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Bezos Disputes Amazon’s Market Power. But His Merchants Feel the Pinch

In recent years, third-party sellers have found it harder to compete and are paying Amazon a bigger chunk of their take.

Jeff Bezos speaks during a conference in National Harbor, Maryland.

Jeff Bezos speaks during a conference in National Harbor, Maryland.

Photographer: Andrew Harrer/Bloomberg

Fifteen years ago, Jason Boyce made a bet on Amazon that changed his life for the better. He started selling basketball hoops on the site—known mostly for books at the time—and his sales and profits took off.

Today, Boyce worries his relationship with the world’s biggest online retailer is getting more and more lopsided. Amazon has evolved from partner to competitor, making products similar to his, selling them for less and giving them prominence on the site. To stand out, Boyce must now buy advertising, which makes Amazon even more profitable at his expense. Inc. Chief Executive Officer Jeff Bezos touted the success of merchants like Boyce this month in his annual letter to shareholders, suggesting they were beating Amazon at its own game because they make up 58 percent of all sales on the site. What Bezos neglected to mention is that Amazon is the biggest winner of all. Amazon captures 50 cents of every dollar spent online in the U.S. EBay Inc., its closest competitor, gets just six cents.

That dominance puts Amazon in control of a $600 billion market that is growing at triple the pace of overall retail spending. Merchants like Boyce might be selling more stuff than Amazon. But Amazon takes a bigger bite of each sale. Its share has almost tripled to more than 40 percent in the past few years, merchants say, mostly due to the new cost of advertising. Those who don’t like it have to shrug, sigh and roll with it because no other site comes close to Amazon’s reach.

Like the dozen successful merchants interviewed for this story, Boyce acknowledges that selling products on Amazon has helped him earn a comfortable living. As businesspeople, he and other merchants are wary of regulation. But when Senator Elizabeth Warren proposed prohibiting Amazon from competing against them, they were at least prepared to listen. “If you’re going to have a marketplace,” Boyce says, “you shouldn’t be able to piggyback off the hard work and labor of your sellers to beat them.”