What Is Amazon?

The ever-growing retail supremacy of Amazon has contributed to the closing of 9300 stores in the U.S. in 2019. Has it or is it just a coincidence of a larger problem? Is this behemoth a monopoly as many have argued and it thus must be broken into smaller entities?

"I think we're just in the middle of a major transition in the retail space. Traditional brick and mortar stores for the most part haven't learned how to compete," stated Nathan. Amazon is a major time saver, delivering stuff to customers door instead of using limited time to go shopping.  

People still use some local businesses for certain things and some avoid the national big box stores in favor of Amazon. They like Amazon's lower prices on many things and free delivery to the front door. Return policies are generous and return shipping is almost always free with convenient pre-printed postage paid label. But other online retailers do the same thing.

"Amazon's customer service is amazing and they've given some customers things for free rather than make them return it. So I reward them with my business and I think that's just fine. I'd be foolish not to do it. I understand the concerns that smaller companies are unable to compete but it's a problem that I don't want to be responsible for solving. I usually prefer to buy clothing at brick and mortar stores however because I like to try things on. And I don't have to fight traffic and weather," added Shannah.

Some have argued that Amazon is not a monopoly at all. 

There are two types of monopolies, pure and natural.

A pure monopoly is an industry in which there is only one supplier of a product for which there are no close substitutes and in which it is very difficult or impossible for another firm to coexist. Sources of maintenance of such a monopoly include legal restrictions (U.S. postal service has a monopoly because Congress has given it one; that is not to say that there are not other mail delivery companies but they are much more expensive), patents (most pharmaceutical companies have patents on their drugs so, until the patent expires, they control a specific drug they develop thus they are a monopolist in that sense), control of scarce resource or input (De Beers control the diamond market), deliberately erected entry barriers into the business (start expensive lawsuits on trumped-up charges or spending outrageous amounts on advertising that rivals cannot match), and large sunk costs (airplane producing companies like Boeing in the U.S. and Airbus in Europe).

A natural monopoly is an industry in which advantages of large-scale production make it possible for a single firm to produce the entire output of the market at lower average cost than a number of smaller firms, each producing a smaller quantity.

Which one of these does Amazon fit into? It supplies and ships goods, connecting suppliers with customers in a novel way that does not require huge personal inventories. But it is still a behemoth company that controls a large swath of the market. So, is it a monopoly? Is it becoming one? Will it eventually put out of business ALL the little guys?

Another interesting issue is that a monopolist engages in price discrimination - charging higher prices for the same goods to customers who are less resistant to price increases, or failing to charge higher prices to customers whom it costs more to serve. (one example is national health care)  
Price discrimination can sometimes be damaging to the public interest, but at other times it can be beneficial. Some firms cannot survive without it, and price discrimination may even reduce prices to ALL customers if there are substantial economies of scale. (Amazon is definitely an economy of scale).

More questions to ponder of other products and service providers:

- Is the software industry a natural monopoly?

- Are Facebook, Google, Twitter, YouTube monopolies?

Some have argued that they are and should be broken up, particularly the social platform ones that drive the information highway.

Last but not least, why do we have Anti-trust laws at the Justice Department and are they doing their job?

What will happen to customer choice for goods and delivery charges once Amazon is the only one left delivering goods and the shipping costs skyrocket? As it is now, Amazon hires the postal service for weekend deliveries.

Not withstanding the wide variety of goods provided, stellar service, free returns and rapid deliveries, does Amazon fall under monopoly, monopolistic competition, oligopoly, or perfect competition?