Critics who believe Amazon has gotten too big and powerful often quote estimates that the company accounts for nearly 50% of online sales in the U.S. But one widely cited source for that figure—the research firm eMarketer—recently revised Amazon’s market share estimate sharply downward after the ecommerce giant disclosed new data.
A spokesperson for eMarketer told The Information that the firm lowered its 2019 estimate for Amazon’s share of U.S. online sales to 37.7% after getting “new guidance” from data in Amazon CEO Jeff Bezos' shareholder letter. The revision, which hasn’t been previously reported, comes as Congress launches hearings into the market power of big tech companies and regulators are preparing possible antitrust probes of them. Estimates of Amazon’s market share are likely to be critical in any antitrust review of the company.
• EMarketer recently revised Amazon’s estimated share of online sales
• Revision came after new data from Amazon on third-party sales
• Market share likely to play a role in future antitrust hearings, probes
The company and its critics are already tangling over which market share figures tell the real story of Amazon’s power. Amazon executives, if they’re called to defend the company’s business practices, are likely to argue that market share figures based only on online sales are misleading, pointing instead to Amazon’s 4% share of total retail sales, including brick-and-mortar stores. That much lower figure reflects the fact that the vast majority of shopping still occurs in traditional stores.
Amazon is also likely to defend itself on other fronts, from its contributions to the jobs market to the taxes it pays.
Mr. Bezos's shareholder letter, released in April, for the first time disclosed the percentage of Amazon’s total gross merchandise sales by year that came from third-party sellers—58% last year. Cindy Liu, an eMarketer analyst, said the firm lowered its figures because its earlier estimates for third-party sales through Amazon were too high. The chart that accompanies this story reflects eMarketer’s revised 2019 online sales figures for the company, along with earlier years.
“Amazon’s retail business competes in the worldwide market for retail sales,” the Amazon spokesperson said. “Our competitors include all the other online and brick-and-mortar stores that people shop at every day.”
Amazon isn’t the first company in the antitrust crosshairs to talk down its market share. In their defense against competition authorities, companies commonly seek to define the market in which they operate as broadly as possible. When the U.S. government sued Microsoft in 1998, for example, it focused on the company’s dominance of operating systems for personal computers, estimated at around 85%. Microsoft, in contrast, argued its share of the worldwide market for all PC software—around 4%—was the more relevant figure.
Nicholas Economides, a professor of economics at New York University who studies antitrust and has advised the Federal Trade Commission in the past, cautioned that any antitrust case against Amazon will not be predicated on its market share alone. “Just by looking at market share, you can start an investigation, but it doesn’t mean you can win a case,” he said.
While Amazon has quietly emphasized its small share of total retail sales in discussions with policy makers, the 4% figure is still a surprise to many, a possible reflection of Amazon’s popularity in more affluent enclaves. This year, the company stepped up its efforts to play down its bigness—no easy feat for a company with $233 billion in sales last year and a market capitalization of $913 billion, which makes it the second most valuable company in the world after Microsoft.
In April, Amazon CEO Jeff Bezos told investors in his widely read annual shareholder letter that Amazon is a “small player in global retail,” largely because almost 90% of retail sales occur in brick-and-mortar stores. “We represent a low single-digit percentage of the retail market, and there are much larger retailers in every country where we operate,” he wrote.
To regulators, Amazon has stressed that it does not operate in an online retail vacuum. Last August, Brian Huseman, the head of Amazon’s public policy office, told the Federal Trade Commission that “the distinction between ‘physical’ and ‘digital’ is increasingly blurring, and now largely meaningless.”
But the company’s antitrust critics aren’t buying the argument, instead viewing online sales as the appropriate lens for examining Amazon’s position. Matt Stoller, a fellow at the Open Markets Institute, an anti-monopoly advocacy group, said looking at Amazon’s share of total retail oversimplifies the areas in which Amazon holds power. He said much of that power comes from the fact that it operates “the pipes” for online retail, its huge marketplace for third-party sellers.
“Nobody would say, ‘I sell tomatoes in a farmer’s market, therefore I’m competitive with a Home Depot selling lumber in San Diego,” said Mr. Stoller, a frequent Amazon critic.
Some of Amazon’s competitors with roots in physical retail have taken shots at the power of internet companies. The president of the Retail Industry Leaders Association, whose members include Walmart, Best Buy, Target and Gap, told the FTC in a letter last year that the Internet has risen to become the center of decision-making by consumers and is “controlled by a relatively small number of highly influential firms.”
Amazon maintains a vast lead over other big players in online retail. Walmart is the third-place player in the market in the U.S. But it accounted for only 4% of online sales last year, up from 3% in 2016, according to eMarketer. Walmart’s total retail sales in the U.S., including offline and online, are more than twice those of Amazon.
Amazon’s response to antitrust probes is likely to rely on other arguments the company has used for years behind the scenes in Washington, where it has a sizable lobbying effort. The company has widely promoted the idea that it is “a method to empower the little guy,” a former staffer on its policy team said.
Amazon provides logistics services to third-party sellers, taking a portion of their sales in exchange for taking some of the burden off those small- and medium-sized businesses. It has brought some of those sellers to Capitol Hill to meet with representatives and describe how Amazon has helped them. To bolster its argument that Amazon is an engine for job growth, it published a report saying that its marketplace sellers have created 1.6 million jobs.
It has also discouraged Amazon staffers’ language. Several years ago, according to two people familiar with the change, Amazon lawyers told employees to stop referring to Amazon as a platform—a term that is commonly used throughout the tech industry, but which has acquired a more sinister connotation in policy circles, implying an all-powerful gatekeeper in its realm.
Instead, one of the people said, Amazon employees were told to refer to the company as a service.
—Ashley Gold contributed to this article.
CLARIFICATION: This story has been updated to clarify that Amazon didn't directly contact eMarketer with data from Mr. Bezos' shareholder letter, as an earlier version indicated. It has also been updated to include a comment from an eMarketer analyst and to say that the firm lowered Amazon online market share estimates for years prior to 2019.