Many retailers admire Amazon’s path from a primary online seller to a third-party marketplace and service platform. However, analysis by Bernstein reveals that most retailers’ attempts to duplicate this success have fallen short, both structurally and financially.

The Retail-as-a-Service Challenge

The idea of Retail-as-a-Service (RaaS) is gaining traction. Companies such as Ocado in grocery and Zalando in fashion have aimed to provide software, logistics, and e-commerce infrastructure to various brands.

The concept aims to utilize established assets to create new revenue streams without directly managing the customer relationship.

Nonetheless, returns have been modest.

Why Amazon Thrives While Others Falter

Amazon captures over 40% of U.S. e-commerce, benefiting from:

• High demand density

• Years of investment in technology and logistics

• A diverse supplier base

• Unmatched depth of categories and data integration

In contrast, its competitors lack the required capital investment and category range to make the RaaS model feasible.

To illustrate:

• Salesforce invests roughly $700 million per year in technological capital

• Meanwhile, Next invests only £50 million, and Zalando €80 million

Profit Challenges and Market Limitations

While RaaS provides operational leverage, it does not yield high profit margins:

• Next’s branded sales yield a 21% EBIT margin

• Its Total Platform RaaS initiative yields merely 5% EBIT

This business model is not asset-light. Although these providers do not hold inventory risk, they are still responsible for storing and managing it, which increases operational costs.

A Confined Addressable Market

Bernstein estimates that the European RaaS potential encompasses only around 60 apparel retailers with sales from €200 million to €600 million annually, creating a narrow client base for a model with high fixed costs.

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