Amazon's Expansive Reach in Daily Life
Vitamins, repair tape, and a jar of mango chutney are just some of the items my household purchased last month through Amazon's extensive online shopping platform.
In addition, we shopped at Amazon's supermarket chain Whole Foods, streamed its TV shows, read books on Kindle e-readers, and browsed numerous websites likely powered by Amazon Web Services (AWS), its highly profitable cloud-computing division.
These examples represent only a fraction of the interconnected products and services offered by the global giant, which earlier this year surpassed US retail giant Walmart to become the world's largest company by annual sales.
Why Does Amazon Have Few Western E-Commerce Rivals?
Amazon, founded by Jeff Bezos in 1995 as an online bookstore operating out of a rented garage, has few serious competitors in Western e-commerce. This raises the question: could consumers benefit from increased competition?
It is important to note that Amazon does face competitors in each of its sectors, including e-commerce. Major US retailers such as Walmart and Target have broad and rapidly expanding online retail operations and offer their own versions of Amazon's Prime subscription service.
In the UK, Tesco leads in online groceries, while Zalando is Germany's largest online clothing retailer. For ultra-low-cost products, Chinese platforms Temu and Shein are significant players.
Additionally, eBay, which recently received a $55.5 billion (£41.7 billion) takeover offer from video games retailer GameStop, operates with a different business model focused on auctions, second-hand goods, and collectibles.
GameStop has expressed hopes that eBay could eventually become a stronger competitor to Amazon. However, Amazon currently dominates the e-commerce market share by a wide margin.
In the US, Amazon accounts for 40.5% of all online retail sales, with Walmart trailing at 9.2%, according to figures from last month. eBay holds approximately 3%.
Amazon also holds a strong position in the UK, accounting for about 30% of online retail sales.
"Amazon is not an undisputed monopolist in e-commerce, but it is the dominant firm," says Annabelle Gawer, director of the Centre of Digital Economy at the University of Surrey. "And the scope of what it sells is unparalleled."
Factors Behind Amazon's Dominance
Experts highlight several factors that have made Amazon exceptionally difficult to challenge.
One key factor is the 'first-mover' advantage. Being among the earliest to scale online retail with a clear vision of how the internet could revolutionize shopping through convenience and speed, Amazon captured market share faster than many competitors.
Equally important was the willingness of Amazon's shareholders to allow the company to operate at a loss for many years by selling products below cost and later aggressively reinvesting early profits to fuel growth. To this day, Amazon has never paid dividends to shareholders.
"[The strategy] constrained the competition," says David Yoffie, professor emeritus at Harvard Business School (HBS). "For traditional companies, pursuing the same approach would have significantly damaged their stock price and angered shareholders," he adds.
Today, Amazon benefits from its most profitable businesses, particularly AWS, which generates significant funds that support its lower-margin retail operations and investments in new ventures.
Positioning itself as a technology company has also been advantageous. Algorithms, automation, and data have been central to Amazon's ability to scale, enhancing efficiency and shaping the customer experience.
The company fosters a culture of bold experimentation, according to Sunil Gupta, also a professor at HBS, venturing into areas such as cloud computing, consumer devices, private-label products, original content production, and healthcare, while discontinuing ventures that do not succeed.
Key Strategic Moves
Experts identify two pivotal business decisions that contributed to Amazon's dominance.
First, in 2000, Amazon transitioned from being solely an online retailer to an online platform, enabling third-party sellers to offer their goods through its store.
This created a "network effect," explains Gupta. More sellers meant a wider product selection, which kept customers from shopping elsewhere and attracted even more sellers. "It is very hard for a new player to break that," he notes.
Second, the launch of Amazon Prime in the US in 2005 and the UK in 2007, offering free and fast delivery in exchange for an annual subscription fee, made the platform "very sticky," says Emily West, a professor of communication at the University of Massachusetts Amherst who has studied Amazon.
"You have the free shipping, in which case you may as well just search for your stuff on Amazon," she explains.
While Prime itself is not especially profitable—most of Amazon's e-commerce profits come from advertising and third-party seller fees—the benefits included with Prime have expanded to a broad bundle. This includes a vast library of movies and shows, including Amazon's own content, and discounts at US Whole Foods stores, making membership increasingly difficult to cancel.
"Amazon is not just a website that sells products," says Gawer. "It's an ecosystem of multiple businesses that are reinforcing each other… which makes it very hard to compete with."
Allegations of Anti-Competitive Behavior
Another possible reason for Amazon's lack of rivals is behavior alleged to violate competition laws, potentially preventing existing competitors from growing and new ones from emerging.
In the US, both the Federal Trade Commission (FTC) and the state of California have separate antitrust lawsuits against Amazon scheduled for trial in early 2027. These lawsuits allege that Amazon uses unlawful practices to maintain dominance and harm competition, with California recently releasing extensive evidence.
Amazon denies these allegations and is contesting the legal actions.
The FTC case is broad, but a key allegation is that Amazon prevents new or smaller marketplaces from gaining traction by restricting their ability to compete on price.
Amazon is accused of penalizing sellers—such as by lowering product visibility in search results or removing the "Buy Box"—if it finds they offer lower prices on other websites.
The alleged effect is that shoppers have little incentive to leave Amazon because prices remain consistent, and rival platforms' typical strategy of lowering fees to encourage cheaper prices fails as sellers fear losing sales on Amazon.
Calls for Structural Changes and Future Competition
Some have called for breaking Amazon into multiple independent companies to "oxygenate the market," according to Stacy Mitchell, co-executive director of the US-based non-profit Institute for Local Self-Reliance, part of the Athena coalition advocating for changes in Amazon's operations.
However, others view a breakup as unlikely, noting that Google recently avoided such an outcome in its competition case.
With vast financial resources—hundreds of billions or even trillions of dollars—and sufficient time, most experts agree that a company could build a copycat of Amazon's e-commerce platform. This would be more feasible for incumbents like Walmart, which is already adopting elements of Amazon's strategy.
Nonetheless, Amazon's next significant challenge may not come from another traditional retailer.
A very different shopping experience is emerging. E-commerce is beginning to be integrated directly into generative AI interfaces like ChatGPT, allowing users to purchase products without leaving these platforms—a development that could threaten Amazon's dominance in online retail.
"You aren't necessarily seeing a company that is impossible to compete against," summarizes Yoffie.
