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Investing.com -- Retailers across sectors have attempted to emulate Amazon’s transition from a first-party seller to a third-party marketplace and service platform.
But according to Bernstein analysts, these attempts have largely failed due to structural and economic limitations that most retailers can’t overcome.
Several companies have pursued the "retail as a service" (RaaS) model, offering logistics, software, or full-stack commerce solutions to other brands.
This includes Ocado (LON:OCDO) in grocery, Zalando and The Hut Group in apparel, and Next in general retail. Despite significant investment, uptake has been limited, and returns have underwhelmed.
Amazon’s advantages are unique: it controls over 40% of U.S. e-commerce, has dense demand and a fragmented supplier base, and has invested for decades in logistics and technology.
Other retailers lack this scale, category depth, and capital intensity. For example, Salesforce (NYSE:CRM) invests about $700 million annually in tech CAPEX, compared to £50 million at Next and €80 million at Zalando.
For providers, RaaS promises added operating leverage. Next’s Total Platform and Zalando’s ZEOS aim to repurpose existing infrastructure.
However, Bernstein notes that RaaS is a lower-margin business. While Next earns a 21% EBIT margin on its own branded sales, Total Platform delivers only 5%.
The model also isn’t asset-light. Warehousing and logistics still require CAPEX and operating costs. While providers don’t own inventory, they still need to hold it, limiting margin potential.
The addressable market is also small. Bernstein identifies only 60 European apparel retailers with €200–600 million in annual sales.
Brands above this range often opt for in-house solutions; smaller ones lack scale for returns.
There’s also little differentiation. Most RaaS providers rely on off-the-shelf logistics tech or basic automation.
Zalando still picks orders manually in parts of its network. Ocado stands out with proprietary grocery fulfillment tech but has seen demand slow.
Sales estimates for Ocado Technology Solutions are down about 30% since their 2023 peak.
Strategic concerns further dampen adoption. Outsourcing to a competitor introduces operational and competitive risk.
For example, Kering (EPA:PRTP) pulled its brands from YNAP to regain control, and Farfetch’s B2B platform collapsed after major clients exited post-acquisition. Smaller clients also risk being deprioritized within RaaS platforms led by larger retailers, affecting service quality and customization.
Revenue expectations have reflected this skepticism. FY25 estimates for Next’s Total Platform have dropped 68% since April 2023.
THG Ingenuity’s FY25 sales outlook has fallen by the same proportion. Zalando’s B2B adjusted operating profit estimate is down about 60% since March 2024.
While outsourcing remains viable through specialists like GXO or SAP, Bernstein sees little that RaaS adds beyond traditional providers. For now, Amazon’s model remains an exception, rooted in scale, not a template others can copy.