As the e-commerce juggernaut Amazon solidifies its influence and establishes its own brand of brick-and-mortar retail outlets — generating billions in annual sales for the company — there is rising concern that Amazon may also claim a stranglehold on the existing retail ecosystem. Indeed, a new report from the Information offers a compelling analogy: One tech-finance conference speaker remarked that, in 2019, there may be more “disruption” in brick-and-mortar retail stores than at any time since the fall of Lehman Brothers.
Some key indicators of Amazon’s dominance: The company’s share of U.S. online sales rose from 5.7 percent in 2013 to 13.2 percent in 2017, and is now on track to surpass that 15 percent share by 2020. Amazon accounted for 18 percent of all U.S. retail sales in 2016. Amazon’s dominance allows it to take a chunk of the industry’s profits — and not just those of online-only brands. According to the Information, Amazon does not report its profit margins in financial filings, so it is impossible to be sure how much the company makes from its brick-and-mortar chains.
What is clear, however, is that Amazon’s retail division has been steadily making larger and larger profits, both at a single store and a multi-store chain: The average profit per store for Amazon’s brick-and-mortar network in 2017 was nearly $16 million (a nearly fortyfold increase from its average profit per store in 2010).
Unlike Amazon’s e-commerce business, Amazon’s brick-and-mortar retail business faces intense competition, in addition to general weakness in the brick-and-mortar retail landscape. One of Amazon’s largest brick-and-mortar competitors, Macy’s, has seen annual same-store sales decline, and is planning to shutter dozens of stores. Other retail chains have announced plans to close hundreds of stores by the end of this year. The company’s physical store revenue will rise in 2018 and 2019 as it makes capital investments.
While Amazon’s brick-and-mortar business is growing quickly, and shows clear signs of dominating the retail environment, there are skeptics. Some say Amazon is only contributing to weakening the brick-and-mortar retail environment by pulling out into the world as the consumer market gets more fragmented, and that the company is unlikely to be able to shut itself out of the brick-and-mortar space through the power of its brand alone. With the exception of one of its original brick-and-mortar chains, physical stores are losing money for everyone. Amazon, however, has repeatedly proven resilient to new threats, and that could be a positive sign.
The opinion pages of The New York Times have also attracted readers’ attention with takes on the e-commerce juggernaut and its rivals. Last November, the Times’ humor section published a satirical article on Amazon’s more human side. (A version of this piece was published elsewhere online.) The headline of the humorous article: “Traffic Keeps Plowing Into Amazon, But It’s Still Undefeated.” It found little common ground in the satire with the Times’ serious take on Amazon as a serious threat to the brick-and-mortar retail environment, but that isn’t necessarily damning for those concerned about Amazon’s power over the $2.7 trillion American retail market.
This piece originally appeared on Slated.