If you do any of your holiday shopping online, chances are good that you’ve visited Amazon.
The site sells more books and toys than anyone else, online or off, and it’s fast approaching the No. 1 position in apparel and consumer electronics. Amazon touches nearly 50 cents of every online shopping dollar, and a new report predicts that its dominance will only grow.
Within five years, the report from the Institute for Local Self-Reliance says, a fifth of the $3.6 trillion U.S. retail business will have moved online, and two-thirds of cybershopping will occur through Amazon.
Many analysts would chronicle such growth as an American success story, comparable to the way Ford reinvented transportation or Disney changed entertainment.
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The institute, a nonprofit that promotes “humanly scaled institutions,” instead writes about Amazon as a tale of greed, comparing it to Standard Oil and the 19th-century railroad robber barons.
Amazon, the report says, “increasingly controls the underlying infrastructure of the economy.” That’s a reference to the company’s giant cloud-computing division, its warehouses and Amazon Marketplace, an e-commerce platform for third-party sellers.
Because 55 percent of shoppers start their searches directly on Amazon, rather than on a search engine such as Google, the giant company has a new kind of market power. Smaller businesses feel like they have to use Marketplace or customers won’t find them.
Stacy Mitchell, the institute’s co-director, argues for breaking up Amazon, like Standard Oil and AT&T before it. The report suggests that the government “at the very least” should force Marketplace to be split off and regulated like a utility.
“We are in danger of seeing the benefits of this technology centralized as a result of a single company having so much power,” Mitchell says. “We are losing the benefits of diversity and choice.”
Others say Amazon is just responding to consumer demand by making transactions better, cheaper and faster.
“I think Amazon is the greatest disruptive force to hit retail since Sam Walton,” says Howard Davidowitz, president of New York consulting and investment banking firm Davidowitz & Associates. “Everything they’re doing comes from competence and being in tune with the consumer.”
Davidowitz calls Amazon Prime, the free-shipping and streaming-video service, the greatest customer loyalty program of all time. Amazon didn’t lure shoppers by being predatory, it attracted them by being smart.
Glenn MacDonald, Olin professor of economics and strategy at Washington University, doesn’t see the case for a breakup. “They have tons of competition,” he says. “All you have to do is look at the internet and see a lot of other companies selling what they sell.”
If Amazon is a monopolist, he adds, “they’re the worst monopolist ever. Their profit margin is 2 percent, which is even low by the standards of retail.”
Big retailers have always aroused suspicion. The Great Atlantic and Pacific Tea Co. was the evil empire of the 1930s, and Wal-Mart played the same role in the 1980s. Both were accused of squeezing suppliers and crushing competitors.
A&P eventually fell on hard times and closed its last supermarket in 2015. Wal-Mart is still very large, but it struggles to compete with Amazon online.
If history is a guide, Amazon will face its own disruptive challenger someday. Policymakers should try to remove unfair advantages the company has — it still isn’t required to collect sales tax in Missouri and 15 other states, for example — but they don’t need to break up a company that has thrived by meeting consumers’ needs.