Because the company also stores and ships a majority of the products that sellers sell on its marketplace, Amazon learns more about the cost structure of its suppliers than do its brick-and-mortar rivals.
Amazon encourages independent merchants with carrots and sticks to use its own in-house fulfillment service to ship their customers’ orders; the stick allegedly entails tying its fulfillment service to preferential access to Amazon’s platform. In contrast, a big-box outlet or a grocery store can never learn as much about a brand’s costs or margins.
Knowing more about a brand’s cost structure allows Amazon to choose which brands to invade and to better develop its private-label product. Sellers with successful products are often invited by Amazon to move some of their products or launch new ones under the AmazonBasics brand umbrella. Amazon can leverage data before other brands make a similar offer to the upstart. These opportunities to copy—and protect oneself from invasion from would-be copiers—are not available to rival sellers on Amazon’s platform, as competitors can only guess at the brand’s costs.