Is Amazon Reaching Too Deep Into Our Lives?

Amazon is already a huge part of many people's lives. And its $13.7 billion deal for the organic grocer Whole Foods will likely bind its customers even more tightly.

"It kind of feels like they're taking over so much commerce in our life," said Erica McGivern, a Whole Foods and Amazon customer who lives in Seattle, where Amazon is headquartered. "It's intimidating."

The acquisition could easily hurt both Amazon's existing rivals and future startups that might one day challenge it. Yet experts don't believe U.S. antitrust regulators will oppose the deal. That's largely because it doesn't create anything resembling a traditional monopoly.

Instead, it merely extends Amazon's long quest to make shopping so convenient that consumers won't even think about stepping away from its embrace. The more successful that strategy, the more Amazon can monopolize the attention and shopping dollars of its customers -- which, of course, is perfectly legal.

A Question of Price

Amazon is just one of several major tech companies -- such as Google and Facebook -- facing new scrutiny over their market power, which doesn't map neatly onto traditional notions of monopoly.

When a company dominates a market, it typically pushes up prices to boost profits -- something U.S. antitrust law is geared to prevent. Amazon, however, has a track record of keeping prices low and locking customers in to sell more stuff. For instance, the company typically sells gadgets like its tablets for little or no profit -- but then pushes people to buy digital movies they can watch on the tablet.

"Amazon's strategy has always been a volume strategy, not a profit strategy," said Lauren Beitelspacher, a marketing professor at Babson College in Massachusetts.

In a traditional sense, Amazon still faces lots of competition. Walmart remains the leading retailer overall, with more than three times Amazon's retail revenue. Even with Whole Foods,...

Comments are closed.

Is Amazon Reaching Too Deep Into Our Lives?

Amazon is already a huge part of many people's lives. And its $13.7 billion deal for the organic grocer Whole Foods will likely bind its customers even more tightly.

"It kind of feels like they're taking over so much commerce in our life," said Erica McGivern, a Whole Foods and Amazon customer who lives in Seattle, where Amazon is headquartered. "It's intimidating."

The acquisition could easily hurt both Amazon's existing rivals and future startups that might one day challenge it. Yet experts don't believe U.S. antitrust regulators will oppose the deal. That's largely because it doesn't create anything resembling a traditional monopoly.

Instead, it merely extends Amazon's long quest to make shopping so convenient that consumers won't even think about stepping away from its embrace. The more successful that strategy, the more Amazon can monopolize the attention and shopping dollars of its customers -- which, of course, is perfectly legal.

A Question of Price

Amazon is just one of several major tech companies -- such as Google and Facebook -- facing new scrutiny over their market power, which doesn't map neatly onto traditional notions of monopoly.

When a company dominates a market, it typically pushes up prices to boost profits -- something U.S. antitrust law is geared to prevent. Amazon, however, has a track record of keeping prices low and locking customers in to sell more stuff. For instance, the company typically sells gadgets like its tablets for little or no profit -- but then pushes people to buy digital movies they can watch on the tablet.

"Amazon's strategy has always been a volume strategy, not a profit strategy," said Lauren Beitelspacher, a marketing professor at Babson College in Massachusetts.

In a traditional sense, Amazon still faces lots of competition. Walmart remains the leading retailer overall, with more than three times Amazon's retail revenue. Even with Whole Foods,...

Comments are closed.