Amazon could be a lot bigger than we think

Amazon's data-savvy e-commerce model has already upturned the retail market. But it may have a far bigger reach in retail than commonly understood — signaling more threats to mass market retailers.

Amazon's yearly sales account for about 15% of total U.S. consumer online sales, according to the company's statements and the Department of Commerce.

But the Seattle e-commerce company may actually be handling double that amount — 20% to 30% of all U.S. retail goods sold online — thanks to the volume of sales it transacts for third parties on its website and app. Only a portion of those sales add to its revenue.

“The punchline is that Amazon’s twice as big as people give them credit for, because there’s this iceberg under the surface, but you only see the tip,” said Scot Wingo, executive chairman of Channel Advisor, an e-commerce software company that works with thousands of online sellers.

When third-party sales are taken into account, Amazon's share of what U.S. shoppers spend online could be as high as $125 billion yearly, and it could represent close to 30% of the online goods Americans buy, according to an analysis of Amazon's financial statements.

Gene Munster, a senior analyst at Piper Jaffray, estimates Amazon touches 30% of total e-commerce in the United States, and its share is growing.

“Amazon’s just going to slowly grab more and more of your wallet,” he said.

Given its growth, it's possible to contemplate a future with Amazon as the nation’s largest single retailer, though what that looks like is unclear.  Walmart was massively disruptive when it came on the scene, laying waste to local retail districts with each megastore it opened.

Amazon, which increasingly can offer delivery in one to two hours, promises to be even more disruptive, said Jason Goldberg, senior vice president of commerce at Razorfish, an e-commerce marketing agency.

“The more power Amazon gets, the tougher it makes it for those independent retailers,” he said.

Amazon by the numbers

Estimates of Amazon's true reach in online sales start with its domestic revenue — $63.7 billion in 2015 retail sales in the United States and Canada, with Canada making up a relatively small portion of its sales.

In the United States, total annual retail sales are about $5 trillion, with the Department of Commerce estimating 8% of that is e-commerce. That puts total online sales at around $400 billion, and Amazon’s share at 15%.

Amazon's retail revenue, however, doesn't reflect the full value of the items sold on Amazon by other retailers. These are companies that use Amazon as an online sales venue, sometimes their only one. Amazon says 49% of its units sold come from third-party sellers.

As an example, think of televisions. Search “32 inch TV” on Amazon, then click “32” and under.” A total of 457 possible matches come up. But only 45 of them are actually sold by Amazon. The rest come from companies like A-Meado Enterprices LLC, with 55, ByBuy with 54 and IPC-Store with 33.

These are separate companies that use Amazon as a sales platform. Some have their own warehouses and only take orders on Amazon, some hire Amazon to take care of the entire process, a service called Fulfillment by Amazon.

“Amazon is basically the fronting website for a lot of retailers out there,” said Charles O’Shea, a senior analyst with Moody’s Investors Service.

To the average consumer, there's not much difference between something they buy on the Amazon site that comes from Amazon versus something that someone else is selling there, said John Haber, CEO of Spend Management, a supply chain consulting firm in Atlanta that works with many online retailers.

“The stuff comes in an Amazon branded box,” Haber said.

But to Wall Street, they're different, which is how the measure of how big Amazon looms in the average buyer’s world could be significantly underestimated