Amazon and the FTC are facing off. Putting any discussions of trust-busting, Prime enrollment issues and “monopoly” aside, the fascinating, underlying discussion is about Amazon’s market. The FTC and Amazon are at odds over how much of the e-commerce market Amazon controls. And, whether Amazon’s market is e-commerce or is online marketplace.
According to Bloomberg Technology, one FTC argument will be that Amazon has enough market share to be called a monopoly. And, as a monopoly, Amazon illegally abuses its market position. Bloomberg Technology states that there will be a contentious disagreement about what is Amazon’s actual market. Amazon will doubtlessly argue that it commands a tiny sliver of global and US retail, online and off.
Amazon’s argument will be macro. That is, Amazon sees itself as an e-commerce player. Using this definition, Amazon has a 37% market share. The FTC wants, according to Bloomberg Technology, a different definition. The FTC wants to define Amazon as an online marketplace, platforms that allow a variety of sellers to conduct business online. Using the FTC definition, Amazon has a 70% market share.
From a marketing perspective, the Amazon-FTC arguments about market do not reflect how consumers think. Amazon and the FTC are arguing about the world of distribution. E-commerce and online marketplace are channels. E-commerce and online marketplace are how and where a consumer buys something. A channel of any kind is how goods and services are delivered.
Both Amazon and the FTC do not have the consumer in mind with their arguments. Why? Because a market is a want. Decades ago, Harvard professor Ted Levitt posited that people do not want drills. People want holes. People want the benefits of the drill. The market is for holes.
From a consumer and marketing perspective, a market is not a product category. There is no lip gloss market; there is no mascara market. But, there are wants for attractiveness, for youthfulness, for status and for elegance. A market is a want. If there is no want, there is no market. There is no such thing as the automotive market. Nor is there such a thing as the cola market or the pet food market. There is no such thing as the granola bar market. There is a market for portable, quick, and easy-to-eat nutrition. There is a market for an afternoon pick-me-up. There is a market for a healthy, attractive and fit body. There is a need for portable protein before or after strenuous activities. There is a need for a non-messy, vitamin-enriched gym bag food.
A market is not a geography. There is no such thing as the French market, the Japanese market, the Italian market, the Common Market. Geographies are where markets exist. Geographies are how you organize to deliver the brand promise to the market.
A market is people with a want. If it is a global want, there is a global market. If it is a growing want, it is a growing market. If some people in Italy and some people in France and some people in Australia share the same want, then they are in the same market. It just happens that they live in different places. If there is no want, there is no market.
A market is not a distribution channel. A distribution channel is how you reach the market, not the definition of the market. There is no such thing as the warehouse store market or the department store market or the supermarket market. Or, in the Amazon-FTC case, an e-commerce market or an online marketplace market. Brands are not specifically designed for channels. Companies design brands for people, people with a want.
Brands may choose a particular way in which they deliver their experiences. For example, a brand may choose to be online only, such a Blue Apron Or a brand may choose to be a brick-and-mortar brand such as Publix. Or a brand may create a combination of online and brick-and-mortar, such as Walmart or Target. Consumers want the ease of choice when it comes to how brands are bought and delivered. However, it is the brand with its benefits that the consumer purchases.
A market is a specific group of people who share common needs in a common context. Product categories, channels, and price categories are not market segments.
Many companies, as well as both Amazon and the FTC, compute market share based on geographies and categories and channels and price points. Category share, geography share, channel share, price point share are not market share. These reflect what the manufacturer desires, not what the customer desires. Specific shoppers go to Amazon for specific products that satisfy specific needs. A person may need 8-foot replacement lamp cords. Or a person might want Carhartt thermal pants. It is doubtful that an Amazon shopper says, “I am looking for an e-commerce site or an online marketplace. These are where the goods exist but these channels are not what the goods are good for.
Looking at markets in terms of channels or geography affects how business looks at its data, how business looks at its business and how business is managed. If a teenager in Paris has the same want as a teenager in New York or in Tokyo then these teenagers are in the same market no matter how the brand is organized or delivered. But, if two teenagers living next door to each other in Paris have different wants, then these teenagers are in different markets. So, online Shein offers youth clothing that are globally appealing satisfying the consumer want for stylish, inexpensive, fast fashion. It is doubtful that a global teen considers Shein’s benefit as being an online mall. Being online is wonderful. But, online is a distribution channel for wanted items.
The what-is-a-market discussion is not an academic issue. Look at the automotive business. Car companies see markets as product types. Car companies see potential “conquests” as wanting an SUV or a truck, for example. But, in reality, the driver is looking for a vehicle that can carry four people and lots of stuff but looks attractive and feels luxurious on the inside.
The hotel industry defines markets as features at a price point. The markets are mid-scale, upper mid-scale, or upscale, or luxury or economy. No one says to their beloved, “Dear, I made a romantic reservation for this weekend at an upper-midscale hotel.”
Brands are promises of expected relevant, differentiated, trustworthy experiences. Amazon is a brand. Amazon delivers an expected, relevant, differentiated, trustworthy experience. Amazon wants to be the Earth’s most customer-centric company. Of course, operations and price help create customer-centricity. So, Amazon’s fight should be about the want that it satisfies.
Amazon and the FTC are confusing market with marketplace. These two constructs are different. Language is important. But, so is the understanding at the basis of this Amazon-FTC fight. If market is the issue, then recast the arguments into actual markets based on consumer wants. But, if channels are the issue, then be clear, because consumers see channels as how and where they obtain wanted goods and services. A channel is not a market.