Final answer:
Amazon benefits from creating its own branded products by reducing reliance on other suppliers, cutting costs, saving on advertising, and gaining negotiating leverage with suppliers. The strategy is integral to Amazon’s ability to offer competitive pricing and leverage economies of scale.
Step-by-step explanation:
The question asks what advantage Amazon gains by creating its own branded products. The answer is that there are multiple advantages to this strategy:
- Reduces reliance on well-known suppliers of commodity products, giving Amazon more control over its inventory and product offerings.
- Enables the firm to cut out the costs associated with purchasing from a branded supplier, which can include various middlemen fees.
- Amazon-branded products promoted on its own site in search results can eliminate costly advertising expenses, as the platform already attracts a massive audience.
- Creating its own products gives Amazon negotiating leverage with suppliers due to the competition it creates, potentially leading to better terms on the products it does buy from external sources.
Amazon's production model and cost structure have empowered the company to offer competitive pricing, disrupt traditional industries, and leverage economies of scale for greater efficiency. These internal brands are part of a nuanced strategy to maintain dominance in retail by managing costs, controlling end-to-end processes, and offering products directly to consumers.