Amazon Continues to Boost Its Market Share

The standout winner in ecommerce of late is Amazon, where global sales have soared thanks to aggressive discount pricing and an ever-growing variety of merchandise categories. The gross value of merchandise sold through the company’s “Marketplace” partners is roughly equal to Amazon’s own sales. (Amazon records only the service fees it charges these Marketplace retailers, not the full price of the merchandise sold.) Amazon has become a market leader in vital merchandise categories including apparel and such consumer goods as health and beauty products. By 2022, Amazon accounted for over 40% of all U.S. ecommerce merchandise sales. (Another big winner is the Shopify platform that operates websites for smaller retailers.)

Amazon’s phenomenal growth is a result of excellent corporate strategy plus its competitive pricing and convenience. Shoppers don’t have to drive to a store, thereby saving on gasoline as well as time. Amazon has also diversified to an amazing extent, offering everything from jewelry to appliances to groceries to industrial and scientific supplies. Shipping can be expedited through the Amazon Prime program which, for a modest annual fee, offers unlimited free two-day shipping, the option to upgrade to one-day shipping for a few dollars and no minimum order size. Amazon had approximately 167.2 million Prime members in the U.S. alone as of 2023 (and more than 200 million globally), according to eMarketer, and those customers spend, on average, considerably more than non-Prime customers. Amazon Prime Now offers two-hour delivery for groceries and other household items in many major U.S. cities.

Also, Amazon has been placing banks of lockers in retailers such as grocery, convenience and drug stores in urban areas. Amazon packages can be placed in these special lockers, so that customers can later pick up packages themselves, using access codes sent by email, instead of trying to be at home to meet delivery by UPS, FedEx or the U.S. Postal Service. Deutsche Post DHL has offered a free locker service in Germany for years.

In 2017, Amazon acquired specialty supermarket firm Whole Foods Market, Inc. for $13.7 billion. This is an extension of Amazon's rapidly expanding grocery sales strategy. The company also offers AmazonFresh, a grocery delivery service for Prime members in select U.S. cities for an additional monthly membership fee.

Amazon is one of the world’s largest online beauty product retailers. Amazon designed digital, online storefronts which are special sections for luxury beauty items and for salon, spa and dermatology products to help customers find new products. Amazon also moved into the pharmacy business, fulfilling drug prescriptions that are ordered online. The company’s share of U.S. apparel sales is massive as well, although it has to deal with growing competition in low-cost apparel from foreign ecommerce companies.

Amazon has so much online power that manufacturers are building exclusive product lines for the Amazon brand. The initiative markets products in an “Our Brands” campaign to Amazon customers. (Amazon typically markets these products under house brands like Amazon Basics and Amazon Essentials, but it also utilizes a broad range of other brand names that are not as clearly linked to the firm.) It offers participating manufacturers quick customer feedback, top listings in search results and marketing support. Amazon benefits because it does not have to invest money and effort into developing exclusive products. Companies including GNC, Tuft & Needle and the makers of Equal sweeteners have already created exclusive products for Amazon.

The company is facing aggressive competition from China-based Temu and Shein, which are e-tailers with extremely low prices. While neither site offers fast delivery or superb customer service, their rock-bottom prices are attracting increasing numbers of shoppers in the U.S. Comscore estimates that Temu’s monthly unique visits from American customers reached 70.5 million in March 2023, while Shein’s monthly unique visitors hit 41 million that same month. Comscore also reported that Amazon’s unique monthly visitors for March 2023 fell to 211 million, compared to 217.5 million in September 2022.

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