This is really a neat data point (and one of my personal favorites 👏!)
When this is enabled, Wholesale Inspector will discount the Sales per Month estimates (and their derived values) to account for the amount of time Amazon has been in stock. This essentially gives an estimate for how many units are sold by 3rd party sellers.
As an example, if a product has 300 sales per month and Amazon is in stock 50% of the time, if this option is enabled (and the AMZ Sell Rate is 100%) then we will adjust the SPM number down to 150 under the assumption that Amazon will take 100% (the AMZ Sell Rate) of sales when they are in stock.
Another example, if a product has 500 SPM and Amazon is in stock 20% of the time and the AMZ sell rate is 50%, then the SPM number will be adjusted down to 450. This is assuming that Amazon will compete for 20% of the sales (100 units), but they will only capture 50% of those 100 units there were competing for (50). So we take those 50 units off of the SPM estimate to get a result of 450.
The AMZ Sell Rate field allows you adjust the algorithm based on how competitive you think Amazon is. An AMZ Sell Rate of 100 means that no 3rd party seller will make any sales while Amazon is in stock. An AMZ Sell Rate of 0 means that you can compete with Amazon just like any other 3rd party seller.
Recommendation: I would highly recommend turning this option ON. I prefer to keep my analysis data quite safe and would recommend an AMZ Sell Rate of 100 for most people to start.