Opportunities for self-preferencing in international online marketplaces

Abstract

Purpose

Large digital platforms face intense scrutiny over self-preferencing, which involves a platform provider favoring its own offers over those of competitors. In online marketplaces, also called retail or e-commerce platforms, much of the academic and regulatory debate focuses on determining whether the marketplace provider gives preference to its own private labels, such as “Amazon Basics” or Walmart’s “Great Value” products. However, we outline, both conceptually and empirically, that self-preferencing can also occur through other dimensions of vertical integration – namely, retailing and fulfillment.

Design/methodology/approach

This article contributes by conceptualizing three dimensions of vertical integration in online marketplaces – private labels, retailing and fulfillment. Then, two studies empirically assess (1) which of the 20 most-visited global online marketplaces vertically integrates which dimension and (2) which share of 600 m available offers is vertically integrated to which degree in eleven international Amazon marketplaces.

Findings

The majority of the leading marketplaces vertically integrate all three dimensions, implying ample opportunities for self-preferencing. Across international Amazon marketplaces, only 0.02% of available offers consist of an Amazon private-label product. However, Amazon is a retailer for around 31% and fulfills around 38% of all available offers in its marketplaces. Hence, self-preferencing on Amazon can occur most frequently through retailing and fulfillment but comparatively infrequently through private-label offers. Still, these shares differ substantially by country – every second offer is vertically integrated in the USA, but only one in ten in India.

Originality/value

Most of the self-preferencing debate often focuses on private-label products. Instead, we present large-scale empirical results showing that self-preferencing on Amazon could occur most often through retailing and fulfillment because these channels affect much larger shares of offers. We also measure the variation of these shares across countries and relate them to regulatory environments.