Amazon accounted for nearly 37 cents out of every dollar that U.S. consumers spent online in 2018 and more than 5 cents of every retail dollar that U.S. consumers spent (when factoring out items not normally bought online, such as automobiles and gasoline), according to Internet Retailer estimates.

In late July, U.S. Treasury Secretary Steven Mnuchin leveled an explosive claim on CNBC, declaring Amazon has “destroyed the retail industry across the United States” and there’s “no question” it has limited competition.

The comment was Mnuchin’s reaction to a U.S. Justice Department announcement a day earlier that it was opening a broad antitrust review of large technology companies that would include how the retailer has “achieved market power” and how its practices may be reducing competition, stifling innovation or otherwise harming consumers. While the Justice Department didn’t state which companies it was looking into, it is widely believed that Amazon is in its cross-hairs.

There are a number of reasons that Amazon has attracted regulators’ attention, most notably the retailer’s outsized role within the ecommerce industry. After all, Amazon accounted for nearly 37 cents out of every dollar that U.S. consumers spent online in 2018 and more than 5 cents of every retail dollar that U.S. consumers spent (when factoring out items not normally bought online, such as automobiles and gasoline), according to Internet Retailer estimates.

A number of factors contribute to Amazon’s power within ecommerce and the broader retail industry. They include: Amazon Prime, its loyalty program that this year began offering one-day shipping, in addition to discounts at Whole Foods, streaming services and a host of other benefits; the vast trove of data that it gathers from consumers; its massive marketing budget that exceeds the ecommerce revenue generated by all but three U.S. merchants; and its online marketplace, which allows the retailer to expand its online selection by millions of SKUs that Amazon does not need to purchase.

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Amazon’s unique market positioning within the retail landscape has helped drive the U.S. ecommerce industry’s growth. Consumers spent $513.68 billion online with U.S. merchants in 2018, up 14.2% from $449.88 billion spent the year prior, according to a new Internet Retailer analysis of industry data and historical U.S. Commerce Department figures. And Internet Retailer estimates that consumers in 2018 purchased $188.91 billion from Amazon.com, the retailer’s U.S. ecommerce site, as well as its shopping app (including sales of Amazon’s own products and of marketplace sellers), a 23.0% jump from 2017.

That means Amazon accounted for roughly 36.8% of U.S. online retail sales, and 55.4% of ecommerce gains in the United States last year. Or, put in a broader context, Amazon accounted for 5.2% of the $3.632 trillion U.S. consumers spent on retail goods last year and 24.7% of total retail sales growth.

Amazon’s marketplace grows

The growing number of retailers and brands selling on Amazon play a big role in its growth: 58% of the gross merchandise value of goods purchased on Amazon was sold via its online marketplace in 2018. That’s up two percentage points from a year earlier and nine percentage points five years earlier.

That growth stems from a number of large brands, including Nike Inc., Best Buy Co. Inc. and Chico’s FAS, beginning in recent years to sell at least a portion of their SKUs on the Amazon marketplace and a concerted push by Amazon to sever wholesale relationships with many small merchants that sell in bulk directly to the retail giant. That so-called vendor purge will likely drive those small retailers to sell directly to consumers on Amazon’s marketplace.

The net result of those efforts is that more than one-third—176—of the merchants ranked in Internet Retailer Top 500 presently sell on Amazon, up 69.2% from 104 in 2017. And those merchants are increasingly paying to promote their products and brands using Amazon Advertising, the retailer’s fast-growing advertising business.

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Looking at those third-party sales in a different way, marketplace merchants sold an Internet Retailer-estimated $160.00 billion last year, a 22.5% increase from $130.66 billion a year earlier. And in the United States, third-party sales totaled $109.12 billion. That means third-party Amazon sellers accounted for roughly 21.2% of U.S. online retail sales last year.

Amazon collects a commission on each sale made by marketplace sellers—a fee that ranges from 8% to 25%, based on product category, with most items requiring a 15% commission. That suggests Amazon collected roughly $24.00 billion in commissions on its marketplace sales last year and $16.37 billion just in the United States. (Amazon does not report its commission revenue from marketplace sales.) Beyond those commissions, Amazon also generates revenue from marketplace sellers paying to market their brands and products via Amazon Advertising and for additional services, such as Fulfillment by Amazon, which enables merchants to pay Amazon to store and ship inventory.

Internet Retailer’s new 2019 Amazon Report examines the retail giant’s various business lines to help explain how this massive company exerts its influence over nearly every aspect of the retail industry.

This article is an excerpt from Internet Retailer’s 2019 Amazon Report. The full report is available as part of Internet Retailer’s U.S. Reports Pro Membership and as part of Internet Retailer’s Platinum All-Access Membership. Single copy sales are also available.

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