Since its establishment in 1994, Amazon has gradually become one of the largest corporations we know today. Consumers worldwide enjoy the retail behemoth’s excellent delivery service and product range at prices at which most competitors fail to compete. Nowadays, more than 50% of all product searches in the U.S. start on the platform (Bloomberg, 2016). Although the company certainly enriched the online shopping landscape, we should wonder if the company’s increasing dominance and power will keep us fulfilled if only few alternatives remain.
A recent and avid example of the power and dominance that Amazon already enjoys is the tax benefits it got offered by the state of New York, totaling $2.8 billion for locating their second headquarters in the state. This tax incentive may exceed $5.5. billion if Amazon hires additional employees (CNN Business, 2018). But Amazon’s influence certainly does not stop there. Jeff Bezos’s “everything store” is living up to its name with not only a wide product offering but also as a dominant player in, among others, the web services, entertainment and digital infrastructure industry. The consumer and vendor data derived from that, as well as the network effects that come with it, may enable the platform to fully monopolize the online shopping industry.
The first signs of this dominance are already there, as several vendors start to speak out against the increasing demands of the platform for larger discounts and higher margins (Amazon’s Stranglehold, 2016). But this may just be the first step of the platform to leverage its power. Amazon already started to exploit manufacturing and vendor data to start producing products very similar to the ones offered by vendors on the platform (Amazon’s Stranglehold, 2016). The move to manufacturing, combined with the increasing dependence of vendors and manufacturers on the platform, may lead to full control of the value chain.
If this Amazon’s dominance becomes reality, we should hope for regulators to intervene, innovative ideas of other market players to flourish or for Amazon to not exploit its power. However, I deem the latter unlikely and as a result, a lack of competition might leave consumers paying the price. Amazon truly enriched online shopping with their low prices, quick delivery service and wide product offerings. However, the idea of having few shopping alternatives (such as Alibaba) should leave us wondering if the smile in the company’s logo will stand for that of the consumer or merely the platform.
What do you think? Will Amazon leave us (un)fulfilled if it becomes too powerful? Or will the platform’s dominance be held back by regulators and/or innovators? Or is it, like in SouthPark, up to the people to step up?
References:
CNN Business, 2018. Helipads and everything else Amazon is getting out of its deals with New York and Virginia. Available at:
https://edition.cnn.com/2018/11/13/business/amazon-hq2-subsidies/index.html
Bloomberg, 2016. More Than 50% of Shoppers Turn First to Amazon in Product Search. Available at:
https://www.bloomberg.com/news/articles/2016-09-27/more-than-50-of-shoppers-turn-first-to-amazon-in-product-search
ILSR, 2016. Amazon’s Stranglehold: How the Company’s Tightening Grip Is Stifling Competition, Eroding Jobs, and Threatening Communities. Available at:
