unlike Whole Foods Amazon has no particular desire to be a grocer, and contrary to conventional wisdom the company is not even a retailer. At its core Amazon is a services provider enabled — and protected — by scale.

E-commerce distribution has massive fixed costs but benefits tremendously from economies of scale The cost to build-out Amazon’s fulfillment centers was justified because the first and best customer is Amazon’s e-commerce business That last bullet point may seem odd, but in fact 40% of Amazon’s sales (on a unit basis) are sold by 3rd-party merchants; most of these merchants leverage Fulfilled-by-Amazon, which means their goods are stored in Amazon’s fulfillment centers and covered by Prime. This increases the return to scale for Amazon’s fulfillment centers, increases the value of Prime, and deepens Amazon’s moat