Amazon, Sears, and market power

Derek Thompson has a nice piece at The Atlantic about the uncanny similarities between Amazon and Sears (a point Benedict Evans has also made):

It’s remarkable how Sears’s rise anticipates Amazon’s. The growth of both companies was the result of a focus on operations efficiency, low prices, and a keen eye on the future of American demographics.

Might this comparison say anything about recent concerns over Amazon’s market power?

Well, you might think the story of Sears illustrates the problems of market power — a big company extends its tentacles, competing with much smaller ones, and controls an extremely large part of the market for lots of different stuff.

But here’s Robert Gordon on what Sears replaced:

In the America of 1870, local merchants had local monopolies, and their customers had little ability to compare prices. Thus there was constant tension between the rural customers and the merchants, for there were few guidelines for judging whether a price was fair… In this environment, we can understand why mail-order catalogs were such a salvation for rural customers.

The Sears story, then, is about the creation of a big, powerful company that, yes, probably gained all sorts of market power via its scale. But it replaced lots of little geographic monopolies — small firms that each had substantial market power and used it to extract rents from customers. The change wasn’t about moving from a competitive environment to a less competitive one. It was about changing from one form of imperfect competition to another one.

Could something similar be true of Amazon? Who knows — all this is speculative at best. But the Sears comparison clearly helps understand Amazon in other ways, so perhaps it’s at least worth thinking about.