Summary of Findings
Amazon’s CEO, Jeff Bezos, has a reputation of being one of the most brilliant business leaders of all time, with Amazon’s success being directly credited to his leadership style. Over the past twenty
years, Bezos has created one of the largest internet companies of all time, one beloved by consumers and predatory towards competitors. Fueled by the optimism and outcomes of the Information Age, Amazon has transformed from a online book retailer founded in a garage into a household name, radically changing consumer buying behavior. The depth and breadth that Amazon has disrupted the retail (and specifically the e-commerce) industry is growing at an alarming rate, fueled by Amazon’s desire to become the “earth’s most customer-centric company” (Amazon 10K, 2017). Their unique culture and bench strength in digital innovation creates an extremely competitive advantage over
traditional retailers, and it is clear from their financials that this strategy is propelling Amazon to success.
Amazon’s most well-known product, Marketplace, enables Amazon and third party sellers with the ability to market goods and services to consumers around the globe. While at first glance the
promotion of Amazon’s Marketplace seems harmless, digging beneath the covers we realize exactly how much manipulation Amazon has over the entire supply chain, both that of their own and the merchants who sell on their website. Within the past ten years Amazon has created multiple private label brands, some with Amazon’s brand name and others without, to compete directly with retailers it provides its Marketplace service to. The brands are created based upon proprietary sales data, allowing Amazon to quietly identify the product categories which will return the greatest margin. The negative effects of Amazon’s private label brands and products are increasingly being felt by third party sellers on Amazon.com as they quickly lose market share to the e-commerce giant.
Looking towards the future, due to their current success with private label we believe that Amazon will continue to expand their investment in private label brands, branching out into new products and new product categories. Our conclusion brings us to acknowledge the fact that while Amazon cannot yet be classified as a traditional monopoly under the economic, law and social
definitions, their private label brand business is the tipping point into providing the firm total control of the market and their Marketplace. Through this expansion the firm could possibly be tried as a
monopoly in federal court, however analyzing the outcomes of previous monopoly cases, we are fairly confident that Amazon will not suffer any lasting impact.
The economy has changed drastically since the introduction of the internet and e-commerce websites, and the definition of the monopoly should be no exception. While conventional monopolies typically hurt the consumer with their ability drive high prices, Amazon has revolutionized the way consumers purchase products by driving prices down. They are creating a new definition of monopoly, a vertical monopoly, which instead isolates the negative impacts to members within the supply chain. The question to address now is what will come first? Given that an eventual roadblock is bound to appear for Amazon, will the retail giant be tried as a traditional monopoly, or will the laws be updated to extend to
corporations who have gained full control over the supply chain? There is also a third option, where neither happens and instead any fallout Amazon may experience in the future will be from the threat of retailer/manufacturer and consumer backlash. These options, combined with Amazon’s thirst for total control, creates the next question of what the end state of Marketplace truly is.
What’s Next? Our Recommendations
We have three recommendations which are required to further enforce the predictions of this case study. Our first recommendation is for supplementary research to be performed to further
comprehend Amazon’s market share in each major product category. While Amazon currently publishes very little about their diverse product portfolio, additional information is required to further solidify our assumptions. The second recommendation would be to conduct research on the impact to specific retailers, manufacturers and third party sellers to determine the total monetary amount in terms of lost sales, bankruptcy and market share. The findings within this case study looked at retailers as an
aggregate, however we anticipate the specific impact of Amazon’s private label brands will affect retailers in different ways, dependent on their size, maturity, and product portfolio depth. The last recommendation would be to expand past Amazon’s private label brand and look at their impact holistically across the entire supply chain (including distribution). While we are confident in our conclusion that their private label brands are a tipping point to Amazon gaining control of e-commerce retail sales (not necessary a monopoly though), Amazon’s roots go much deeper into the supply chain.
Private labels are just the beginning.
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Appendix
Appendix I: Waves of Technological Revolutions Chart (Perez, 2010)