The Future of Amazon and FBA

I first wrote this post in 2015 with a fairly grim prediction: that Amazon would use third-party sellers to gather data, then increasingly source the best products itself and squeeze 3P sellers out. More than a decade later, it's worth revisiting honestly — because some of that thesis aged well, and some of it was flat wrong. Updating an old prediction is more useful than pretending I called everything perfectly.

Phase 1: Grow the marketplace through third-party sellers — confirmed

Amazon's first goal was to make it as easy as possible for sellers to sell in volume on their website, and FBA was the engine. Third-party sellers send inventory into Amazon's warehouses; Amazon handles storage, pick and pack, shipping, and customer service for a fee, and the product becomes Prime-eligible. This part played out exactly as expected. Third-party sellers now account for well over half of the units sold on Amazon, and FBA is the backbone of that.

Phase 2: Collect data and conquer — partly right, partly wrong

My 2015 claim was that Amazon would systematically work down the best-seller list, source those products itself, and eventually sell most of them directly. That happened in a narrow way and then largely reversed. Amazon did expand private-label lines like AmazonBasics aggressively in the late 2010s. But by the early 2020s, under regulatory scrutiny and because the economics were often unimpressive, Amazon pulled back substantially on its private-label ambitions and reportedly cut many of its own brands. So the "Amazon will sell everything itself" prediction did not come true the way I framed it.

What I underestimated was how Amazon would monetize sellers a different way: advertising. Rather than out-competing sellers with its own products, Amazon turned search placement itself into the product. Amazon's advertising business has grown into one of the largest ad platforms in the world, and "renting" visibility through Sponsored Products, Sponsored Brands, Sponsored Display, and DSP is now a core cost of doing business. The shelf-space analogy I used was right; I just had the mechanism wrong. Amazon didn't take the shelf — it started charging everyone rent for it.

What's actually changed for sellers since 2015

• Advertising is no longer optional. Organic-only launches are very hard now. Ads and organic rank feed each other.
• Fees have climbed and fragmented. Referral fees, FBA fulfillment fees, storage and aged-inventory surcharges, low-inventory and placement fees, and (as of 2025–2026) changes that pushed prep and labeling responsibility back onto sellers all compress margin.
• Brand matters more. Brand Registry, A+ Content, Stores, and brand analytics reward sellers who build a real brand rather than a "me too" product.
• AI is entering search. Amazon's Rufus assistant and behind-the-scenes models like COSMO are changing how products get discovered, rewarding listings that genuinely match shopper intent.
• The platform is more crowded and more regulated. More sellers, more compliance requirements, and more enforcement.

Where it's heading next

My updated take: the existential threat to 3P sellers was never Amazon becoming the seller of everything. It's margin compression from rising fees and rising ad costs, combined with commoditization. The sellers who thrive from here are the ones who build a defensible brand, manage total cost (fees + ads) ruthlessly, diversify beyond a single channel, and treat Amazon as one important pillar rather than the whole house.

The advice I gave in 2015 still holds, even if the reasoning has shifted: diversify, build your own brand, and drive some traffic to channels you control. It's great to be on Amazon. It's dangerous to be only on Amazon.