They are certified under HIPAA and PCI/DSS in terms of their isolation of customers data from other customers and their infrastructure management.
Anyone who thinks they would deliberately attempt to steal customer data is beyond paranoia.
A reason not to use AWS as a competitor of Amazon is that you wouldn't want to give them cash they can invest in their other business lines.
With a bit of effort anyone can find products on Amazon that sell well (there's services that will do this) and then try to compete with those products. Amazon undoubtedly has more insights than those services provide, but that's probably not what makes or breaks their Basics products.
Their strength is probably their manufacturing costs being much lower than the average 3p startup seller and the brand itself.
I don't know why by I love these Basics lines that are being produced by Amazon, Zalando etc. They're positioned perfectly between "brands that are overpriced" and "Chinese brands selling probably crap products with probably fake reviews". I have Amazon basics towels, camera tripod, water filter, toiletry bag and more.
The fact that they can make sure it makes is prominent in any search result in the category, even for a competing product, is what makes it, combined with the fact that it's the one thing on Amazon you can be 100% sure isn't counterfeit, size no one else can sell it so there is no risk of commingling. It's nice that Amazon has found a way to trade on the unreliability of their own marketplace, and to leverage dominant market power in online into marketshare in any particular product market they choose.
Great for Amazon, that is; not so sure it's good for anyone else.