Fulfillment by Platform: Competition and Upstream Market Power

Fulfillment by Platform: Competition and Upstream Market Power E-commerce platforms increasingly offer fulfillment services that promise faster delivery and easier access to customers. This study shows that these services create a trade-off. Using transaction-level data from a major online marketplace, the authors find that platform fulfillment improves the customer experience and raises consumer welfare, but it also changes competition among sellers. Because fulfillment through the platform adds costs for merchants, smaller sellers with thinner margins must raise prices more than larger sellers. As a result, large merchants gain share while smaller merchants lose ground, increasing upstream market concentration. The findings matter for regulators, platforms, and merchants because they show that a service that benefits consumers can still weaken competition on the seller side. The paper provides rare empirical evidence from both sides of an e-commerce marketplace and highlights why platform policies should be evaluated not only by customer benefits, but also by their effects on market structure.