The Real Amazon Moat: Coalition of Competitors Across Price Tiers

You think your Amazon business has a moat? Here’s what you probably haven’t considered.

When we talk about moats in business, Warren Buffett is the first name that comes to mind. He popularized the concept of a moat as the key to protecting a business from competitors. But in the highly competitive world of Amazon, where 2,000 new accounts are created every day (700 in the U.S. alone), what does a real moat look like?

Let’s take it back to medieval times for a moment. A moat was a trench filled with water around a castle, designed to keep enemies at bay. But only castles worth protecting had moats—ones that held enough wealth or importance to draw attackers. The moat had two main purposes: to deter armies from attacking in the first place, and to protect the castle if an attack occurred. Think of your Amazon business as that castle. But here’s the twist: your moat isn’t just about having low prices or good ads; it’s about something much more strategic.

The Modern-Day Amazon Moat

On Amazon, there are 2,000 new sellers joining every day, and all of them are looking for an entry point into the market. Too many sellers think their moat is their low price, or maybe they’ve trademarked their brand and assume that’s enough. But a trademark or low prices alone won’t protect you on Amazon. If anything, relying on just price competition or a brand trademark is a sure way to limit your upside.

Here’s the thing: your real moat on Amazon is built through a coalition of competitors across price points, specifically in the form of well-reviewed, well-branded products at every level—luxury, mid-tier, and budget. This collective defense is far stronger than any individual seller’s strategy.

The Coalition of Sellers: A Secret Moat

Let’s break down what this means: a true Amazon moat isn’t just one high-performing product; it’s about having a coalition of products that cover every price point in your niche. At the top, you have the luxury product, commanding the highest price and offering premium quality. Then there’s the mid-tier product, which balances price and quality. Finally, you have the budget product, often sold by Chinese manufacturers who can offer extremely low prices due to their manufacturing capabilities.

A lot of Amazon sellers complain about their manufacturer selling against them. But instead of seeing them as a competitor, consider this: they might actually be part of your moat. When your manufacturer competes at the low-price tier, they’re covering that budget segment of the market, keeping other low-price competitors at bay. While you may be upset that they’re selling directly on Amazon, their presence actually deters new entrants from taking over the budget segment. And this can help protect your mid-tier and luxury offerings.

Reviews and Branding: The Keys to Defense

Now, let’s get into what really makes this coalition work: reviews and branding. On Amazon, 87% of sales are captured by the top three results in a keyword search. If you’re not in that top three, you’re fighting for scraps. To stay at the top, you need more than just ad spend; you need great reviews that act like a fortress around your product.

But reviews alone aren’t enough. Your brand has to be memorable. On Amazon, where customers make decisions in seconds, your branding—whether through trademark protection, compelling storytelling, or visually distinctive assets—helps you stand out. Think of branding as your moat’s second line of defense. It keeps customers loyal to you and discourages them from jumping to a competitor.

The Power of Three: Luxury, Mid-Tier, and Budget

Here’s where the coalition of sellers really comes into play. In every competitive niche on Amazon, there are typically three price points represented on the first page of results:

1. Luxury: The top spot, likely a higher-priced, premium product.
2. Mid-Tier: The balanced option—good quality, reasonably priced.
3. Budget: The low-cost option, often dominated by Chinese manufacturers.

Now, the beauty of this coalition is that it forms an almost impenetrable barrier for new sellers. If you’re selling in the luxury segment, your ad spend and high-quality product give you an edge. At the same time, the mid-tier seller is fending off competition from those looking for the best value, while the budget seller—often your own manufacturer or a Chinese competitor—keeps the bottom feeders at bay.

Collectively, this group creates a moat. Any new entrant looking to break into the market will have to decide where to attack. Competing with the low-price sellers? Good luck beating Chinese manufacturers at their own game. Going after the mid-tier? They’ll need thousands of reviews and a solid value proposition. Trying to compete at the luxury level? They’ll have to spend big on ads and branding to even get noticed.

This coalition of competitors means that no single price point is left exposed. And even though you might never speak to your “competitors” in the luxury, mid-tier, or budget spaces, you’re all working together, indirectly, to keep new players from entering the market.

But What About Your Manufacturer Selling Against You?

It’s easy to see your manufacturer’s budget products as a threat. But the truth is, their presence can actually fortify your moat. They’re preventing other budget sellers from getting a foothold, which indirectly protects your higher-priced offerings. So, instead of viewing them as competition, recognize that they’re covering a vital part of your market defense.

How the Coalition Works in Practice

Let’s take an example from my own experience. In the hospitality space, we sell luxury soaps and shampoos for hotels and Airbnbs. I prefer to be positioned in the luxury category because I’d rather sell a few $150 items than dozens of $15 ones. But here’s the thing: I know my competitors in the mid-tier and budget spaces are protecting my market just as much as I am.

Our niche has been locked down by a coalition of luxury, mid-tier, and budget players for years. We’ve seen other brands and even Chinese manufacturers try to enter the market, but they can’t gain a foothold. Why? Because they’re up against well-established sellers at every price point, all with thousands of reviews. Starting from zero reviews, they have no choice but to compete on price, and even then, they’re going head-to-head with entrenched budget sellers.

This is the power of the coalition. It’s not just about outspending your competitors—it’s about forming an unspoken alliance where every price point is covered. The result? No room for new sellers to sneak in.

Strengthening Your Moat with Legal Protections

While the coalition of sellers is your primary moat, you can further protect your Amazon business with legal tools like trademarks and patents. If you have a unique product, getting a patent will give you exclusive rights to sell it, preventing direct competition. For the rest of us, a trademark can offer protection against counterfeiters and unauthorized resellers, especially if you’re part of Amazon’s Project Zero.

But here’s the thing: trademarks and patents alone won’t build your moat. They’re just another layer of defense. Your real moat is the combination of strong reviews, compelling branding, and a coalition of competitors across price points.

Conclusion: Building a Real Moat on Amazon

In the end, building a strong moat on Amazon is about more than just product quality or ad spend. It’s about creating a multi-layered defense that spans across the luxury, mid-tier, and budget segments of your niche. By leveraging great reviews, branding, and even your budget-selling manufacturer, you can deter new entrants and protect your market share.

Your moat isn’t just a defensive strategy—it’s a coalition of sellers working together, even unknowingly, to make your niche impenetrable. And if you can establish yourself as a key player in that coalition, your Amazon business will have staying power for years to come.