Seller ServicesWide moat

Amazon's marketplace genius is that it does not merely take a commission on each sale; it has monetized nearly the entire operation of the sellers who depend on it. A typical seller pays Amazon a referral fee on the sale, pays again to store and ship the goods through Fulfillment by Amazon, and pays a third time to advertise for visibility — so that Amazon earns from the seller's storage, logistics, and marketing, not just its transactions.

This layering turns the marketplace into a far richer business than a simple sales commission would be. Amazon collects fees whether a given seller thrives or merely survives, and it collects them at high margin, because the fulfillment network and the advertising system are already built and each additional seller adds little marginal cost. The seller's whole cost of doing business becomes Amazon's revenue.

Fulfillment by Amazon is the piece that binds hardest, because it binds the seller to the platform while filling Amazon's own network. A seller who stores inventory in Amazon's warehouses gets the coveted Prime badge¹ and fast delivery, which lifts sales — but also becomes dependent on Amazon's logistics and loath to leave, and helps Amazon spread the fixed cost of its fulfillment machine across more volume. One service sells the next.

The upshot is that Amazon captures a large and growing share of each seller's revenue — often cumulatively a half or more, once every fee is counted — while the seller bears the inventory risk and the capital. It is an extraordinarily profitable arrangement, and it is why the marketplace, not the first-party retail, is where much of Amazon's commerce profit is quietly made.