A Closer Look at Amazon's Growing E-commerce Monopolyby@linakhantakesamazon

A Closer Look at Amazon's Growing E-commerce Monopoly

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Amazon, which started as an online bookstore in 1994, has grown into a retail giant selling almost everything imaginable in 2020. It operates through two main business units: the first-party retail, where it sells products wholesale, and the third-party marketplace, allowing other companies to sell directly. The marketplace's vast selection, powered by millions of sellers, contributes significantly to Amazon's success, making up 60% of its unit sales in 2023. This fusion of retail and marketplace arms, along with its unprecedented scale, has made Amazon a dominant force in the e-commerce world, with its marketplace generating enormous profits, nearly (redacted)% of its net income in 2021.
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FTC v. Amazon Court Filing, retrieved on Sep 26, 2023, is part of HackerNoon’s Legal PDF Series. You can jump to any part in this filing here. This is part 1 of 80.

A. Amazon's First-Party Retail And Third-Party Marketplace Business Units

67. Amazon's First-Party Retail And Third-Party Marketplace Business Units Amazon began as an online bookstore in 1994 and rapidly expanded into new product categories: first DVDs and CDs, then electronics and toys, and then nearly everything. In 2020, Amazon sold almost (redacted) unique products across virtually every conceivable category to U.S. consumers.

68. Amazon originally sold goods to shoppers by purchasing items wholesale and reselling them on its website. Amazon calls its wholesale suppliers "vendors." Today, Amazon continues to sell a wide range of products through this type of vendor-retailer relationship, from laundry detergent to sports equipment.

69. Amazon also sells its own private label goods. These range from devices like Amazon's Kindle e-reader or Ring doorbell, to consumer products like batteries sold under the "Amazon Basics" label, to products without any clear· Amazon affiliation, such as dietary supplements sold under the "Revly" label.

70. These two components, vendor-retailer and private label, make up Amazon's first-party retail business unit, which Amazon refers to collectively as Amazon "Retail."

71. Amazon also runs what it calls its "Marketplace," where other companies can sell products directly to shoppers through its online store. Amazon calls third-party companies that sell on Amazon "sellers," and refers to sales by sellers as "Marketplace" sales.

72. Amazon charges sellers four primary fees to sell on its Marketplace. First, Amazon requires sellers to pay a selling fee, which can be a monthly fee or a fee for each item sold. Second, Amazon charges all sellers a commission or "referral fee" based on the price of each item sold on Amazon. Third, Amazon charges sellers for the use of Amazon's fulfillment and delivery services. Forth, Amazon charges sellers for advertising services. While Amazon also charges sellers. As a practical matter, most sellers must pay these four fees to make a significant volume of sales on Amazon.

73. Amazon estimated that in 2022, it would take (redacted)% of all sales revenue earned by sellers who use its fulfillment service.

74. The Marketplace accelerated Amazon's growth by allowing it to exponentially expand the selection of products on Amazon without having to carry the risks of unsold inventory. Sellers, who range from small businesses that offer a single product to multinational firms that sell thousands of products, ultimately bear that risk. As of the first quarter of 2021, there were over (redacted) active sellers on Amazon's U.S. Marketplace.

75. Amazon touts to its investors that sellers on the Marketplace are "a key 20 contributor to the selection offered" to Amazon shoppers. Sellers offer a huge variety of items for sale, from laptop computers to harnesses for walking pet chickens, complete with bowtie. In 2020, sellers offered more than (redacted)% of the unique items available for sale on Amazon. Sellers' products make up a growing majority of Amazon unit sales- 60% in the second quarter of 2023, up from 55% in 2021.

76. Amazon's online superstore unites its Retail and Marketplace rums, with products intermixed and presented to the public simultaneously and side-by-side. To a shopper browsing on Amazon, there are no obvious differences between the types of listings, nor is there a way to regularly shop for products sold only by Amazon Retail or Amazon Marketplace.

77. Amazon has achieved unprecedented scale. In 2021, goods worth more than (redacted) were sold through Amazon's U.S. online store. That amount is larger than the 2021 gross domestic product of (redacted) countries.

78. Amazon achieved this astonishing scale in part by combining its Retail and Marketplace arms. Amazon's product selection includes popular· and frequently pm-chased items and a "long tail" made up of an immense variety of less-frequently purchased products. Products offered by sellers on Amazon's Marketplace contribute substantially to that "long tail." More generally, Amazon’s sellers dramatically increase Amazon’s product selection, which draws more shoppers to Amazon, which, in turn, attracts more sellers.

79. Sellers have also made the Marketplace enormously profitable for Amazon. Amazon's internal documents show that profits from its U.S. Marketplace totaled more than (redacted) in 2021-nearly (redacted)% of its total reported net income for that year.

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