Amazon, Attorneys and Antitrust, Oh My!

A few weeks ago, I was interviewing for a position with a consulting firm. To test my knowledge of the e-commerce landscape, I was asked a relatively routine question.

“So Sam, how do you foresee e-commerce changing in the next several years?” Fair enough; I could have taken my answer in many directions:

• The increase of direct-to-consumer, even among non-native D2C brands. (Which is, like, so last year’s answer)
• The increased use of voice search and voice shopping. (So 2018 answer)
• Personalization with the use of artificial intelligence. (So 2017 answer)
• Facebook making more inroads into the e-commerce space.
• More people skipping the store altogether and buying online. That’s not a new phenomenon but this trend may accelerate due to COVID-19 and the possible permanent changes in shopping behavior.

I briefly touched on some of these answers. But they felt mundane and didn’t showcase my outside-the-box thinking. But then I blurted this out:

“You know, this conversation could be far more fascinating after the November elections.”

Whoa, did that just come out of my mouth? Next came radio silence.

“You still with me,” I asked.

“Interesting,” the interviewer responded quizzically. “Please expand upon that.”

I told her that while I’m not an antitrust lawyer, I sensed there would be more scrutiny over Amazon’s dominance in the e-commerce landscape in the coming years. While I’ve felt that way for some time (as has, to his credit, CEO Jeff Bezos), that opinion has only intensified since COVID-19 has forced people to shop on their phones and computers.

Was she impressed with my answer? I can’t say for sure. A few days later I received an email saying the company decided to “move in another direction.” Wonderful.

Nevertheless, it’s an opinion I hold pretty strongly. Not so much on whether Amazon should be broken up, but rather the prediction that Amazon will face more antitrust scrutiny and even louder calls to get smashed into pieces. Expect Jeff to hang around Capitol Hill more often.   

And it’s an opinion I felt was worthy of a blog post. So let’s get to it.

The E-Commerce Landscape

No doubt about it, Amazon is by far the Goliath in the e-commerce space, both from a brand equity and market share perspective. Let’s take a look at the brand equity. When one thinks of e-commerce, Amazon probably comes to mind. It did for my two anonymous friends (see texts below):

Although not exactly a representative sample of the U.S., it does show the strength of Amazon’s brand equity. 

Now, take a look at the top U.S. e-commerce retailers in 2020, per estimates from research firm eMarketer:

Per my calculations, Amazon’s 38.7% market share is nearly double that of the next nine e-retailers COMBINED (21.7%). And this is after eMarketer made some changes to its methodology – eMarketer noted last year that Amazon had a 47% market share – so nearly one in every two dollars spent online was spent with Amazon.

Amazon’s corporate communication department will hasten to tell you that they only capture 5% or so of all retail sales in the U.S. In that respect, they’re nowhere near a monopoly, and yes, Amazon does have to compete with brick-and-mortar retail. However, the firm's growing power has led to other concerns:

• Amazon has been ACCUSED of what is known as “predatory pricing.” Amazon is well known for its razor-thin margins, largely due to low prices on the site. Critics argue that Amazon is using its power to drive out competition from the market. Predatory pricing is illegal, but it’s also very difficult to prove.
• Amazon has vast troves of data from Marketplace. In the EU, for instance, regulators have investigated whether Amazon used data from third-party sellers to build their own products and undercut it on price.
• Just a few months ago, Amazon was sued on grounds that it required third-party sellers to sell their goods on other sites (or their own) at the same price as they do on Amazon. The plaintiff lawyers contend this policy was in violation of the Sherman Antitrust Act.

Why More Scrutiny Might Be Coming

I believe that chasing sheep is best left to the shepherd. So I’m not going to take sides on whether Amazon is involved in anti-competitive business practices.

However, I will give reasons for why I believe this debate will intensify:

Rapidly changing consumer buying habits: I’ve discussed this in previous posts (and earlier in this post), but it’s worth saying again: many shopping habits implanted during COVID-19 and its aftermath likely will become permanent. Simply put, more commerce will move to digital channels, while brick-and-mortar retailers without strong omnichannel experiences will further suffer.

Will most of the gains away from brick-and-mortar go to Amazon? Or will the new e-commerce wealth be shared more broadly? It’s a little early to say and we’ll have more context when Amazon reports second-quarter earnings in July.

But Amazon has a potent weapon that allows it to capitalize on times like this: Prime. There are more than 112 million Prime members as of the end of 2019, and these consumers have increasingly little incentive to shop anywhere else.

If Amazon’s market share grows from its already very high numbers, expect far more scrutiny.

Economic concerns: A dichotomy has really struck me in recent weeks. Amidst the talk of 40 million or so people losing their jobs, there was also talk about Jeff Bezos becoming the first trillionaire. That’s right, according to an analysis by small-business content platform Comparisun, Jeff Bezos is predicted to become a trillionaire by 2026.

A trillion dollars is a lot of money. The population of St. Louis County is approximately 1 million people. So a trillion dollars would be like $1 million for every man, woman and child in St. Louis County. A lot of money, no?

Granted, I don’t believe Jeff Bezos wealth will more than quintuple in the next six years. Nor do I understand why the hell a content platform’s prediction on Jeff Bezos’ wealth has garnered national attention. But as Amazon’s fortunes improve rapidly due to changing shopping behaviors while our economy recovers very slowly, expect more friction.

Political change: This is what I was getting at in my previously discussed interview. In recent decades, Democratic administrations have been more likely to pursue investigations involving anti-competitive practices. I try to refrain from politics in my articles (even though it has a profound effect on business), but given where we are economically, there’s a chance the president in 2021 will be a Democrat.

And if that happens, expect more scrutiny around Amazon. Democratic leaders with large followings, such as Bernie Sanders and Elizabeth Warren, have staked their campaigns around going after Amazon. Simply put, the political pressure for more oversight will be too much to ignore.

So, What Does This All Mean for Vendors, Marketers, Salespeople, Etc.? 

Sorry for the buzzkill, but I don’t know. There’s too many variables.

Maybe Amazon will run some marketing campaigns saying they’re doing great things for the community and things will blow over. Maybe the political winds won’t be as strong as predicted and Amazon can continue its dominance unabated. Or maybe, over time, it will have to make fundamental changes to its business model. 

But as a political science major turned marketer, I’ll be keeping a close eye on the developments. 

Now it’s your turn! What are your thoughts regarding Amazon? Please comment below. And if you liked what you read, I encourage you to check out more of my writing:

How Big CPG Can Find Opportunity in The Downturn

How Small CPGs Can Respond To Big Brand Sales Growth

An Open Letter To Elon Musk