This is part 3 of a series of six articles. Be sure not to miss Part 1 – Retail Media 2.0: Introducing Retail Performance, Part 2 – The Strategic Evolution of E-Commerce, Part 4 – The Attention Tax, Part 5 – After the Attention Tax: The Strategic Playbook, and Part 6 – The Hail Mary.

In Part 1, I introduced the Retail Performance Flywheel. In Part 2, I proved the economics — a 32.8% profitability increase from a single rotation, with compounding effects that grow with every subsequent cycle. The analysis so far has focused on what Retail Performance does to the platform's P&L.

This article is about what it does to the market.

The Retail Performance Flywheel does not merely improve profitability. It transforms the structural position of the platform within its market — shifting it from one competitor among many to the gravitational center around which the entire ecosystem orbits. This is not hyperbole. It is the operational expression of the most important theory in platform economics.

If you work in e-commerce strategy and have not studied Ben Thompson's Aggregation Theory, stop here and read it. Then come back. Because what I am about to argue is that Retail Performance is the mechanism — the specific, operational mechanism — by which e-commerce platforms become aggregators. Not theoretically. Mechanically.

Aggregation Theory, Briefly

Ben Thompson's Aggregation Theory, developed through his writing at Stratechery, provides the most rigorous framework for understanding platform dominance in the internet era. The core argument is elegant: in a world where distribution costs approach zero, power accrues to platforms that own the relationship with the end user.

In traditional industries, suppliers controlled distribution. If you wanted a television, you went to the store that carried the brand you wanted. The manufacturer's distribution network was the bottleneck, and whoever controlled that bottleneck held the power.

The internet removed that bottleneck. Any seller can reach any buyer, anywhere, at near-zero cost. But this creates a new problem: with infinite supply accessible, how does the buyer decide? The answer is the aggregator — a platform that makes the buying decision manageable by curating, organizing, and presenting supply in a way that serves the buyer's needs.

The aggregator's power comes from a virtuous cycle: a superior user experience attracts more users, more users attract more suppliers (who want access to the audience), more suppliers improve the experience (through selection and competition), which attracts more users. The aggregator controls the interface between supply and demand. It charges suppliers for access. It sets the terms. It wins.

Google aggregates information. Facebook aggregated social relationships. Netflix aggregated entertainment. And e-commerce marketplaces — Amazon, Otto, Zalando, Mercado Libre — aggregate commerce.

The question that Aggregation Theory raises but does not fully answer is: what is the specific mechanism by which an e-commerce platform achieves aggregation? What is the operational tool that creates the gravitational pull, that attracts both sides of the market, that establishes the platform as the indispensable intermediary?

I believe the answer is Retail Performance.

How Retail Performance Creates Aggregation

Traditional explanations of e-commerce platform dominance focus on selection, convenience, and trust. Amazon won because it had everything, delivered it fast, and made returns easy. These explanations are correct but incomplete — they describe the what without explaining the how. They do not account for the economic engine that funds the selection, the convenience, and the trust.

Retail Performance is that engine.

Consider the dynamics I described in Part 2. The platform reinvests Retail Media revenue into pricing, which attracts users, which generates engagement, which produces more Retail Media revenue. This is the demand-side flywheel — the mechanism that attracts and retains buyers.

But there is a supply-side flywheel operating in parallel, and it is equally important for understanding aggregation.

The Demand Side: Why Buyers Stay

The buyer's calculation is brutally simple: where do I get the best deal? "Best deal" is a composite — price, selection, delivery speed, return convenience, trust — but price is the heaviest-weighted factor for most purchases. A platform that can consistently offer prices 5–10% below competitors, funded by Retail Media revenue, is not just incrementally more attractive. It becomes the default starting point for every shopping journey.

This is the behavioral shift that aggregation depends on. The platform does not need to win every transaction. It needs to be the first place the buyer looks. Once the buyer starts on the platform, the switching cost — even if it is only the psychological cost of opening another tab — works in the platform's favor. Retail Performance-funded pricing ensures the buyer starts here. Everything else follows.

As the user base grows, the platform accumulates behavioral data at a rate competitors cannot match. Search patterns, browsing behavior, purchase history, price sensitivity by category — this data powers the recommendation engine, the search algorithm, and the advertising targeting that makes the experience increasingly personalized and effective. The experience improves. More users stay. The cycle compounds.

The Supply Side: Why Sellers Come

Now consider the seller's calculation. A seller choosing where to invest — which platforms to list on, where to spend advertising budgets, where to build fulfillment integrations — evaluates one thing above all others: where are the buyers?

The platform with the most engaged buyers attracts the most sellers. This is the demand-side-leads dynamic that Aggregation Theory describes. But Retail Performance adds a second, equally powerful force: the platform with the most effective Retail Media operation offers sellers the highest return on advertising investment.

A seller spending €10,000 per month on Sponsored Products generates more revenue on a platform with 10 million monthly visitors than on a platform with 1 million. The cost per acquisition is lower, the impression volume is higher, and the targeting — powered by the platform's superior behavioral data — is more precise. The Retail Media ROAS on the larger platform is structurally superior, regardless of how clever the smaller platform's ad technology might be.

This creates a pull that goes beyond simple audience size. Sellers do not just list on the dominant platform — they invest disproportionately in its Retail Media ecosystem. They allocate more budget to its Sponsored Products. They build their product content and data feeds to its specifications. They integrate their inventory and fulfillment systems with its infrastructure.

Every incremental seller investment makes the platform's ecosystem richer — more products, more competitive pricing (as sellers compete for the larger audience), more advertising revenue (which funds further pricing subsidies). The supply side of the flywheel compounds in lockstep with the demand side.

The Aggregation Lock: Where Both Sides Converge

The moment both flywheels are spinning — demand pulling supply, supply enriching demand — the platform crosses a threshold that I call the aggregation lock. This is the point at which the platform's position becomes self-reinforcing to the degree that displacing it requires not just a better product but a simultaneous recapture of both sides of the market.

No seller will leave a platform where the buyers are — not if the buyer traffic is growing. No buyer will leave a platform where the prices are lowest — not if those prices are subsidized by Retail Media revenue that the buyer never sees. The aggregator sits at the center of a network of dependencies that is stronger than any individual relationship within it.

This is not a moat in the traditional sense — a defensive barrier that protects a static position. It is a gravitational field that grows stronger the more mass it accumulates. Every new buyer, every new seller, every new Retail Media investment adds mass to the system. The gravitational pull increases. Escape velocity for either side — the force required for buyers or sellers to leave — rises.

Retail Performance is what generates the mass. It is the specific mechanism that converts Retail Media revenue into platform gravity.

The Competitive Dynamics: How Retail Performance Reshapes Markets

The aggregation effects I have described do not operate in a vacuum. They produce specific, observable competitive dynamics that are reshaping e-commerce markets globally.

Dynamic 1: The Pricing Scissors

A platform operating Retail Performance can offer lower prices than competitors while generating higher total profit. This creates what I call the pricing scissors — a dual pressure that cuts competitors from both sides.

From the buyer's perspective, the Retail Performance platform is cheaper. Volume migrates. From the seller's perspective, the Retail Performance platform delivers higher Retail Media ROAS. Ad budgets migrate. The competitor loses volume and advertising revenue simultaneously — exactly the two revenue streams it would need to fund its own Retail Performance transformation.

The scissors close slowly at first, then rapidly. The market share shift is not dramatic in any single quarter. But over two, three, four quarters, the cumulative effect is decisive. The competitor that does not respond finds itself in a structural decline that becomes harder to reverse with every passing period.

Dynamic 2: The Data Divide

Every transaction on the platform generates data. More transactions mean more data. More data means better advertising targeting, better price optimization, better demand forecasting, better search relevance. These improvements attract more buyers, which generate more transactions, which produce more data.

The data advantage of a Retail Performance platform is not a one-time edge. It is a continuously widening gap. The platform with 10x the transaction volume has not just 10x the data — it has data of fundamentally higher quality, because statistical patterns are more reliable at scale, because rare edge cases are observed more frequently, and because cross-category insights emerge that are invisible at smaller volumes.

This is a competitive asymmetry that money alone cannot close. A competitor can invest in technology. It cannot buy the data that only comes from market-leading volume. And without that data, its Retail Media operation, pricing optimization, and customer experience will always be structurally inferior.

Dynamic 3: The Seller Migration

As the Retail Performance flywheel compounds, seller behavior shifts in ways that further accelerate the aggregation.

Initially, sellers list products on multiple platforms — hedging their bets, diversifying their revenue. As one platform's volume advantage grows, sellers begin to prioritize it: investing more in its Retail Media placements, optimizing their content for its search algorithm, integrating more deeply with its fulfillment infrastructure.

Eventually, for categories where one platform dominates, sellers begin to concentrate — reducing investment in secondary platforms, sometimes delisting entirely. The logic is simple: if 70% of my revenue comes from one platform, and Retail Media investment on that platform generates 3x the ROAS of the second platform, why am I splitting my budget?

This seller migration is the final stage of aggregation. When sellers concentrate their investment, the dominant platform's selection advantage grows (more products, better content), its pricing advantage grows (more seller competition drives prices down), and its Retail Media revenue grows (more seller ad spend). The flywheel accelerates.

The secondary platforms, losing both sellers and buyers, enter a decline spiral that mirrors the Retail Performance flywheel in reverse.

The Uncomfortable Implication

I want to be direct about what this analysis means for the industry.

The Retail Performance Flywheel, operating at full velocity, produces market structures that tend toward monopoly — or at minimum, tight oligopoly with one dominant player and several distant followers. This is not a prediction about any specific market. It is a structural consequence of the flywheel's compounding dynamics.

If you are the market leader and you execute Retail Performance aggressively, you are building an economic machine that will be extraordinarily difficult for anyone to challenge. Your flywheel compounds. Your data advantage widens. Your pricing scissors close on competitors who cannot fund an equivalent response.

If you are a mid-market player, the analysis is sobering. The window to build your own Retail Performance flywheel — to reach sufficient scale before the leader's gravitational pull becomes inescapable — is finite and narrowing. The investments required are large, the organizational transformation is painful, and the outcome is uncertain. But the alternative — continuing to operate in Retail Media 1.0 while a competitor builds Retail Performance — is not uncertainty. It is decline.

And if you are a smaller player, the path forward may require fundamentally rethinking your market position. Competing on Retail Performance against a dominant platform may not be viable. Finding a niche — a category, a geography, an experience — where the dominant platform's advantages do not fully translate may be the more honest strategic choice.

The Platform as Market Infrastructure

There is one final implication of the aggregation analysis that deserves attention, because it connects to the broader competitive dynamics that the second half of this series will explore.

When a Retail Performance-powered platform achieves true aggregation — when it becomes the gravitational center of its market — it ceases to be a retailer in any traditional sense. It becomes market infrastructure. The essential service through which buyers find products and sellers find buyers. The platform that no participant in the market can afford to ignore.

This is an enormously powerful position. It is also a vulnerable one — because market infrastructure attracts the attention of regulators, and more importantly, it creates the conditions for disruption by any force that can change the fundamental interface between supply and demand.

The first three articles in this series have built the Retail Performance thesis: the flywheel, the economics, and the aggregation dynamics. I believe this analysis is correct. I also believe it describes a model whose foundational assumption — that all commerce is mediated by a human who can only look at one screen at a time — is about to be challenged by a force that most Retail Media strategies have not yet accounted for.

That is the subject of Part 4. And it changes everything.

Key Takeaways

• The Aggregation Mechanism: Retail Performance is the specific operational mechanism by which e-commerce platforms become aggregators in the sense defined by Ben Thompson's Aggregation Theory. It generates the gravitational pull that attracts both buyers and sellers.
• Dual Flywheel: The demand-side flywheel (Retail Media-funded pricing attracts buyers) and the supply-side flywheel (larger audiences attract seller investment) operate in parallel, each reinforcing the other.
• The Aggregation Lock: When both flywheels are spinning, the platform's position becomes self-reinforcing — displacing it requires simultaneously recapturing both sides of the market.
• Three Competitive Dynamics: The Pricing Scissors (lower prices despite higher profit), the Data Divide (an exponentially widening information advantage), and Seller Migration (concentration of seller investment on the dominant platform) reshape markets toward winner-takes-all outcomes.
• The Vulnerability: Market infrastructure is powerful but exposed — both to regulation and to disruption by forces that change the fundamental interface between supply and demand.

Frequently Asked Questions

What is Aggregation Theory and how does it relate to Retail Performance?

Aggregation Theory, developed by Ben Thompson, explains how internet platforms gain dominance by owning the user relationship in a world of zero distribution costs. Retail Performance is the operational mechanism that enables e-commerce platforms to achieve this aggregation — the flywheel that generates the pricing advantages, data superiority, and seller ecosystem that create the gravitational pull central to aggregation.

How does Retail Performance transform a platform into a market aggregator?

Through dual flywheels: on the demand side, Retail Media-funded pricing subsidies attract and retain buyers, building the largest audience in the market. On the supply side, the largest audience attracts disproportionate seller investment — more products, more Retail Media spend, deeper integrations. When both flywheels are spinning, the platform becomes the essential intermediary between supply and demand.

What is the aggregation lock?

The aggregation lock is the point at which a platform's position becomes self-reinforcing to the degree that displacing it requires simultaneously recapturing both buyers and sellers. Neither side will leave first — buyers stay because prices are lowest, sellers stay because the audience is largest — creating a stable equilibrium that competitors cannot break without equivalent scale on both sides.

Can smaller e-commerce platforms compete against Retail Performance aggregators?

Directly competing on Retail Performance at market-wide scale may not be viable for smaller platforms. More realistic strategies include specialization — building Retail Performance flywheels within specific categories, geographies, or customer segments where the dominant platform's advantages do not fully translate. The key is achieving sufficient scale within a defined niche to sustain the flywheel.

What makes Retail Performance platforms vulnerable despite their dominance?

Aggregation creates market infrastructure — a position that attracts regulatory scrutiny. More fundamentally, the aggregation model depends on controlling the interface between supply and demand. Any force that changes that interface — that enables a new intermediary between buyers and sellers — could disrupt the aggregation lock, regardless of how powerful the flywheel appears.

Next in this series is >> Part 4 – The Attention Tax: Why AI Agents Will Dismantle Retail Media