Beyond Aggregation: Amazon as Service

This case study examines Amazon's strategic evolution from an aggregator model to a services platform, using the "Buy with Prime" initiative as a key example. The central challenge was whether Amazon should compete directly with platforms like Shopify for merchant websites or leverage its infrastructure advantages differently.

Amazon's approach involved transforming its internal capabilities—fulfillment, logistics, and Prime membership—into external services that merchants could use on their own websites. This mirrors Amazon's successful AWS strategy, where internal infrastructure became profitable external services. Rather than controlling demand through Amazon.com exclusively, the company began offering its logistics network, payment systems, and Prime delivery promises to merchants operating independent e-commerce sites. This represented a shift from pure aggregation (controlling the customer relationship) to becoming the underlying service layer for e-commerce.

The strategy appears strategically sound in retrospect. While Amazon initially seemed to make a "mistake" by directing merchants to Shopify when shutting down its Webstore service in 2015, this actually positioned Amazon to become the infrastructure provider rather than competing directly in website building. By 2022, Amazon launched "Buy with Prime," allowing merchants to offer Prime delivery and checkout on their own sites while using Amazon's fulfillment network.

For product managers, this illustrates the power of the "primitives" approach—converting internal operational capabilities into external products. Rather than competing in every layer, focusing on infrastructure and services can create sustainable advantages while enabling rather than competing with customer-facing platforms.