What’s the benefit of being “not connected to Amazon retail?” Serving a large customer that demands scale seems useful for driving the platform forward—what is the downside?
If I had to guess it's the perception that Amazon is out to compete in any and everything, and if they wanted to they could figure out what products and services are the growing the fastest based on the customer usage data from AWS and then come out with their own competitor.
I used to do $100,000 a month in revenue on Amazon with one HP skew. The product grew to #1 in its category within a couple months, another month after which Amazon started selling it to, "shipped from sold by Amazon".
Amazon is happy to help be your growth partner until you prove worth devouring.
Why would Netflix fund Amazon's prime video service?
Why would Walmart fund amazon.com and Whole Foods?
Why would Dropbox fund Amazon Drive?
AWS is their most profitable business in terms of margin. It makes sense to avoid funding your competition if possible, which is a problem for Amazon given how many business divisions they have and continue to add.
Competition. As Amazon grows as a conglomerate, competitors are less inclined to use their services, even if that one service isn't what they're competing over.
I used to do $100,000 a month in revenue on Amazon with one HP skew. The product grew to #1 in its category within a couple months, another month after which Amazon started selling it to, "shipped from sold by Amazon".
Amazon is happy to help be your growth partner until you prove worth devouring.