhaps the most surprising development of all, Amazon has become the world’s biggest provider of cloud-computing services.
Based on the current interpretation of U.S. antitrust law—which focuses on harm to consumers via predatory pricing—there’s little to suggest that such a corporate arrangement is illegal. Amazon, after all, preaches an almost maniacal focus on consumers and for decades has generally hewed to a core mission of offering customers more selection at lower prices.
When confronted with calls for antitrust scrutiny, Amazon has stressed a few points that, strictly speaking, ring true. The company’s broad reach is not on its own an indication of market power. In just about every market Amazon has entered, it encounters well entrenched competitors, including some retailers who are finding success by blurring the line between online and offline commerce.
And despite being the largest e-commerce player, Amazon still accounts for roughly 1 percent of global retail. In the U.S., the company's share of all retail sales is as high as 7.7 percent, including sales made by other retailers who sell on Amazon's Marketplace. Absent that, Amazon itself accounts for less than 3 percent of U.S. retail sales, according to Euromonitor International.
All the same, size and reach put the company in a class of its own—ensuring that in this populist age Amazon will continue to be a target of would-be trustbusters like Warren. And to think it all began with books—the paper kind that arrived in a box at the front door.
To a young Jeff Bezos, books were a commodity. Copies of a novel sold at Barnes & Noble were identical to the ones stocked by an independent bookstore. And by shipping books from distributors or Amazon's essentially endless warehouse space, the company's digital storefront could offer a wider selection than any brick-and-mortar store.
Books
807M
unit sales
42%
Amazon
58%
Others
E-Books
560M
unit sales
89%
Amazon
6.3% Apple
4.8% Others
E-Books
560M
unit sales
Books
807M
unit sales
42%
Amazon
89%
Amazon
58%
Others
6.3% Apple
4.8% Others
E-Books
560M
unit sales
Books
807M
unit sales
42%
Amazon
89%
Amazon
58%
Others
6.3% Apple
4.8% Others
In the late 1990s, Amazon expanded into other commoditized media products, starting with music and movies. Electronics and toys followed. By the mid-2000s, Amazon’s growing network of warehouses also held kitchen items, sporting goods, video games, apparel and jewelry.
E-Commerce
$524B
total sales
45% Amazon
6.8% eBay
4.0% Walmart
3.8% Apple
1.6% Home Depot
1.3% Best Buy
1.3% Macy’s
33% Others
1.2% Qurate
Retail Group
1.1% Costco
1.1% Wayfair
E-Commerce
$524B
total sales
45% Amazon
6.8% eBay
4.0% Walmart
3.8% Apple
1.6% Home
Depot
1.3% Best Buy
1.3% Macy’s
1.2% Qurate
Retail Group
1.1% Costco
1.1% Wayfair
33% Others
E-Commerce
$524B
total sales
45% Amazon
4.0% Walmart
3.8% Apple
1.6% Home Depot
1.3% Best Buy
1.3% Macy’s
1.2% Qurate Retail Group
1.1% Costco
1.1% Wayfair
6.8% eBay
33% Others
As Amazon grew, the company adopted a business school concept called the flywheel, loosely defined as a sort of self-reinforcing loop. Where possible, projects were to be structured to bolster other initiatives underway at the company.
For Amazon’s core in retail, the formula held that lower prices and wide selection would draw shoppers to Amazon.com, leading to more purchases, giving Amazon more leverage to negotiate even lower prices from manufacturers. That, in turn, would enable Amazon to offer even lower prices and broader selection.
In 2000, Amazon launched Marketplace, offering other merchants the option to pay to list their wares on Amazon’s digital shelves and, later, stock them in the company’s own warehouses, a decision that would dramatically increase Amazon’s own selection without tying up the company’s cash in inventory of iPhone cases and DVDs.
BOOKS, MUSIC &
VIDEO
80%
TOYS & HOBBY 62%
CONSUMER
ELECTRONICS
57%
52%
OTHER
CATEGORIES
OFFICE
EQUIPMENT &
SUPPLIES
51%
FURNITURE &
HOME GOODS
46%
HEALTH,
PERSONAL
CARE & BEAUTY
44%
39%
APPAREL &
ACCESSORIES
FOOD &
BEVERAGE
32%
AUTO PARTS 16%
BOOKS, MUSIC, VIDEO 80%
TOYS & HOBBY 62%
CONSUMER ELECTRONICS 57%
OTHER CATEGORIES 52%
OFFICE EQUIPMENT &
SUPPLIES
51%
FURNITURE & HOME GOODS 46%
HEALTH, PERSONAL CARE &
BEAUTY
44%
APPAREL & ACCESSORIES 39%
FOOD & BEVERAGE 32%
AUTO PARTS 16%
BOOKS, MUSIC, VIDEO 80%
TOYS & HOBBY 62%
CONSUMER ELECTRONICS 57%
OTHER CATEGORIES 52%
OFFICE EQUIPMENT & SUPPLIES 51%
FURNITURE & HOME GOODS 46%
HEALTH, PERSONAL CARE, BEAUTY 44%
APPAREL & ACCESSORIES 39%
FOOD & BEVERAGE 32%
AUTO PARTS 16%
But as Amazon painstakingly expanded the categories of goods it stocked, for most people, the company remained a bookstore first.
Then in 2005, Amazon rolled out the Prime membership program, offering, in exchange for an annual fee, quicker shipping on a selection of items in its inventory. The program, over time, helped nudge customers who might have only used Amazon for books and movies to browse other categories of goods. After all, after that initial payment, shipping was free.
Prime today boasts more than 100 million paying members, making it among the world's largest paid membership programs.
1M
sub-
scriptions
100M
Amazon
139M
Netflix
96M
Spotify
53M
Costco
50M
Apple
Music
500K
subscriptions
100M
Amazon
139M
Netflix
96M
Spotify
53M
Costco
50M
Apple
Music
500K
subscriptions
100M
Amazon
139M
Netflix
96M
Spotify
53M
Costco
50M
Apple Music
Amazon also discovered a high-tech application for its flywheel.
The company in the early 2000s started a project to reorganize the cumbersome corporate technology department that powered its massive consumer websites, retooling its software in such a way that individual computing services could be broken down to their basic building blocks.
Digital storage, processing power, databases and other applications and infrastructure usually sat on backroom servers or data centers. Beginning in 2006 with Simple Storage Service, essentially a hard drive offered for rent on the internet, Amazon started to offer those services to other companies on a pay-for-what-you-use basis. More customers meant more massive server farms, and those economies of scale gave Amazon the flexibility to lower prices and build a series of increasingly powerful computing tools.
Cloud Computing
$80.4B
total sales, infrastructure
32%
Amazon
17% Microsoft
8.5% Google
4.0% Alibaba
3.8% IBM
35%
Others
Cloud Computing
$80.4B
total sales, infrastructure
32% Amazon
17% Microsoft
8.5% Google
4.0% Alibaba
3.8% IBM
35% Others
Cloud Computing
$80.4B
total sales, infrastructure
32% Amazon
17% Microsoft
8.5% Google
4.0% Alibaba
3.8% IBM
35% Others
By the time Amazon began breaking out the revenue of Amazon Web Services in 2015, the cloud-computing unit had reshaped how businesses used technology. It was also Amazon's biggest money maker, churning out billions of dollars a year in profit that the company could put to work investing in new services and expansion of its core retail business. Once again, the flywheel in action.
E-READERS 84%
SMART
SPEAKERS
67%
TABLETS 12%
CONSUMER
ELECTRONICS
8%
E-READERS 84%
SMART SPEAKERS 67%
TABLETS 12%
CONSUMER
ELECTRONICS
8%
E-READERS 84%
SMART SPEAKERS 67%
TABLETS 12%
CONSUMER
ELECTRONICS
8%
Amazon embraced the transition from physical goods to digital ones in other areas. The Kindle e-reader, the company’s first consumer electronics device when it was released in 2007, became a digital marketplace designed to build off the company’s base of book lovers.
That hardware unit got to work growing new and existing businesses in the 2010s. A line of tablets was designed to push an Amazon app store to rival Apple and Google. Amazon Fire TV streaming players hooked into Amazon's Prime Video and music services. The Fire phone targeted shoppers and Amazon fans. The company’s biggest hit in recent years, Echo smart speakers powered by Alexa voice software, offered customers the ability to tap into all of Amazon’s services using their voice.
Amazon’s experiments aren’t an unbroken line of success. The Fire phone flopped and was quickly discontinued. Repeated efforts to match eBay in online auctions were scuttled, as were various online storefronts, payment services and a travel booking site.
Bezos has trained Wall Street not to panic when new projects aren’t immediate financial successes so long as they help keep that flywheel spinning. Amazon’s electronics unit has thrived in part by selling devices at prices that barely cover their manufacturing costs. The company doesn’t need to make money on the sale of a Fire tablet, the thinking goes, if loyal and happy customers will buy other Amazon services. In 2018, Amazon’s devices were the third biggest sellers in the U.S., according to Euromonitor, trailing only Apple and Samsung.
Amazon’s patience has also started paying off in tough-to-crack retail categories. In fashion, a challenge because shoppers typically prefer to try on clothes in person, Amazon rolled out a series of partnerships with clothing brands, experimented with online fashion listings from an outpost in New York and built dozens of house brands aimed at filling gaps in its inventory.
The retailer is now the second-biggest seller of clothing in the U.S., behind Walmart. The company looms even larger online, accounting for more than a third of U.S. clothing, footwear and accessory sales on the internet, a share bigger than the next nine companies combined.
Online apparel
$70B
total sales
8.7% Macy’s
4.2% Nordstrom
3.7% Kohl’s
35% Amazon
3.2% Gap
3.2% Qurate Retail Group
2.2% eBay
2.2% Walmart
34% Others
1.7% L Brands
1.7% JC Penney
Online apparel
$70B
total sales
35% Amazon
4.2% Nordstrom
3.7% Kohl’s
3.2% Gap Inc.
3.2% Qurate Retail Group
2.2% eBay
2.2% Walmart
1.7% L Brands
1.7% JC Penney
8.7% Macy’s
34% Others
Online apparel
$70B
total sales
35% Amazon
4.2% Nordstrom
3.7% Kohl’s
3.2% Gap Inc.
3.2% Qurate Retail Group
2.2% eBay
2.2% Walmart
1.7% L Brands
1.7% JC Penney
8.7% Macy’s
34% Others
Nowhere, perhaps, has Amazon demonstrated more patience than groceries. By 2017, the company had spent a decade experimenting with little to show for it. So it bought Whole Foods. The company quickly got to work linking Whole Foods into the rest of its empire, using stores as depots for quick delivery, making Prime the gateway to grocery discounts and even selling Echo speakers from kiosks in Whole Foods stores. Amazon is now the fifth largest U.S. seller of groceries, according to Cowen & Co., and is growing faster than any of its major rivals.
Groceries
$695B
total sales
3.7% Amazon/
Whole Foods
25% Walmart/
Sam’s Club
11% Kroger
6.8%
Albertsons/
Safeway
6.4% Costco
47% Others
Groceries
$695B
total sales
3.7% Amazon/
Whole Foods
25% Walmart/Sam’s Club
11% Kroger
6.8% Albertsons/Safeway
6.4% Costco
47% Others
Groceries
$695B
total sales
3.7% Amazon/Whole Foods
25% Walmart/Sam’s Club
11% Kroger
6.8% Albertsons/Safeway
6.4% Costco
47% Others
Amazon has noted that Walmart, the biggest retailer, dwarfs it in scale and geographic reach. The Bentonville, Arkansas-based company sells groceries from some 4,750 brick-and-mortar stores. Amazon-owned Whole Foods and the cashierless Amazon Go convenience stores together add up to just 487 locations. Jeff Bezos will be sure to point that out should Elizabeth Warren and her allies come knocking.