Twenty-five cents of every dollar spent shopping online goes to the Amazon third-party marketplace. Were Amazon’s marketplace an independent platform, it would be the largest online retailer in the U.S.
Amazon marketplace has a roughly 25% market share of the total U.S. e-commerce spending. According to eMarketer data, Amazon accounted for 41.4% of all U.S. e-commerce sales in 2021. Because the marketplace accounts for at least 60% of Amazon’s GMV, it nets 25% as its share of U.S. e-commerce.
Amazon’s share as a retailer is 17%. However, it would theoretically be the largest online retailer even without the marketplace. Walmart, the closest competitor, is less than half its size. It takes combining Walmart with the next five mass-market retailers to get to Amazon’s size.
eBay has been losing market share over the recent years, and marketplaces run by Walmart and Target are orders of magnitude smaller than Amazon’s. Thus, Amazon is essentially the market - its share of the total sales on all marketplaces is likely as high as 90%. That’s why diversification for businesses that sell through Amazon’s marketplace is often unattainable.
Shopify is absent from the list because it’s not a retailer or a marketplace. However, if all Shopify merchants were one retailer, it would be the third-largest in the U.S. with a roughly 10% market share. The significance of that is not whether Shopify competes with Amazon or other retailers (it doesn’t), but rather that it represents the viability of direct-to-consumer retail.
25% market share is a recognition of Amazon marketplace’s surprising yet invisible position in e-commerce. It consists of millions of businesses that sell through Amazon rather than, or in addition to, selling directly online. It’s the part of e-commerce that most consumers are unaccustomed to, and yet at the same time, collectively, it holds the most market share.
However, it collectively holds no power to influence its future - Amazon is alone in deciding it. For example, when Amazon introduced advertising as an option, it over time became a requirement because as some sellers opted-in, others had no choice but to follow. Or, in more direct terms, Amazon changes various fees at will.
Amazon would argue that the marketplace is as big as it is because it is part of a flywheel. “It’s impossible and not productive to even try and separate advertising from third-party from retail. It’s all, to us, part of a flywheel where we service customers,” said Brian Olsavsky, CFO at Amazon, during the third-quarter earnings call. It is all part of the same flywheel, but whether parts of it could be separated will get challenged in the future.
Amazon marketplace is the largest online retailer, but Amazon, the second-largest, controls it.