Amazon's strategy of tracking purchase data allowed it to identify lucrative market segments. By analyzing the data, Amazon could understand consumer preferences and trends, enabling it to enter and dominate any segment that showed potential for high profitability. This strategy, combined with the vast reach of its online platform, Amazon Marketplace, gave it a significant advantage over traditional retailers who were slower to respond to the e-commerce trend. Furthermore, Amazon's growth led to a decrease in its cost of capital, while it increased for other retailers, further strengthening its market position.

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Amazon's growth has a significant impact on the cost of capital for other retailers. As Amazon continues to grow and dominate various market segments, it gains a competitive advantage that allows it to access capital at a lower cost. This is due to its strong market position, robust financial performance, and the confidence it instills in investors. On the other hand, other retailers, especially traditional ones, may find their cost of capital increasing. This is because as Amazon grows, these retailers may lose market share, which can lead to weaker financial performance and a higher perceived risk by investors. Consequently, investors may demand a higher return for their capital, leading to an increased cost of capital for these retailers.

Several factors contributed to the rapid growth of Amazon Prime in 2016. One of the key factors was the Amazon Marketplace, an online network that enabled sellers to gain access to the world's largest e-commerce platform. This allowed customers to choose from millions of products without Amazon having to invest in additional inventory. Amazon's ability to track purchase data also allowed it to enter and dominate any segment the minute it became lucrative. Traditional retailers' late response to the Amazon e-commerce threat also played a role. In 2016, while US retail grew at 4%, Amazon Prime grew at over 40%. Amazon's growth is inversely correlated with the rest of the sector, meaning that as Amazon's cost of capital continues to decline, it increases for other retailers.

Traditional retailers were unable to respond effectively to the threat posed by Amazon's e-commerce due to several reasons. Firstly, Amazon's online platform allowed it to reach a global customer base, which traditional retailers could not match with their physical stores. Secondly, Amazon's use of data tracking allowed it to enter and dominate any lucrative market segment quickly. Lastly, traditional retailers were slow to respond to the rise of e-commerce, and by the time they did, Amazon had already established a strong presence and customer loyalty. This, coupled with Amazon's decreasing cost of capital compared to increasing costs for other retailers, made it difficult for traditional retailers to compete.

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