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How Capitalism (Not Regulation) Helps E-Commerce

3 e-commerce companies are a case study in how government laws and systems can make or break an industry

E-commerce is becoming the preferred method of retail shopping worldwide. In the U.S., the industry has grown to nearly $800 billion and is expected to increase. Across the globe, the sector grows increasingly competitive, with multiple nations fostering their own “Amazon-style” companies. Yet thriving e-commerce depends not only on market demand but reasonable laws—namely for land use—and a larger climate of economic freedom. We will show how by comparing 3 of the biggest firms: Amazon, Alibaba, and Coupang.

Amazon: good company dealing with bad zoning

There is no knocking Amazon: it is by far the world’s largest e-commerce company, and trails only Walmart in overall retail spending, accounting nationwide for 9.2%. Amazon is even entering the brick-and-mortar market itself through an increasing number of in-person store formats.

But there is still something missing: one-day shipping. The firm promises it to Prime customers for some items, but other purchases can take days (or weeks, based on my experience living in a metropolitan part of central Virginia). For large swaths of rural America, Amazon relies on USPS, with all the delays that can bring.

Why can’t Amazon deliver more quickly? Land-use policy.

America has a sprawling development pattern due in part to its vast landmass. But zoning and other laws separate uses and keep our metropolitan centers needlessly disperse (as I have written for Catalyst before). This means Amazon’s distribution centers are sometimes far from population centers, forbidden from locating closer. For example, when Amazon tried to build a distribution center in New York, it faced a convoluted zoning dispute over the definition of an “industrial park district” brought by a litigious NIMBY. Similar disputes have occurred in Seattle, Boston, and the Denver suburbs; the Boston example caused the company to scrap its proposal. For this reason, many distribution centers get built deep into rural or exurban locales, far from consumers.

Even if Amazon could build these “last-mile” centers, storage capacity would be limited because of zoning that prevents warehouses from being multi-story.

Alibaba: good company dealing with an authoritarian regime

Alibaba is China’s biggest e-commerce provider, which would ostensibly key it for success. China is the world’s leading e-commerce market, with more than half of all purchases happening via an online platform.

To a great degree, Alibaba has been successful, growing into a $586 billion company. Like Amazon, it wants to expand its offerings, including fresh produce. Catherine Shu of TechCrunch notes that such deliveries are lucrative in part because of “the fact that consumers living in major cities often don’t own cars or have to deal with heavy traffic, making weekly shopping trips an extremely onerous task.” This gets to why Alibaba can succeed: higher urban density in China arguably makes it a better fit than America for e-commerce.

But the firm is getting hammered by China’s government. The Chinese Communist Party’s tight control of the economy limits dynamism, and when Alibaba founder Jack Ma had the gall to state this publicly last October, CCP took swift regulatory action against his companies. Alibaba stock lost value immediately, going from $317 a few days after Ma’s comments to $211 today, and the company is now being broken up.

It is hard to imagine e-commerce—or any private industry, for that matter—truly scaling in such an arbitrary and oppressive system.

Coupang: Density + Free(ish) Markets = Success

Less well known, but repping the best of both worlds, is South Korea’s Coupang.

A profile in Barron’s finds that the company, which commands 4% of South Korea’s consumer activity, is thriving.

“South Korea is a tech-savvy, superdense, highly populated country of more than 50 million people,” writes Eric Savitz.

Unlike Amazon, the company is able to guarantee same-day shipping for virtually all goods, and nearly all orders come through on that promise. Crucially, the firm asserts, distribution centers are within 10 minutes of nearly three-quarters of South Koreans.

The country’s compact nature helps allow e-commerce to thrive—sort of like in China. But unlike there, South Korea has relatively high economic freedom—the Heritage Foundation ranks it at #24 globally, compared to China at #107. The capitalist mindset embedded in South Korea’s economic system is reflected in its dense, mixed-use land model; to that end, Coupang has high-rise, centrally-located warehouses that ensure this rapid delivery system.

The firm wants to enter the Japanese market, which makes sense given that Japan also has a relatively open economy and very high density.


Density plus capitalism creates optimal conditions for e-commerce. It determines everything from the minutiae of where distribution centers are located to larger fundamentals like whether or not a company can grow, and the level of consumer wealth in a city.

All 3 companies I described fit somewhere along these spectrums. Alibaba was a powerful company that now appears to be getting crushed by its government. Amazon is a great company that still performs sub-optimally due in part to regulations. Coupang combines the strengths of both to manage truly stellar delivery times. It will be interesting to see where all 3 companies are a decade from now.

This article featured additional reporting from Market Urbanism Report content staffer Ethan Finlan.

Scott Beyer is a Catalyst Columnist Fellow on a 1.5-year research project through the Global South for Catalyst’s Market Urbanism Around the World series. He is the owner of Market Urbanism Report, a media company that advances free-market city policy. He is also an urban affairs journalist who writes regular columns for Forbes, Governing Magazine,, and Catalyst. Follow him on Twitter: @marketurbanist.
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