Long Live The King?

Amazon may have begun as a niche online bookseller but it quickly became the fastest growing ecommerce and tech platform. Today, Amazon and the internet go hand-in-hand and consumers can buy anything there from all-purpose batteries to zodiac necklaces – “A to Z,” just as the company advertises.

Chances are you’ve bought something on Amazon and there’s also a pretty good chance you regularly buy things on the platform, as it is clearly the online ecommerce platform. Amazon is unquestionably the hegemon of its retail space, yet there are some potential challengers on the horizon, so brands that realize this and adjust their strategies to what consumers want in the changing retail landscape will stand a better chance of success in the coming years.

Competition is a part of the American cultural fabric, not just in sports or politics but also in the business world. Actually, you could argue that this is the case particularly in the business and retail world. Monopolies have never been very popular in the United States, as evidenced by the continuing popularity of twenty-sixth president, Theodore Roosevelt, who made his mark through trust busting and anti-monopoly initiatives. This brings us to Amazon, which many believe, based on numbers, is approaching a monopoly.

In June 2022, Amazon had 37.8% of the e-commerce market share in the US, which although not a monopoly, is expected to increase domestically and globally. So, the pressing questions are: can any company challenge this behemoth and if so, what will they offer consumers? The answer to these questions is a bit complicated and is contingent upon the government’s acceptance – or not – of the tech status quo.

Even more important is if there are any viable alternatives currently operating. Answering the first point is a bit outside of the scope of this study, as it concerns political whims and attitudes in Washington. The second point is worth exploring because there are some legitimate contenders that may challenge Amazon’s primacy in the ecommerce space. So let’s take a look at Amazon’s past and present, some contenders it may have to face in the future, and how the competition could affect American consumers.

From Bookstore to Everything Store

Like many of the major tech companies today, Amazon began with inauspicious origins, eventually developing into a giant. Unlike Google, Apple, and other similar companies, though, Amazon has found its success in ecommerce, which was unheard of in the early 1990s.

Jeff Bezos founded Amazon in 1994 in a garage in Bellevue, Washington, much like Steve Jobs and Steve Wozniak did with Apple nearly 20 years earlier. Bezos’ business model was an immediate success, combing the emerging tech of the World Wide Web with the ancient tech of books to become the world’s first and foremost online bookstore.

Bezos also capitalized on Seattle being an early tech hub by drawing talent to his upstart company and quickly making it much more than an online bookstore. Everything changed on June 19, 2000, when Amazon rebranded from its association with the exotic locale and purely books to “everything from A to Z.”

Amazon began selling most retail items after that date and eventually jumped into other tech spaces, including: Amazon Web Services (AWS) in 2002, Amazon Prime Video streaming service in 2006, the Amazon Kindle reader in 2007, Amazon Fire in 2011, and Alexa in 2014. But despite Amazon’s aggressive foray into web services, streaming, and hardware, it remained at its core an ecommerce site. Amazon’s ecommerce success can be attributed to a number of factors, including effective branding, efficient use of omnichannel marketing, and the ownership of its own supply chain.

Amazon has its own fleet of Boeing 767 jets, so recession and other unforeseen  “black swan” events, such as the COVID-19 pandemic, will have a minimal, or much less of an effect on it compared to other major retailers. Its flights increased in 2020 during the height of the pandemic and its drone program is expected to be offered to more locations in the coming years.

Amazon’s control of its own supply chain is part of the flywheel business model, which is essentially where one project in the company is used to support another. For example, retail sales were used to develop AWS, and when AWS began turning a profit it could be used to fund the Boeing fleet, or the success of Alexa could be used to buy more drones.

Amazon’s present points to its continual impact on ecommerce for at least the near future. Amazon market – which is the “store” itself – is available in 21 countries in addition to the US. Since the late 2010, Amazon has continued to expand its footprint in the retail space, first by acquiring the online shoe store, Zappos, in 2009, and then buying Whole foods in 2017, placing the company in the grocery business. In 2022, Amazon brought in $514 billion in revenue, solidifying its status as the king of ecommerce, but there are a few things that potential competitors could learn from the company’s meteoric rise.

Amazon and the Consumer

In addition to its flywheel business model, much of Amazon’s success is attributed to its loyal customer base. Regular Amazon consumers enjoy a number of things about the online store, including its convenience. Quick delivery – especially for Amazon Prime members – easy returns and a user friendly interface all make the company a consumer favorite. The low prices are probably its primary draw, but with that said the quality of its product is generally not lacking.

When Amazon began its fulfillment program in 2006, it allowed third-party sellers to operate directly on the platform, giving consumers more competitive pricing, quality, and a wider range of choices. In 2017 there were more than two million third-party sellers on the platform, which increased during the pandemic. All of these features are further enhanced by Amazon’s branding and omnichannel marketing, which keeps the name and image in the minds of consumers. So, with all of this in mind, is there any way another company could possibly challenge Amazon? There are a few worth mentioning, including a standard brand in the retail business.

Potential Challengers

The seemingly most logical challenger to Amazon’s ecommerce crown would be retail auction giant eBay, which in 2022 captured 3.5% of the ecommerce market share to put it at fourth place. When compared to Amazon’s nearly 40% share of the market, it doesn’t seem like eBay will usurp the king any time soon, although it should be pointed out that eBay’s unique business model does allow for growth as well as its ability to retain a specific niche of the retail sector.

Perhaps the biggest challenger to Amazon is the current number two company in the space, Walmart. Yes, that’s right, the brick-and-mortar giant that Americans begrudgingly love, and love to make fun of, probably has the potential to be Amazon’s most serious competitor in ecommerce.

Although Walmart’s business model remains solidly brick-and-mortar, which has made it the largest retailer in the US, it’s slowly but surely moving into ecommerce and online retail. In 2022, Walmart was the number two ecommerce business, but it’s still far behind Amazon with only a 6.3% share of the market. With that said, the executives of Walmart appear interested in making a run at Amazon.

The number of items sold on the Walmart website has greatly increased due in large part to the participation of third-party sellers, which was one of the strategies that helped put Amazon on top. The grocery sub-space of ecommerce is another front where Walmart could be poised to challenge Amazon. About 26% of all grocery spending in the US is done at Walmart, and the company plans to increase that number by offering more online purchasing options and curbside pickup to more than 3100 stores in 2023 in order to counteract Amazon’s step into the grocery business.

The dark horse candidate to challenge Amazon’s ecommerce dominance is located halfway around the world in China. Chinese ecommerce retail company Alibaba currently controls the Chinese market with 58% of the share, but it has not shown any signs of a desire to enter the American market. If Alibaba were to make a serious effort to enter the US market things could quickly get quite interesting, although much of that would depend upon the nature of American-Chinese relations.

A Tough Nut to Crack

The evidence shows that Amazon’s dominance of the ecommerce space will continue for some time, at least in the United States. The flywheel model has made it a force in many sectors that has helped it strengthen its ecommerce dominance. Reports also show that Amazon has used its success in the US to expand its footprint globally, but this doesn’t mean that Amazon is the only player on the board and that consumers won’t benefit from the situation.

The wildcard in this emerging ecommerce competition will be the government. If the US government decides to treat Amazon as a monopoly it could open space for eBay, Walmart, or even Alibaba, and if tensions continue to rise or get worse between the US and China Alibaba could be eliminated as a contender but Amazon and Walmart will be left with supply chain issues.

The growing competition between Amazon, Walmart, eBay, and potentially Alibaba, means that consumers can expect to have even more choices at affordable costs. The trend of third-party sellers will also likely gain steam and could play a role if Walmart or Alibaba make a more serious attempt to crack the Amazon nut. But as Amazon expands globally, more international consumers will become familiar with the brand, which will help Amazon keep its ecommerce primacy across the globe.