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Why does Amazon have no Western rivals?

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Zoe CorbynBusiness reporter

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Vitamins, repair tape and a jar of mango chutney - just some of what my household bought last month via Amazon's sprawling online shopping platform.

We also shopped at the company's supermarket chain Whole Foods, streamed its TV shows, read books on Kindle e-readers, and browsed countless websites no doubt powered by Amazon Web Services (AWS), its highly profitable cloud-computing business.

And that isn't half of the interconnected products and services offered by the global behemoth, which earlier this year overtook US superstore giant Walmart to become the world's largest company by annual sales.

But why does Amazon, launched by Jeff Bezos in 1995 as an online bookstore out of a rented garage, have so few serious rivals in the West when it comes to e-commerce? Couldn't we consumers benefit from a bit more competition?

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Amazon's sales dwarf those of other online retailers

First, to be sure, Amazon isn't without competitors in any of the segments it is in, including e-commerce. Major US retailers like Walmart and Target both have broad-based, rapidly expanding online retail arms, and offer their own versions of Amazon's Prime subscription service.

In the UK, Tesco leads in online groceries, and Zalando is Germany's biggest internet retailer of clothing. When it comes to ultra-cheap products, Chinese websites Temu and Shein are major forces.

Then there is eBay, which earlier this month received a $55.5bn (£41bn) takeover offer from video games retailer GameStop, though it later rejected it. Ebay has a different business model to Amazon, with its focus on auctions, second-hand goods, and collectible items.

And while GameStop said it hoped eBay could one day become a stronger competitor to Amazon, the latter currently towers over all its rivals when it comes to total e-commerce market share.

In the US, Amazon accounts for 40.5% of all online retail sales, while its nearest rival Walmart has 9.2%, according to figures from last month. Ebay is down at around 3%.

Amazon also strongly dominates in the UK, where it accounts for about 30% of online retail sales.

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"Amazon is not an undisputed monopolist in e-commerce, but it is the dominant firm," says Annabelle Gawer, director of the Centre of Digital Economy at the University of Surrey. "And the scope of what it sells is unparalleled."

A combination of factors has made Amazon exceptionally difficult to rival, note experts.

One is a 'first-mover' advantage. Among the earliest to scale online retail – and with a clear vision of how the internet could revolutionise shopping with convenience and speed – it captured market share faster than many rivals.

Just as important was the willingness of its shareholders, for many years, to allow the company to lose money by selling products at a loss, and later to aggressively reinvest early profits back into the business to fuel growth. To this day Amazon has never paid shareholders a dividend.

"[The strategy] constrained the competition," says David Yoffie, a professor emeritus at Harvard Business School (HBS). For traditional companies, pursuing the same approach would have significantly damaged their stock price and angered shareholders, he says.

Paul Stead/University of Surrey

Annabelle Gawer says that the scope of what Amazon sells is "unparalleled"

Today Amazon has a big advantage over retail rivals in that it can use funds from its most lucrative businesses – notably AWS, its main profit engine – to sustain its lower-margin retail operation and...