Jeff Bezos released his annual letter to Amazon (NASDAQ: AMZN) shareholders in April, announcing: "Third-party sellers are kicking our first party butt. Badly."
Alongside that declaration, he provided investors with the percentage of gross merchandise volume coming from those third-party sellers over the last 20 years. Last year, they accounted for 58% of all sales on Amazon's marketplace. That implies about $293 billion in total volume on Amazon.
That's a massive number, but it's lower than analysts were expecting. eMarketer previously forecast Amazon would account for 49% of all online sales in the U.S. in 2018 with over $258 billion in gross merchandise volume in its home market alone. Since Bezos released that extra information, eMarketer lowered its estimate for Amazon, bringing its share of the market down to 38% for 2019.
eMarketer is often used as a source for citing Amazon's dominant market share of online retail, so the revision is certainly noteworthy. Here are a couple of important things for investors to understand.
Image source: Amazon
Amazon's market share is still increasing
Amazon's market share didn't just plummet out of nowhere. eMarketer merely overestimated Amazon's historical sales, so it went back and updated those numbers based on the data Bezos provided in his letter to shareholders.
Amazon's share of online sales continues to climb under eMarketer's new estimates. It's gone from about 32% of the market in 2016 to 38% this year. That's despite facing intense and fast-growing competition from brick-and-mortar stores moving into the online space during that period.
Walmart (NYSE: WMT) has notably invested significant amounts in growing its online sales and it's certainly struck a chord with its online grocery platform. Digital sales for Walmart U.S. grew 40% last year and climbed another 37% in the first quarter.
Walmart's even managed to attract a significant percentage of Prime members to its digital platform. But Walmart's market share of online sales in the U.S. will climb to just 4% this year, up from 3% in 2016, according to eMarketer.
Amazon might be growing sales more slowly than its competitors, but it's growing off such a massive base that it continues to grab market share within the industry.
Lower market share looks better in an antitrust case
Amazon is happy to downplay its market dominance at a time when antitrust investigations are looming around it and several other big tech players. Indeed, Bezos stressed Amazon's relative size in retail in his letter. "Amazon today remains a small player in global retail," he wrote. "We represent a low single-digit percentage of the retail market, and there are much larger retailers in every country where we operate."
eMarketer's numbers corroborate Bezos' story. The analysts estimate Amazon's market share of combined online and in-store retail in the U.S. is less than 5%.
Regulators are concerned that too much concentration in the market by Amazon would make it impossible for others to compete with their own retail operations, whether that's first-party sales or a third-party marketplace. It might also give Amazon too much buying power in the industry, forcing lower margins for small vendors -- something it's already started doing.
Downplaying how big Amazon's presence is in the online market could help stave off antitrust regulations. But if Amazon continues to grow like it has, it's bound to stay in the minds of those on Capitol Hill looking for anti-competitive practices.
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