Amazon Is A Monopoly, So Why Are Its Profits So Small?

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In 2021, President Biden appointed Lina Khan as the chair of the FTC, setting the stage for a regulatory crackdown on big tech. Khan, a prominent advocate for more aggressive antitrust enforcement, made waves in 2017 with her paper, "Amazon's Antitrust Paradox." She argued that despite appearing to benefit consumers with its vast selection and lower prices, Amazon's dominant market share gave it the power to crush competitors, ultimately harming consumers in the long run. Fast forward to 2023, and the FTC has filed an anticipated antitrust lawsuit against Amazon, which holds a whopping 37% market share in the US e-commerce market, dwarfing its closest competitor, Walmart, at 6%.

But here's where things get interesting: Amazon's revenue growth has been staggering, reaching over $500 billion in 2022. However, its operating profit margins have been razor-thin, ranging from 2 to 5% of revenue. Amazon operates in three distinct segments: North America, International, and Amazon Web Services (AWS). While the majority of Amazon's revenue comes from e-commerce, AWS consistently posts operating margins of 25 to 30%, while the e-commerce segments often struggle to break even.

In this video, we delve into the perplexing situation of Amazon's alleged monopoly and its profitability. We explore three possible explanations for this apparent inconsistency. Could it be that the FTC is mistaken, and Amazon isn't a monopoly? Or perhaps Amazon is abusing its monopoly power but mismanaging its operations? Finally, we'll discuss the possibility of Amazon having a long-term plan to eventually profit from its monopolistic position. Join us in unraveling the complexities of Amazon's antitrust paradox and its implications for the future of e-commerce.

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0:00 - 4:26 Intro
4:27 - 8:20 Amazon business model
8:21 The lawsuit