According to the news report by Bloomberg, EMarketer Inc., one of the most widely used sources for estimates on retail sales in the United States, has cut its estimate of the market share Amazon.com Inc. will hold after new figures from the e-commerce giant were incorporated into its calculations.
EMarketer had previously forecast that Amazon.com would account for 47% of the total online retail market in the US. However, now, the research firm has cut that figure down to 37.7%.
A spokesperson from Amazon said that EMarketer had contacted the analyst relations group in the company after the retail giant’s Chief Executive Officer Jeff Bezos revealed that independent merchants on Amazon’s e-commerce platform constituted 58% of gross product sales. This is the first time that the company had revealed figures related to that metric.
The revision on Amazon’s market share by EMarketer comes at a time when the company, along with Facebook Inc., Alphabet Inc.’s Google and Apple Inc. are all being put under pressure about their market power.
In recent weeks, regulators have apportioned antitrust oversight of the four technology majors. Many have taken this as a sign that these companies could soon be facing formal inquiries with regard to their market power.
Amazon has been downplaying its market size, stating that its sales represent barely 4% of the total spend in the retail market in the United States. However, critics of the company say that it is important to consider the giant’s power specifically in the online retail space, since spending there has been growing at three times the rate of overall retail.
Jeff Bezos revealed the figure about third-party retailers as an oblique response to the critics. He wrote a note to investors in April, where he stated that third party sellers were kicking their first-party butt quite badly.
With regard to cutting its estimate of Amazon’s market share, a spokesperson clarified that this update on the forecast was based on Bezos’ disclosure in his letter to his shareholders, and that the market research company had not received any information from the online retail giant.
Estimating the scale at which Amazon works is difficult, since the company does not exclusively function in one space. The company operates in multiple markets, including cloud computing, devices, online video streaming services and so on. And this week, Amazon launched its latest product – a secured credit card tied up with Synchrony Bank, targeting customers who had bad or no credit history.
Added to that, it is also difficult to measure the company’s market share in e-commerce since it works both as an online consignment shop as well as a traditional retailer.
Just as traditional retailers do, Amazon purchases products wholesale and then sells them to end customers. These transactions are reported by the company as revenue. However, transactions carried out by third-party merchants who use Amazon’s platform to sell their goods, the company only reports the commissions and fees it charges the merchants.
EMarketer, on the other hand, estimates the company’s market share totally on consumer spending, and not on the revenue that Amazon generates. What this means is that all the money that people spend shopping on Amazon is calculated as the company’s market share.
The reason why EMarketer has to estimate Amazon’s market share is because the e-commerce giant does not report the total amount of money its shoppers spend on its platform.
eBay Inc., on the other hand, clearly reports how much money shoppers have spent on its marketplace. For 2018, shoppers on eBay spend nearly $90 billion.