Because for any individual seller there’s a heavy short/medium term advantage to using the marketplace in the form of dramatically increased reach and simplified logistics.
You could ask why people start businesses that rely on buying stuff for x and then selling it for y when that business model has already been fully exploited?
There is a supermarket chain called Aldi who's entire business seems to rely upon copying branded products yet they are lauded for offering great value?
Because there's not another marketplace where you can, with some effort and very little actual innovation, turn a $5,000 investment into a six (and sometimes seven) figure a year revenue stream.
Many retail stores do this to their vendors. Amazon does it to it's "sellers", which are really just a category of "customers". As an amazon seller, you pay for the privilege of selling through their platform.
Well, because marketplaces like Amazon have a strategy for that: learn from sellers, imitate their products, offer your imitated product prominently on your "neutral" marketplace and crush the competition with a lower price until they have to give up or let themselves be bought [1]. That's nothing really new. The difference with Amazon is just the scale.
Many Amazon sellers only sell on Amazon, or have a large majority of their business sales there. This is equivalent to having insight to almost your entire business.
Most brands at Walmart and other stores are sold many other places.
Which goes back to the buyer problem, that they don't consider other channels. Then you get hostile co-development of browser extensions for cross-channel price comparison, and life in the jungle continues on as such...
There are many businesses who are 100% dependent on Amazon as a platform and Google as an acquisition stream. If you want to break out and sell on your own online platform, you're still dependent on Google, be it through search or advertising.
I would love to hear of consumer facing (B2C) online businesses who are successfully operating without any Google or Amazon dependencies to see if it's even possible in the current online ecosystem.
My hypothesis is that it isn't, and as such Amazon and Google should be broken up. They have close to a functional monopoly on consumers, but I'm putting forward that they also have a functional monopoly on online businesses in commerce.
It's a little bit different because Amazon claims to be a marketplace at the same time as curating its own specific product offering. It would be kind of like if a mall required all transactions from independent stores in the mall to go thru the malls servers and then the mall started its own product lines to sell based on that data.
That amazon does has been common knowledge since Amazon Basics first appeared. Obviously, Amazon is enjoying the enviable position enjoying being the mall, the payment processor, and everything else.
A lot of businesses do this. It's far less risky to copy a successful model than it is to explore the unknown space of products/services and find out what a successful model is, what to price it at, etc.
This is part of the reason systems like the patent system were created for inventions: to encourage people to bother exploring risky unknown spaces to develop inventions by granting them essentially a short term monopoly to harvest their reward which they would then compete against after a time period so society could further benefit from their finding by allowing competition to drive prices down and iterate on those inventions.
Obviously the patent system doesn't really serve this purpose anymore like so many systems that have been sidestepped/bypassed, changed through regulatory capture and corrupted by pure profit seeking behaviors.
Some companies foster cordial relationships with their partners by staying strictly in their lane.
For example, ARM licenses CPU core designs to chip manufacturers, but they don't make their own chips, as doing so would turn their customers into their competitors.
Businesses like contract manufacturers are similar - Foxconn wouldn't start making their own smartphone.
I suspect that's more coordinated - you get the own brand which is generally cheap and cheerful, then the premium brands. I suspect there's some oversight there though.
I think the real question to ask is whether or not Amazon has a monopoly and whether they are abusing it to gain an unfair advantage over the producers of the stuff they sell. I mean when you mention other stores, I don't know if you mean this but I'm picturing e.g. a grocery store - where I come from there's usually three competing ones in the neighbourhood. They will all sell products from a premium brand, alongside their own (cheaper) store brand. But the premium brand is usually available at all competitors at similar prices.
It's one thing to see that unbleached toilet paper is selling well, and getting a supplier to sell you a store brand version. But it's completely different to see that a particular office stand is selling very well, determine that it has a 20% margin, and have someone build an identical product which you sell 5% margin.
If you look at many Amazon Basics products, they are clear ripoffs of existing products. To the point where they are indistinguishable from the images. I was looking for a Lodge braisier just yesterday and saw that AB produced an identical product, down to the unique blue color Lodge uses in their enamel.
I guess you could go through the trouble of suing Amazon, assuming you had the resources. But then you'd be booted from the platform and they'd still be selling your knockoffs for years.
I think it's fine if Amazon sees that cast iron cookware is selling well and decides to enter that market. What's not fine is to blatantly steal the design of the best selling product in a category, then make your ripoff more visible on your site. At least make an attempt to differentiate the product.
> "It's one thing to see that unbleached toilet paper is selling well, and getting a supplier to sell you a store brand version. But it's completely different to see that a particular office stand is selling very well, determine that it has a 20% margin, and have someone build an identical product which you sell 5% margin."
Those two sound like the exact same thing to me. There is no real difference.
It even happens between electronics manufacturers; you'll see a company noticing a competitor's product is successful, dissecting it to figure out the manufacturing costs and estimated margin, and tailoring its product line to provide a competitive product.
(Aside from all that, I though HNers didn't believe in IP?)
Well, you can patent or trademark designs. And our legal system protects the holder of those patents and trademarks for good reason. Amazon is able to leverage their position in the market to abuse suppliers and get away with illegal behavior because the suppliers lack the resources to fight Amazon.
There's a difference between a clean room design that takes inspiration from a product and an identical copy. I can write and perform a song in the style of The Beatles, but I cannot write and perform "Hey Jude" without paying royalties.
In what way does Amazon know the backend margins that any other store wouldn’t?
They don’t. Amazon isn’t being asked to produce a product for a vendor then taking that and selling it themselves, that would be wrong. This is Amazon doing exactly what other stores do, seeing what sells well and making their own version.
A. Amazon doesn't know what seller margins are. They can't because they have no insight into what sellers pay for the products, only what the products sell for.
B. The main reason that products, in general, look alike is because they're all being produced at the same 3 factories in China. And for lots of products, there's no reason to deviate significantly from the house design that the factory offers.
A. They absolutely do. There are plenty of companies out there that will analyze a product, describe how they believe it is made, and produce a cost break down to the penny. They will go so far as to measure the thickness of the paint used.
B. I used Lodge as an example because I know they make their own products in the US and they do not produce generics. Ergo, I'm quit confident Amazon ripped them off.
Of course, Amazon has been sued over this before [1] [2] [3]. Is three references lawsuits enough evidence for you, or should I dig up some more? And there are many reports of them ripping off vendor products, as I described, from smaller vendors who never sue because they lack the means [4].
Finally, here's evidence from a former Amazon employee claiming they do exactly what I said they do. [5]
Based on how much Amazon will grow during this pandemic, I wouldn’t be surprised if they are cut up by government to reduce their power to destroy any competitor.
has there been any antitrust activity in the united states recently? Like... past 10 years?
Particularly given the current administrations disposition, I think pinning your hopes to anti-trust is like financially planning around lottery tickets.
But Trump hates Bezos because Bezos owns Washington Post, which publishes articles critical of Trump.
I'd imagine if the administration goes through with the antitrust investigations, Bezos would just show up with a suitcase saying "Here's my offer to your 2020 reelection campaign" (not literally, he could put it through a Super PAC) and Trump would say "Art of the deal!" and that threat would disappear...
Or Bezos could double down and get a law firm very rich trying to prove that the suit would be unfair because it's driven by the president's little ego...
I mean, no one's concerned amazon is going to merge with someone, my god I hope the FTC would block that. But I think the grand parent comment and I are talking about breaking up gigantic pre-existing monopolies. Not any general activity that can be categorized under "anti-trust"
I don't know if you count it was antitrust, but there's been two blocked mergers in the last ten years: Comcast and Time Warner as well as AT&T and TMobile.
Amazon makes life so hard for their suppliers it doesn't even surprise me. I once shipped a box of 10 laptops to sell on FBA (retail value ~$10k) and UPS showed the box as delivered, Amazon checked in the units and showed them available for sale on the website. Then 24 hours later all of them got removed saying I sent the inaccurate quantity in the box and none where now available for sale. The laptops disappeared and I had to do an insurance claim with UPS. Amazon's support was horrible and made me never want to sell with them again. Lots of stories like mine on the Amazon subreddit.
Subreddits tend to wildly misrepresent reality due to survivorship bias. People generally don't post or noodle through such communities when things are going well. That's not to say there isn't a significant supplier issue -- just be aware of the company you keep. I often forget to be critical of the bubbles I inhabit.
In any case, I do wonder if Amazon's treatment of folk like you would improve considerably if Amazon had competition. It seems they can push you around because there are no consequences to pay.
"Subreddits tend to wildly misrepresent reality due to survivorship bias"
I disagree. If Amazon had great customer service, there wouldn't be a large volume of people complaining.
"In any case, I do wonder if Amazon's treatment of folk like you would improve considerably if Amazon had competitio"
I agree with you here. The only two marketplaces that actually get traffic are Ebay and Amazon. I've tried them all over the years and the rest combined don't even come close.
> If Amazon had great customer service, there wouldn't be a large volume of people complaining.
Volume of complainers is an absolute number. Customer service can only reduce the proportion of complainers. If you have 50 complainers on 100 customers, bad customer service. If you have 50 complainers on 1,000,000 customers, good customer service.
You can conclude nearly nothing based on the absolute number of complainers in isolation.
As a counterpoint, we regularly have Amazon reimburse us for thousands of dollars of merchandise when they lose our products at their warehouses. And they reimburse us for what we would have netted had we sold the product, instead of what the product cost us. It's been a great arrangement so far.
You want to start a discussion about company stated policies and how each person feels they do or do not live up to them? That could go on for quite awhile!
You're either missing the point or strawmanning, I'm not sure which.
In speaking with Congress, they're stating to everyone that they are there to act as a platform for third parties. They're a "pass-thru" service.
That implies that while metadata may be being collected, you shouldn't be looking at it, as it isn't "yours". It would be like a cloud provider going into business undercutting their client's because they weren't savvy enough to encrypt their business records. Or the post office going through your B2B mailings, figuring out your footprint, them becoming a competitor.
You have one job. That's it. Once you start abusing your access to your seller's transaction data to figure out where to or whether to diversify into their vertical, there is a fundamental breach of trust, and a very reasonable case to be made in having exploited something you shouldn't be.
That's the Hobbesian Leviathan for you; you don't need all those little businesses anyway!
Stating the obvious I guess. All retailers do this and create their own white-label brands to squeeze profit from well-performing categories.
Target, for instance, is very upfront about it and they have like a gazillion white-label brands that compete in hundreds of categories, which makes it very gray for the customer.
Does anyone really think that any retailer launches a competing product in a category without looking at all their supplier data?
If you want distribution you risk this. The only way to avoid it, it's to do direct to consumer or having a product that is extremely hard to copy.
I really don't think Target is that upfront. How am I supposed to know Mossimo and Goodfellow are Target brands. I do however understand that Kroger groceries are made by the kroger store.
>On March 28, 2000, Mossimo, Inc announced a major, multi-product licensing agreement with Target stores, for $27.8 million.
>In 2017, Target underwent a makeover, introducing new smaller lines and eliminating bigger billion-dollar lines, including Mossimo.
>Target distanced itself from Mossimo amid Mossimo Giannulli's alleged involvement in the 2019 college admissions bribery scandal, saying that Target had not been involved with Giannulli in over a decade
I mean. That's what I meant. Upfront in the sense that they compete with their suppliers by having a lot of brands that are hard to distinguish as white-label brands by Target.
To me that is not a problem as long as they are not giving their own products better placement. If 50 brands of cornflakes and in them target has a 10 white-label brands that is not a problem but if all 10 white-label brands are put in front of other brands ie first few in search results then it is a problem.
In all seriousness, not giving your own brands prominent placement would be ignoring the benefits of vertical integration, leaving money on the table, and violating your fiduciary duty to stockholders.
The idea that corporate directors (of whichever kind) have an legal obligation to maximize profits/shareholder value is a myth. Taken directly from Alito's (non-dissenting) opinion in Hobby Lobby:
"While it is certainly true that a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so."
Additionally, even if there were such a requirement, it would be toothless. The corporate directors of a company facing criticism from its shareholders that it is not maximizing profits (in the short-term) could simply retort that they are pursuing a strategy that maximizes profits in the long-run, and that investors should look elsewhere for short-term gains.
As a practical example, consider any company that pursues more environmentally sound practices, or tries to source materials more ethically. By doing more than the bare minimum, they are surely cutting into short-term profits, however they may in the process be building a more resilient and popular brand that profits more in the long-run.
This would actually be an interesting test of that decision and the law of Business Judgement, which normally shields corporate directors from micromagement via lawsuit.
I doubt it would pass the threshold of "grossly negligent" that you'd typically need to sue a CEO as a shareholder, but it's certainly different from an otherwise positive action that simply uses company resources - like raising salaries or making charitable donations.
Frankly all that distinguishes these “brands” is literally just the packaging. How’s this better than planned economy where every item is just labeled with its dictionary definition?
I mean seriously, if this is end-game capitalism what’s the added value?
This is the same situation that happens on most platform plays.
You can see this in how Salesforce and Shopify are leveraging their platforms to learn what is popular and produce/buy their own products to sell to their customers to capture 100% of the value, rather than 30% of the value of the solution to the customer.
This questionable business practice is neither new nor limited to online companies. Brick and mortar companies like Costco do have their own products competing from other vendors, and I am sure they analyze sales data before jumping on selling their own.
I think the biggest issue isn't the "copy product by leveraging data", but more like, their products play by a different set of rules.
They could copy products and launch them abiding by the same guidelines, policies and everything else.
That's not the case, and that's where the unfairness comes to play: Amazon plays on their market place by a different set of rules.
It's not only Amazon. Google, Apple, and so on. The question starts to arise, if they want such massive platforms and play on such marketplaces, they must obey their own guidelines, else they are either stripped from the playground or someone else should own the play ground.
if they want such massive platforms and play on such marketplaces, they must obey their own guidelines, else they are either stripped from the playground or someone else should own the play ground.
So here's a question: Is a store really a marketplace? It seems to me that Amazon, Target, Macys, etc, do a lot of curation and editorial work with regards to standards of production and marketing for items in their stores. Isn't that more akin to publishing?
I think the grey area and critical zone is this: Should a company be allowed to advertise their ecosystem/playground as akin to a "marketplace" when what's really happening, is that they are tightly controlling the product and harvesting the information for themselves? Seems like a bait and switch to me! ("Your margins are our opportunities," is the most fundamentally aggressive business statement I can possibly imagine, and Jeff Bezos said it!)
Apple, Amazon, and YouTube all seem to fall into this general pattern: A "marketplace" or "ecosystem" which is less bazaar and more their tightly planned cathedral. "Partners" who are put upon, data-analyzed, and sometimes cannibalized. This pattern seems to be very widespread, and it only stands to reason, given the tremendous increase in the ability of companies to leverage technology to harvest such data in their own playgrounds.
I understand your idea, but I still think they are and should be defined as marketplaces, with a scrutiny any marketplace should get.
The first reason is, Amazon isn't doing much curation (if any), due to their size they can't do proper curation, and bots are terrible at it (either based on keywords or reporting). This is proven by counterfeit items being sold, listings being stolen/manipulated, biased report systems.
Then Amazon claims they aren't liable for the products sold - the customer belongs to Amazon (you can't even have access to their names anymore), the listings belong to Amazon, everything except what arrives at the door.
At last, Sellers pay for the product advertising Amazon does, it's called a Referral Fee (ranges from 8% to 15%). In fact, the Seller pays for everything (and they should, yet the amounts are up for discussion).
So they have all the symptoms of a marketplace, yet Amazon plays what ever role is more suitable for them.
I only think they should be enforced the rules of a market place in any developed place in the world.
No real private marketplace would be open if they were selling counterfeits. Even if they sold legit products as well, until they purged everything counterfeit they would not be open, and they'd pay fines for it.
I bet if any public Health/Goods inspection force would be deployed on ANY amazon warehouse, they'd find shady shit. But such public organizations don't have the tools/protocols to do what they do in the real world.
I agree with you when you say, this isn't limited to Amazon.
For example, why can't we get the full data from the customer that purchases from us? Why can't they be our customer on Amazon? Amazon hoards everything, and we get the scraps.
What kind of "full data" would you want from the customer? Earlier, you mentioned their name. Why can't the customer's transaction be as anonymous as possible, if they choose to be?
It seems as if Amazon, likely prodded by the GDPR and CCPA, is limiting the personal information they share with third parties. I think that's a good thing, for the consumer at least.
That's a slippery slope: is the person the seller customer, or Amazon's customer?
Their name was an example of something required to provide feedback, make amendments, or any kind of engagement that's required with that customer.
Anonymity is one of the reasons review manipulation thrives on Amazon.
Honestly I doubt it was due to GDPR/CCPA, or user privacy concerns, and more turning FBA into a pipeline of homogeneous suppliers that race to the bottom.
Amazon is a monopolist in several categories. Different rules apply to monopolists than other organizations. A basic constraint is that a monopolist may not use their position of monopoly in one area to give them an advantage in another.
This is totally false - the number of retailers who have testified before congress that they don't use seller data to compete against sellers - and then who go ahead and do just that is basically zero.
Additionally, most other retailers actually BUY the third parties products and take the risk of promoting and selling it. On Amazon third parties take the inventory and many other risks and may have to pay amazon to promote their product.
The story here is that amazon has testified it does not do something, has supposedly the "highest ethical principals" - yet goes ahead and does exactly that which it said it doesn't do.
Do that not matter to you from a trust / credibility perspective?
"Nate Sutton, associate general counsel at Amazon, told lawmakers the company doesn’t tap data from individual third-party merchants to determine what new products to create."
> The online retailing giant has long asserted, including to Congress, that when it makes and sells its own products, it doesn’t use information it collects from the site’s individual third-party sellers—data those sellers view as proprietary.
Amazon agrees that what is being reported goes against their policies.
'"However, we strictly prohibit our employees from using nonpublic, seller-specific data to determine which private label products to launch." Amazon said employees using such data to inform private-label decisions in the way the Journal described would violate its policies, and that the company has launched an internal investigation.'
That carefully phrased language could be technically accurate but still allow them to use seller-agnostic information about the market for batteries or speaker wire to decide to launch Amazon Basics batteries or speaker wire.
(Which by the way, I’m totally fine with, because there’s no reasonable way to prove you’re not doing it and any brick-and-mortar retailer is almost surely doing it as well.)
It's also ethically fair game to base your decisions to launch a product on the amount of consumer interest the category gets. Everyone does that.
What they promise not to do is take a look at seller specific data. That makes sense because it won't get them much extra compared to looking at categories, and the sellers ethically claim it's their data.
Actually - as the article described, they DO spend a lot of time looking at SPECIFIC seller data for unique products because it gives them LOTS extra that category details don't provide.
Could you please stop using allcaps like this? This is in the site guidelines: Please don't use uppercase for emphasis. If you want to emphasize a word or phrase, put asterisks around it and it will get italicized.https://news.ycombinator.com/newsguidelines.html.
> This is totally false - the number of retailers who have testified before congress that they don't use seller data to compete against sellers - and then who go ahead and do just that is basically zero.
I can't understand this at all. Retailers create in-house brands all the time. Do they somehow make decisions of which products to create in a black box? How would they even do that?
If you go into the Walmart pharmacy, their store-brand equivalents are full of statements such as "Compare to the active ingredient in Advil".
a) actually sell their product to walmart, even the branded product is owned, priced and managed by WALMART. So there is much less SELLER specific data to datamine.
b) sellers to walmart AGREE that the data on products priced, sold, and promoted by walmart (even branded one) belongs to walmart, and in many cases the seller has to pay extra if they want day/store level detail on sales. So in most cases it is a very upfront relationship, and walmart takes a lot more risk in pricing, promoting etc.
Here Amazon has enticed sellers by reassuring them that in CONTRAST to target, Amazon will NOT use the data they provide amazon to market against them AND sellers give amazon a lot more "seller" data because the sellers are often doing their own price management etc etc.
I mean, let's be objective for a minute here. Do you really believe that Walmart, Target, Costco, Kroger, etc, are more ethical with their suppliers than Amazon?
Let's not forget that many of these large retailers have moved to the practice of taking up to 90 days to pay their suppliers. 90 DAYS! That's three months before you see the money of the product you sold through their channels. And they do this because they simply can.
I believe that there's not a single retailer that doesn't leverage its distribution advantage to squeeze their suppliers. If you're not Coca Cola, PepsiCo, Unilever, Procter and Gamble or Colgate Palmolive, you have little to no room for negotiation.
I've done consulting for small business distributing into major stories.
Other stores are very very UPFRONT on what they will do. Many make the small mfg sign an agreement that not only will the store have all the data, but the mfg will need to pay the STORE if they want the data.
The difference here is that a) it is all upfront and b) the mfg can make an informed decision - is this worth it.
If you need store / day detail on sales because you are running promos and in-store marketing vs just being a low cost volume seller - all affect your view of this.
Finally, in grocery retail - once you have the order and deliver, you DO get paid regardless of whether product sells. This is an important positive even selling through Target in some cases especially with more perishable goods. Amazon as a seller you can't plan as well - their alog or someone else paying for promo could cut your demand in half overnight.
Additionally retail stores actually drive demand / discover ability when they purchase your product in a way amazon often does not.
> The difference here is that a) it is all upfront and b) the mfg can make an informed decision - is this worth it.
You sign the same deal when you sell on Amazon, probably even signing away more rights. I'm not sure I haven't read the full EULA when you sign up to sell.
> Amazon as a seller you can't plan as well - their alog or someone else paying for promo could cut your demand in half overnight.
This is about the only thing you've said I agree with. But it's not due to lack of data, it's due to barrier to entry with retail sales you have less competition. Right for the wrong reason here.
> Additionally retail stores actually drive demand / discover ability when they purchase your product in a way amazon often does not.
Amazon drives way WAY more discoverability than any retailer.
Pretty much your entire argument contradicts real world experience, common sense, and actual reality from what I know of the situation. I can tell you for a fact your assertion that 'Amazon doesn't do this' everything you're saying is 100% false.
Amazon drives way WAY more discoverability than any retailer.
This is completely false. Amazon provides significantly less discoverability than a retailer. With a retailer, you get a product that actually shows up in front of people's eyeballs, and the ability to provide in-store promotions to attract customers, and, most crucially, the store lets you know how the promotions perform. A small minority of retailers make you pay for this data, but most don't because they want products to sell through. Many stores will even work with new brands to promote their products, such as (temporary) eye-level product placement, end-of-aisle placement, special displays, etc.
Source: Before going in-house I used to rep manufacturers of all sizes from startups to billion-dollar behemoths selling to major, regional, and local retail chains. Grocery stores are the best at working with brands (but also the fastest to drop products that don't sell), Target is about average, and Walmart was the worst at the time though I hear they've gotten better.
As a non shlock product seller you are much more comfortable in local retail I think? I just thought retail was easier to actually talk to real people.
The schlock sellers I think are more expert in the amazon game (image / product swapouts and seller targeting, review spiking games, competitor flag and return / hazard attacks etc). So much BS and so little real recourse - the scale of marketplace must be nuts.
Tim - have you actually ever reped / managed distribution into retail at the moderate scale at least?
Do you have a reasonably high volume ($1M+ sales) amazon account to compare to?
I just ask because for such strong opinions "everything you're saying is 100% false" you don't seem like you have actually worked with businesses in this way.
Beleive it or not, you can actually talk to real human beings at your local retail stores. And yes, you can talk to real people at amazon, but if issue is outside their box (on seller side) you get little mercy. If inside box some of the treatment is amazing (amazon payments for goods they show as lost by them as a sale with no return risk)
> Finally, in grocery retail - once you have the order and deliver, you DO get paid regardless of whether product sells.
It's been quite a long time since I worked in the grocery business, but I don't think this is accurate. A lot of vendors stock their products themselves or use food brokers that do it, and they are on the hook for expired and returned product. And there was a shitload of bribery and corruption happening to steal shelf space and end unit space from competitors. It's a surprisingly cut throat business.
Major retailers buy and sell their product line data from neilson and others. I worked on a project with one of them so I know first hand. So the idea that they don't use seller data to market their own products has to be false.
And amazon sellers can sell their data (and do sometimes) as well. All that is fine.
Remember, for major retailers, a) THEY are the seller in most cases and b) in most cases they get mfg's to agree to whatever is going on in the agreement UPFRONT.
"Nate Sutton, associate general counsel at Amazon, told lawmakers the company doesn’t tap data from individual third-party merchants to determine what new products to create."
Of course they don't use data from individuals, they use all of the data, in aggregate, from everyone including themselves.
Amazon has promised individual sellers it would not use the data for their products to market against them (not individual buyers).
Despite the ludicrous lengths Amazon goes here to say there were multiple sellers and so this data was aggregate, we all understand (and amazon did too) that if you generate statistics such as median sale price per month / day etc where 99.95% of the data comes from one seller, you have the data from that seller.
> Amazon has promised individual sellers it would not use the data for their products to market against them (not individual buyers).
Again, there's that word. Individual.
They get off on a technicality with that comment to congress. The second you have even 0.05% (Your example, not mine.) of any category occupied by a second reseller, you're no longer targeting individuals -- you're entering a 'product vertical'.
Amazon does exactly what you're claiming they do not.
Does anyone really think that any retailer launches a competing product in a category without looking at all their supplier data?
So, if cars are inevitably becoming computers with wheels, what's going to happen to insurance companies? The major weapon of underwriting is data, and a company like Tesla is going to have a huge advantage in data over external insurance companies.
Is it really a societal good for big companies to control all of this data, or should the data belong to the consumer/owner/user? I suspect it's the latter which gives people the most choice and freedom by fostering the most competition.
Insurance companies are already offering discounts for using their apps while in car.
I was debating on whether I should include mention of these apps. Here's the thing about that: The data available to these apps is nothing compared to the data available to Tesla. Tesla can figure out how often you get close to bumping into something, exactly how far, how fast you were going, and what the lighting/weather conditions were like at the time. That data is orders of magnitude better than the stuff coming out of the app.
It's very analogous to iOS app makers competing with in-house Apple iOS apps. It's hard to compete, when your competitor controls the APIs.
All the things you name are available to a phone app as well. Particularly, if it has enough penetration to be in the vehicles near you. Local weather + data aggregation from all the insurance companies apps and suddenly about the only thing they don't have is whether you were looking at the road, and the condition of your tires and other vehicle specific metrics. Sure the GPS/accel data might be off a few percent vs the car but does that matter?
(BTW, Assuming a deal with your credit card company, they probably can approximate your tire age too).
All the things you name are available to a phone app as well.
Only 'kinda'. You might get 1 camera feed, and you can see what the weather report was for the area. Tesla has something like 8 camera feeds, and they can tell if visibility was compromised because the other car situated at 7-o'clock to the rear was in a building's deep shadow. The app could only kinda get that if one were lucky.
suddenly about the only thing they don't have is whether you were looking at the road, and the condition of your tires and other vehicle specific metrics
That and a lot more! Also, with far superior granularity, and with fewer data quality problems.
(BTW, Assuming a deal with your credit card company, they probably can approximate your tire age too).
Again, mostly. I would agree that the apps could compete. They're competing at a significant disadvantage, though.
There are insurance companies who already sell trackers that plug into your car's OBD-2 port and have onboard hardware so that the insurance company sees your acceleration, handling, sudden braking, times you drive, miles you drive, etc.
Right now, very safe and low risk drivers can use these companies to get discounted insurance.
Eventually, every safe driver willing to install these trackers will do so for the lower insurance rates, leaving a much higher risk pool with the non-tracking insurance plans, and it will become very expensive to not be tracked by your car insurance company.
I know. So again here's the heart of my point: Even with the OBD-2 port, the data available to these apps is nothing compared to the data available to Tesla. Tesla can figure out how often you get close to bumping into something, exactly how far, how fast you were going, and what the lighting/weather conditions were like at the time. That data is orders of magnitude better than the stuff coming out of the app.
Sure, but what's stopping any other car manufacturer from buying and using the same sensor kits? Look, I get that you can't get the same data with a 3rd-party kit but if you're an insurance company you're gonna be working with car manufacturers anyway.
Sure, but what's stopping any other car manufacturer from buying and using the same sensor kits?
Nothing, though I'm guessing they will be far behind for a year or so even after they deploy. (Unless that team is super competent, and they have absolute management backing.)
Look, I get that you can't get the same data with a 3rd-party kit but if you're an insurance company you're gonna be working with car manufacturers anyway.
It completely changes the dynamic of the business. One won't be able to compete, except as a manufacturer partner, and not all manufacturers will be equal. It will limit choices to consumers, and very strongly drive consolidation. I'm not saying only Tesla will be able to do it. What I'm saying, is that the nature of the business will change massively, in a way where customers will wind up with fewer coices.
The difference is aggregate vs specific data. If insurance companies use the cars' data to change their policies in aggregate, there's no problem. Meaning, if they discover that cars of a particular brand have more accidents, they can raise premiums on owners of that brand of car. On the other hand, determining that YOU drive really fast, should NOT trigger a higher premium.
It should absolutely trigger a higher premium if driving faster means higher losses. Otherwise the people driving slower are subsidizing the risk that the people driving faster are taking. How is that fair?
Everyone is arguing as if Amazon is the only retailer here. Yes, they are a platform, but they are one of many.
In fact, many people here contradict their own argument by saying that they are forced to go to other websites or direct to the supplier. Stating as much is tantamount to admitting that the market is functioning correctly.
Amazon is great for some things and bad for other things. If it doesn’t meet your needs, go elsewhere instead of rewarding it with your business and then complaining that it’s too big and powerful because people like yourself keep rewarding it with your business.
This is common practice in the retail industry. Large retailers want to ensure that they can offer their customers the lowest price on all of the products they sell.
Similarly, Netflix's sometimes odd choices for their deals or for original content production is certainly driven by the performance or certain metrics of previously acquired content.
> Stating the obvious I guess. All retailers do this and create their own white-label brands to squeeze profit from well-performing categories. Target, for instance, is very upfront about it and they have like a gazillion white-label brands that compete in hundreds of categories, which makes it very gray for the customer.
IIRC, many traditional white label brands are actually manufactured by the name brands themselves, and they're part of a strategy to segment the market.
The difference here seems to be that Amazon has been cloning relatively unique products made by smaller companies, while traditional white label brands are fungible commodities made by large players with little differentiation. From the OP:
> Because of the limitations of shelf space, traditional retailers stock far fewer products than Amazon’s hundreds millions of items. Typically, they create private-label products to compete in generic categories such as paper towels, rather than copycat versions of items created by smaller entrepreneurs, private-label executives said.
That is largely not the case. I spent ten years making private label medical devices for CVS, Kroger, Target, and dozens of other stores.
There tend to be specialist manufacturers who fill the store brand niches. E.g. in pharma, close to 90% of the pills, tabs, and liquids sold in front of the pharmacy counter are made by one company, Perrigo, whose entire model is predicated on being a store brand supplier.
I don't think Kimberly Clark makes the store brand paper products, nor does P&G make the store brand beauty/cleaning supplies.
And I can give an opposite case. I used to work for a large 1st-tier manufacturer of consumer batteries (hearing aid, AA, 9V, etc etc).
We were constantly competing with the other manufacturers for the Wal-Mart, Walgreens, CVS, etc white label brands. It was increased volume for our plants and they would usually suck up surplus supply.
The catch was that your contract was continually up for renewal and you had to beat the others on price and other criteria. After all, nobody else would know that the rack at Wag's was half-bunny and half-coppertop, right?
It was also a headache because defective parts and customer complaints counted against you hard. We actually tested our white label products more than the name brand SKUs.
I work in this industry as well. That said - private label is a small (but growing) area in the US markets, so it's hard to make a generalized statement of how much someone does or does not participate.
Many retailers are beginning tie production of private labeled products in with being the captain of a category - which begins to create incentive for companies to start to pursue these private label opportunities.
K-C and P&G are two examples of companies who largely resist the private label trends in the US - you could counter with ConAgra and Treehouse.
A lot of that has to do with the product and what-not, of course.
I wonder if issues like this combined with the COVID crisis will impact customer and supplier behavior?
For me, Amazon has been a shitshow for the last month. For in-stock product, they project delivery for Memorial Day and deliver in 24 hours, or promise prime and deliver not-so-much. Other retailers seem to be fine. Target, NewEgg, Walmart, etc seem to be fine. Small online retail seem to be fine.
I wonder that their awful practices are biting them now... once they hit a bump the whole system jams up.
I've lived in Kirkland, Washington, off and on since 1994. It's amazing how many people all over the world know of Kirkland from Costco branding. For a log time the reddit tag line[0] was "We're more than Costco!"
> but I am a Costco fan boy, and they do the same thing
Are you sure? My understand was the Kirkland is mostly just a re-badge for already existing manufacturers.. Kirkland usually buys up their "B" stock/bin of items and just rebrands them.
The solution isn't hoping the free market would solve this with a competing platform. The solution is to create regulations & laws that prevent this behavior.
You're either a platform/retailer or you're a manufacturer. You don't get to be both because we see the perverse incentive that happens when it's allowed.
No, this is not great for the consumer. It lowers the bar for everyone. What I find mostly on Amazon in the past year or so is cheaper imported versions of decent products. The decent products are hard to find or I have to look outside of Amazon. They've pushed out the quality and replaced it with higher profit junk.
Its kind of the same thing with Home Depot. I used to be able to buy quality hardware from a local store. Now all I have is Home Depot and they sell mostly imported junk hardware. I have to go somewhere like McMaster-Carr now for quality hardware. Home Depot has not been good for me, Home Depot has only been good for itself.
Different problems. One is the regulation of which suppliers can distribute on a platform, deceptive advertising, right-to-repair, and similar consumer protection considerations.
The other problem the article and parent comments are describing relates to the distributor/retailer creating or sourcing generic alternatives to the items sold by their existing suppliers and informing their decisions to do so based on the sales data from their own partners/suppliers.
This latter case seems ok to me, even if it sucks for suppliers, in the sense that we generally get better outcomes for customers. As long as the general regulations for consumer protection are in-place such as preventing confusion between brands and generics.
Good question. Actually I don't have any data for that. Anecdotally many "store brand" items of things that seem commodity-like, are things that I can get the same quality as a name brand at a lower price. This is better for me, and I suspect better for most consumers in a static situation. But the market is dynamic. Does this stifle innovation of new products? Does the reduced revenue of "brand" named producers, especially smaller ones hurt? Does the price competition produce a race to the bottom that ultimately doesn't benefit consumers? I don't know. But I would say that the considerations of increased regulations of "generics" vs increased regulation of "online markets" seem to me to involve different tradeoffs.
Sadly, the American grocery store is not optimized for consumers, so we can't draw many inferences from it. It's true that no-frills versions of commodity products are a good deal compared with heavily marketed products. But I don't see any reason to think letting individual stores dominate that market segment would be necessarily better for consumers.
Giving consumers the same basket of goods at a lower cost just increases their real income, purchasing power, and overall standard of living. Amazon is effectively distributing billions of dollars of charity to those who need it the most. They lose $2 billion a quarter on retail. That's $2 billion per quarter in subsidies to consumers.
...which is classic anti-competitive behavior. That isn't a free and fair market - it's one that's in the process of being captured by a few large incumbents.
If they raise prices then they invite an instant flood of competition and lose their monopoly. They have no power to raise prices and restrict competition. Their only competitive advantage is pricing. Amazon's only profitable products are AWS and its stock. The benefit of losing $2 billion a quarter doing retail is debatable. Would you prefer a world without amazon's subsidies given that they have no power to exploit anyone?
Your theory is that Amazon is spending $2 billion a quarter even though it gets them no long-term advantage?
If you're right, then capitalism is hopelessly bad at optimization and we should scrap it. But what I think is more likely here is that Amazon's execs understands the economics of their business way better than a zero-karma free-market fundamentalist whose pseudonym is a genitalia joke.
They get a long-term advantage in that their stock continues to rise. The stock is the product. And AWS enjoys having a household brand attached to it. And don't be mad that someone with a genitalia username is making a point your brain is incapable of making a cogent argument against, in spite of it eliciting a strong enough emotion for you to leave a comment.
Their stock will only rise if they eventually make more money. Meaning that investors expect them to be able to make that $8 billion/year up eventually. Presumably through pricing, because selling stuff at above-cost prices is where their money comes from.
Also, I only made fun of your username and your lack of karma because you were making absurd unevidenced claims like, "They have no power to raise prices and restrict competition." If you're going to say things like that, then it's not so much making a point as doing what Frankfurt calls bullshiting. [1] That combined with your very low karma suggests you're not really worth the time of a serious reply. Note the link in my bio: http://www.penny-arcade.com/comic/2004/03/19
And what do you propose in place of capitalism? You sound like a child. Why would you want to force companies to make a profit on every product? There's something called a loss leader. How about just prohibiting all forms of charity? You make zero sense.
And at least I don't resort ad hominem arguments. That's what happens when lower IQ individuals have nothing else to say and don't know how to deal with the cognitive dissonance that arises when truth clashes with their feelings. Feelings based on cartoons and TV shows that programmed you to viscerally react that way.
Fair enough, its not quite the same thing. Though Home Depot has a ton of its own products now too - they are doing the same thing inside physical retail stores rather than online only.
For pharmacy items where there is some regulation around the quality of the product, I find generics/store brands to be great. For products that are not regulated in some way quality is all over the place. If you search Amazon for "ul listed usb charger" you will mostly see results for products that are not UL listed - there are probably 5 times more unlisted products for sale there than listed products - Amazon is pushing a bunch of cheap and high-profit crap at me even when I try to avoid it.
Tip- check out Fastenal. They don't tend to have small retail packages, so you need to buy larger quantities, but it's really nice not to have to wait for shipping. They're an industrial supplier, but all the stores I've been in were perfectly happy to sell to the general public.
I tried to look for a decent priced backpack on Amazon a few months ago but there are a gazillion listings for what appears to be the same backpack, only the names differ. I ended up just buying it straight from Aliexpress from where it undoubtedly has been sourced from one of the same (or single?) factories. There's basically cheap-as-chips level products, and then 'high-grade' which is still dubious at times whether the quality of materials is better or not. Middle of the pack product pricing seems to just be swallowed up in a race for the bottom or the top.
People seem to think "capitalism" produces the best results simply because of privatization, but it is the competition that is created. It doesn't matter if the one producer is Soviet Russia or Amazon, it hurts everyone in the long run when their is one supplier.
This is a frequent trick in econ 101-style defenses of anarchic markets - play with the time horizon.
If you're hungry, a soda is "great for the consumer". For 15 minutes, it alleviates that feeling. Does it follow that everyone should consume only soda?
You're focused to much on Amazon. Every company does this just go to your local Walmart, everything is white-label. A law like this would have to be applied to them as well.
Similarly how Microsoft launching Internet Explorer to beat Netscape and eat another Market was technically more competition (for a while, until they've established another monopoly and all competition ceases).
On the contrary, house brand products are great for consumers. Rather than having to figure out if they can trust a brand for a product category that they really don't care about, they can just buy the house brand knowing that a certain minimum level of quality exists. This is why Amazon Basics products are so popular on Amazon: consumers know that, at the very least, Amazon can be sued, a form of recourse that is not available with most of the smaller brands and sellers on their platform.
This is me. I bought an AmazonBasics product initially, a phone cable, thinking it would be crap. It wasn't. So I bought another one, a set of HDMI cables. They weren't crap either! Then I bought AmazonBasics wash cloths as a joke. They were quite nice! Now I find myself shopping around the AmazonBasics section first. I still find it amusing in a "Spaceballs, the flamethrower!" kind of way.
> That reduces competition and allows Amazon to charge more.
that never happens, unless there's a regulation in place that prevents new sellers to get into the market as quickly as they can. When a price for the product begins to rise, it attracts new sellers, as now there's a wider price range to position your competing product.
Definitely not. Consumers are best served when you have a bunch of relatively equal players competing for their business, and where success is rewarded financially. That gives everybody an incentive to focus on continuously getting better at serving the customer through R&D, etc.
But if the reward for success is just having Amazon come in and hoover up the money you would have gotten by launching a knockoff, then suddenly there's a lot less incentive to invest in novel products. That's true both for categories where Amazon is competing and ones where it isn't currently.
I wouldn't be surprised if Amazon's replacement product is sometimes modestly worse, because a) they don't have the kind of deep expertise in a product that the original creators do, and b) it doesn't have to be as good to get the money.
And then there's after-sale support. Amazon's customer support is atrocious. The one thing they're good at is taking things back. But anything more complex and it's a nightmare.
> Consumers are best served when you have a bunch of relatively equal players competing for their business, and where success is rewarded financially.
That depends on the significance of economies of scale and barriers to entry in a particular market. The term “natural monopoly” (as it’s used in economics) refers to a particular market where, because of barriers to entry, the optimal number of firms is one. Two firms would not be able to produce their good for cheaper than one firm.
Consumers are definitely better served by competitive markets than monopolies, natural or otherwise. I agree that's not always possible, and where it isn't, we generally get bad monopolist behavior, heavy regulation, or both.
I also suspect the notion of "natural monopoly" is oversold and too simple. Would it be more efficient if we had exactly one ISP for the country? In theory, yes, because then we only have to run one set of wires everywhere, and we'd get rid of a lot of duplicative equipment and staff. But in practice, monopoly and oligopoly ISPs are generally both expensive and bad. I just moved from a competitive area to a "natural monopoly" area; my internet now costs twice as much for 10% of the bandwidth, much lower quality, and much worse service.
I think that's because companies aren't static entities that reliably produce goods, even though that's what most people imagine. Instead they're temporary coalitions of individual actors hopefully prodded into optimal behavior by external forces like competition. Especially so given American business culture, which often refuses to recognize ways of thinking that might mitigate the problems.
I dislike Amazon as much as the next guy but let's not kid ourselves here. Consumers aren't looking for innovation in the paper towel market. They just want cheap stuff. If Amazon can make these products cheaper then the consumers win.
There’s no evidence that that mechanism is effective any longer. The United States regulators seem to be entirely content with fake not-monopolies (eg ISPs) lying about how much competition they have, and let monopolies or duopolies fleece millions for essential services or products as long as they spend the requisite amount of kickback via lobbying.
Admittedly those are public utilities but the attitude seems to hold true in antitrust as well. Walmart is probably the best example there, or now Amazon as evidenced by TFA.
Product feature innovation is not the only kind of innovation. Supply chain innovation provides the cost reductions needed to lower prices. And you regardless need product expertise to know where to cut costs.
As a super-obvious example, an accountant looking to cut costs at a hamburger chain might first suggest reducing the amount of meat or using old meat. But that reduces value as much or more than costs, so it's a bad optimization.
that solves the problem for suppliers, but creates one for consumers with lower competition. Less competition, higher prices.
*just noticed I was down voted, likely by
MichaelApproved because he has 7500 Karma and I only have 156.
I'm starting to really hate contributing to HackerNews discussions because it's fully of a bunch of bullies who pound on your karma if you don't agree with their viewpoints. Bring on the downvotes, I know HN hates any mention of it's imperfections as well. At least my conscious is clear.
Please don't submit comments saying that HN is turning into Reddit. It's a semi-noob illusion, as old as the hills.
Please don't comment about the voting on comments. It never does any good, and it makes boring reading.
To your point, though, lower competition is not always bad. I as a consumer very much prefer having to deal with fewer toilet paper suppliers if they are of good enough quality. The toilet paper industry is not one where I expect dramatic innovation brought by competition. I just want the cheapest pack that won't feel like sand paper on my delicate behind.
There are, surprisingly, quite a lot of similar industries where consumer would prefer cheap and fast rather than elaborate and innovative products.
The cheapest pack comes FROM competition. You, as the consumer, want the cheapest pack. You want competition. It's the most basic of economic principles.
P.S. making comments without a basic education of a topic is equally boring to read. I would rather you say it and have the chance to learn than silence you though.
You missed the whole point in that uncalled for attack on my education. No one here is talking about preventing all competition. Then you went on repeating an economic principle without understanding it fully. I know that because you consider it absolute while it's in fact not. In the real world, it is very rare to find an actually efficient market with perfect and instantaneous discovery where those simplistic economic laws apply correctly.
The general point is that it is generally possible to keep fair competition flowing between a smaller group of companies, as long as that group is large enough for its members' respective interests not to align completely.
All other things being equal, there can be only one cheapest pack of toilet paper in a given market, which immediately disproves your argument. After all, having 5000 toilet paper manufacturers all competing among themselves is certainly no guarantee of any improvement to the consumer for that particular criteria, because 1000, 500, 100 or even 2 would have sufficed barring collusion.
Now we can add many other qualities to toilet paper that make discerning customers keener to see past price when they're buying between competing suppliers. However, in mature markets with proven, stable demand, there comes a point where adding more actors does not bring value. Those additional entities are merely tapping into existing market value without providing marginal benefits and without forcing others to improve.
Do you believe the toilet paper industry is so ripe with innovation that its warrants as many competing manufacturers as possible, with as much competitive spirit among them as possible? Nope. In a supermarket, the pack of toilet paper that's put in shelves slightly above eye-level will be chosen way more often by consumers than other packs located a bit below. Companies do not compete on the quality of their products, they compete on the amount of money they pay for their products to be stacked the right way on the right shelves at the right location.
Back in the real world, across many industries, going from thousands of competing companies to a few hundreds is definitely not worse for the consumer.
Please don't break the site guidelines by going on about downvotes. It just adds noise, and since it's against the rules, usually guarantees more downvotes.
If you think there's something abusive going on, email hn@ycombinator.com so we can look into it.
The alternative to introducing this regulation is not going to a system with no regulation, it's continuing with the current framework where Amazon is actively driving competition out of the market. Opposing this regulation without an actual alternative is just defending the status quo.
> "The solution is to create regulations & laws that prevent this behavior."
I'll take a slightly contrived and simplified set of examples to illustrate why a lot of free-market advocates don't agree with this sentiment as being correct.
1. We identify this "market failing" behavior of Amazon. I.e. Amazon does it a few times and after a while, public starts to
2. Legislators make it illegal for a platform to sell the same products as their suppliers. Easy, right?
3. Amazon alters products to not be technically "the same" so they skirt regulation. E.g. Renames "Plain Artisan Soap" to "Amazon Artisanal Soap", never mind that the product they "copied" was called "Joe's Plain Artisan Soap", and Amazon's product is advertised as "cheap alternative to expensive artisan soaps".
4. We notice and we complain.
6. Amazon complains back (maybe even a few court-cases along the way?), says certain products aren't the same. E.g. Supplier sells artisan soap, but Amazon argue their white-label "soap" isn't the same, it's just soap.
7. So to be fair, legislators start coming up with a reasonable system to identify similar products, which forces amazon to identify "similar" products in order to get them off.
8. Legislators followup and create reasonable rules and exclusions how Amazon can market their branded soap, or how closely the soap can resemble an existing product.
9. Amazon happens to also have a bunch of their own genuine products that it manufactures cheaply. Perhaps a byproduct of some sort of warehouse process they have, and they use their idle machines to make it, or something. But new suppliers come on that happen to sell something that according to regulations is "similar" to those products, and Amazon gets into hot water.
10. Amazon has to put rules, processes, maybe software algorithms to identify such a case. Remember, at Amazon scale, they have thousands of new suppliers and orders of magnitude more "products" that get added each day.
11. Regulators realize it's too difficult to figure this problem out and go to court over it. So they come up with a complaints + arbitration system to address it fairly with a "human in the loop". Think DMCA, takedown requests, etc.
12. Above regulations require paperwork, and you have to register as a platform if you get requests, you're obligated to address complaints of "similar products", etc.
Amazon implements all these rules at each stage, neverminding the "good-faith" interpretation of the original and subsequent laws put in place each time. I.e. "We just don't want platforms abusing their power to undercut genuine businesses." But at this stage we've, through genuine and honest market "interventions" and reasonable rules that seem straightforward and simple and cheap to implement, created regulatory costs that by default get applied to every new "platform" that competes in a space similar to Amazon. You've now successfully put in place regulations that inhibit and prevent competitors manifesting to compete with the existing monopoly or oligopoly.
And the alternative, if I'm getting AbrahamParangi's point, is to create regulations that only apply to Amazon. That seems arbitrary and unpredictable. I understand that regulations applied equally to every company increase barriers to entry, but making special rules for specific companies weirds me out.
Wouldn't solve anything. They'd just split their company to be separate entities but still share all the information and operate as if nothing has changed.
What they would probably do is form special relationships to give certain brands special placement and/or endorsement, but charge those brands a larger fee for the special treatment. The end result is basically the same.
What really is the issue? That Amazon is leveraging its success to be successful? It's unfair that Amazon is able to see that a product category is doing well so it invests its own money into manufacturing a product to sell through its site?
Do you really think that if Amazon couldn't use the data from its own site that it wouldn't procure it elsewhere? Before any product is developed there is extensive market research done to get an idea of how much money this product could make.
Anyone can and does do this, why should Amazon be punished that its data collection mechanism is cheaper than others?
It is not illegal to have a monopoly; but it is illegal to use a monopoly you have in one area to get an unfair advantage in another.
Amazon may or may not legally be a retail monopoly - I do not know the answer. But your question can be rephrased for any monopoly and the answer would be “monopolies should be punished for leveraging their monopoly power in other markets, because that ruins the market for everyone else.”
Free markets and democracies are good at a lot of things, but self preservation is not one of them - therefore you need anti-freedom laws.
> It is not illegal to have a monopoly; but it is illegal to use a monopoly you have in one area to get an unfair advantage in another.
This is a very common misconception in the United States. It’s how a lot of defenders of antitrust law want antitrust law to work, but it is not how antitrust law does work.
This Supreme Court case explicitly establishes that antitrust laws can be used against companies which obtain a high market share simply by anticipating future demand and responding effectively and efficiently.
> antitrust laws can be used against companies which obtain a high market share simply by anticipating future demand and responding effectively and efficiently.
This would make sense as a feature. If you subscribe to the view that competitive pressure is the source of progress, then you never want any company to actually win. Like a donkey chasing a carrot on a stick, you want companies to endlessly run towards market dominance, but never actually get there - because once they do, they stop contributing to progress.
>What really is the issue? That Amazon is leveraging its success to be successful?
The issue is that over the long term, Amazon is lowering the ROI on innovating and taking risks in the consumer goods space. It's able to do this because of its dominance as a marketplace.
Where it gets grey is when stakeholders privately invest or start companies that sell on the platform. Amazon chose to do it upfront with Amazon Basics but there’s nothing stopping them from creating house brands/labels even at arms length to give the impression that it’s not Amazon.
This issue us that Amazon also dictates what you are allowed to sell your product for elsewhere. It would be one thing if they just used your own data and created a competing product, but the fact you cannot sell your product cheaper elsewhere is the issue.
Anticompetitive practices include activities like price fixing, group boycotts, and exclusionary exclusive dealing contracts or trade association rules, and are generally grouped into two types: agreements between competitors, also referred to as horizontal conduct.
Thanks! I meant how would Amazon prevent it at all. (But maybe they would just sue you. But ... can't you just create a separate company to conduct off-Amazon business?)
Vertical monopolisation is a mixed bag actually. Vertically integrated companies profit more with lower prices in the downstream market than a purely downstream product company because they make profit at both stages. Antitrust law is far kinder to vertical mergers than horizontal mergers.
Sun pushed OpenOffice to cut MS's profits from Office
Google and MS are pushing into the Cloud to reduce Amazon's influence
Amazon is creating its own ad network and offering Twitch to reign in Google
Walmart is slowly creating its own global online shopping platform to compete with Amazon
Should Amazon ever have no competitor, monopoly regulations would kick in. But usually, all the other big players will make sure that Amazon has enough competition to not be invincible. It's not fun for small players, but they obviously don't care enough to organize and take their products off Amazon.
Btw, Amazon does not necessarily have less overhead due to Price's law: [1]
>The square root of the number of people in a domain do 50% of the work.
Should Amazon expand into every business, they would be so huge that all their efficiencies and more would be eaten up by the overhead.
Price's law is of questionable empirical validity, it's more like a useful guideline/urban legend. On the other hand, there is substantial economic research demonstrating the harms of monopolies, including vertical ones.
I'm a bit confused. Are you claiming that because of Price's law, Amazon doesn't actually benefit from it's monopoly position?
Almost. I think that Amazon cannot hold a monopoly position in all markets because its size would be so big that a smaller competitor could compete.
As a consequence, there will be an optimal size where Amazon is serving many markets, most likely the most profitable ones, thus massively benefiting [ * ], but they leave every other market open.
Depending on the future, this is not necessarily a bad position because low interest rates could seed plenty of startups which means that competitors could operate below break even points.
The question is: will Amazon ever reach that position or will its competitors make sure that all its profitable markets will dry up and its growth will be limited?
[*] Actually, not Amazon is profiting because the value of that dominant position would be priced into Amazon shares in advance. Amazon would just execute its dominant position that its investors had foreseen.
Why wouldn't 7. be: a competitor easily enters the market because they can just make the good and charge a markup that's somewhere between what amazon is charging and 0 and still make a profit and get all the business?
If what you said about amazon having less overhead prevents the above hypothetical from happening, then what's the problem? It's apparently more efficient for Amazon to supply this good and that's what an omnipotent benevolent economic dictator would choose anyways.
We run a DTC automotive retail website that has both white-label products and vendor products and have product development and manufacturing capability in house. We also sell through multiple channels like wholesale customers, marketplaces, (including Amazon when it makes sense), and a 2 retail stores.
Are you saying that we need to dramatically change our business model and can only either be a manufacturer or sell other peoples products because this model is unethical?
Or a competing product emerges with a lower price and/or better quality. Step 6 would only happen if competing products are not allowed to be sold on Amazon. And even if Amazon does that, I would assume that if the delta in price and quality is big enough people would switch to buying the product on Shopify, eBay, or any other platform the manufacturer can use to sell.
The fallacy in this all too pervasive argument is assuming that once a competitor dies or is bought out, there is no more competition from now until judgement day.
This is flat out silly and has never been observed. Monopolies cannot significantly raise their prices, or competitors instantly appear.
>You're either a platform/retailer or you're a manufacturer. You don't get to be both
Ok, done.
Now what are manufacturers supposed to do when Amazon and Walmart start bullying them some other way? You just made shipping their product directly to the customer against the law.
No, that's not what a platform is. You can always sell your product direct to consumer. You just can't be the intermediary for both your own and other companies' products on the same site.
OK, done.
Now you have Amazon Basics' products competing with Amazon Fulfillment's products on Amazon Dotcom's website. Different entities, not even under the same corporate governance.
If they are different entities, how come Amazon Basics can use the same name as the platform? Did Amazon sell the rights to another company to use their brand?
"Did Amazon sell the rights to another company to use their brand?" But of course, why not? These kinds of trademark licensing agreements are all over the place, there would be no difference here.
Alright, so you actually can be a manufacturer and a retailer at the same time, just with your own products on a separate website.
Are manufacturers legally barred from linking to the marketplaces of its peers?
Could Amazon not just maintain two websites, and shut down the marketplace for certain goods when it feels it has enough information to sell its own versions on the other site?
If not, could Amazon not just sell the information it would have used to develop its own products to another company (which we'll assume is totally unrelated) to develop its own off-brand products, and then treat those products preferentially?
I think those are good implementation concerns. Maintaining two separate websites isn't really an option under the supposed regulation, that's still one company being a platform and a manufacturer. The second option seems alot more likely to be allowed -- but now, at least you've created a market for that information and it's not just Amazon that has access to the data. Not sure I understand why it would treat the those products preferentially though -- unless you're bundling selling that information with product placement fees, which doesn't seem to be related (or necessary). I would assume product placement would be another revenue stream for the platform, like it is now for brick and mortar retailers like walmart
The software corollary would be that Apple can no longer host GarageBand and Keynote on the App Store, and Google can no longer host GMail or Google Docs on the Play Store.
I think that's a great call-out. It's interesting that we don't see the same problem in app stores -- probably because there's not much profit motive for apps like there is for general retail.
Well, the function of anti-trust law is specifically to target massive unchecked power.
If you're the supplier with a Shopify and Amazon Merchant account, or a local grocery store with white label products, none of this applies to you because you don't have the capability to effectively hold other businesses or markets hostage, no matter how aggressive you are.
That's what India basically regulated with Amazon. i.e. a company can't sell proudts on their open-market platform from companies you have a stake in (or your own generics presumably?).
>The new rules could wipe out nearly half the products on Amazon.in, said Satish Meena, an analyst at Forrester Research Inc. “It’s likely to disrupt availability for customers,” he said.
>The biggest beneficiary from the tightened rules could be Reliance, which is India’s largest private company and owns the country’s biggest brick and mortar retail chain.
In theory India standing up to giant foreign corporations. In practice, a huge giveaway to another giant corporation at the expense of Indian consumers and a big warning to other companies hoping to expand to or invest in India.
Or it will allow small businesses space to compete in India instead of taking a shortcut of allowing unfettered access by large corps to increase commerce, but in a way that funnels profits away from India itself.
That portion of the article is basically the opinion part. I didn't find great coverage over the full details of the regulations themselves.
How come we don't see this kind of angst with other store brand items. I can't imagine these comments being lobbed at Wal-Mart's Great Value, Costco's Kirkland Signature, or Bi-Lo's SE Grocers items.
And private label doesn't mean you have to manufacture anything at all. Sometimes, you will go to the company whose marketshare you are trying to take and they will manufacture the product for you.
If the aim is to curb monopoly powers of Amazon etc this would be disastrously counterproductive
When Joe's Custom Bike shop isn't allowed to be a manufacturer and a retailer of someone else's bike equipment, the customer is going to go to Amazon or Wal Mart to buy it. And retail giants, buoyed by the government killing half their competitors, will still find a way of squeezing their suppliers and funnelling sales data to preferred suppliers or related entities.
I would disagree, the free market is working just fine. Many brands are no longer selling on Amazon and doing very well.
We don't need laws to restrict one party from taking advantage of another in a deal... it just takes brains and some companies are using theirs to partner with other platforms or sell DTC(Direct To Consumer)
I agree. I am hard pressed to think of a recent time that I advocate for an anti - monopoly government action, but Amazon and its current practices is one of those times. If they provide the platform they should not be able to compete with and undercut those using their platform. They are at such as scale that they can basically put anyone out of business to the detriment of all other businesses. This is what the legislation is designed for and it should be used in this case. Pro sellers on amazon also have to pay a fee averaging 13% per sale, while amazon products don't suffer that handicap. Its a competitive advantage the sellers cannot overcome.
Many years ago I worked for a small analytics company bought by Amazon. My job was to analyze and report on the rise and fall of various product sectors on the web. We were in a unique position at the time, with the ability to see what URL's people were visiting. Reports we presented to Bezos, Jason Kilar and team, were used to make acquisition and growth decisions. In one case we found that that toys and plus size women's clothes were the top sellers for ecommerce in the US. They looked at the data and backed out of buying one of the major e-commerce players in toys and instead launched their own toy site / section. It was the beginning of Amazon moving away from Books and Music and into all other products.
The point is that competitive data is what drives decisions for product and segments in all areas of retail and business. Either in house or outside. Gathering that data from within your property is no different than using an outside agent.
You are acting as if they're spying on their customers, when the customers are you and me, not the reseller using their platform/space/warehouse/services.
Sounds nice in theory, but deferring to the government for this is how to fuel the lobbyist industry and end up with regulatory capture.
Anyone can host a website, market their product, ship with FedEx/UPS. Preach people do that instead, rather than bow down to our government stamped and approved overlord Amazon.
Thanks for the enlightening insight, captain obvious.
Every single platform company, whether online or offline, does this. Apple does this with their appstore. Microsoft did this with their windows platform. Every retail or grocery store does this by developing their own native brand that blatantly copy existing products but with a bit lower quality and lower price.
Is this good or bad? Well this is how the vendors are forced to innovate, and that's good for the consumers! If we just all become social justice warriors and shame all these platform companies to do nothing because their products shouldn't hurt others like a bunch of communists, then it is US, the consumers, who lose from this. And even these social justice warriors, at the end of the day, are all consumers.
I also find it weird how they say Amazon "scooped up data", when all that data has been on Amazon's own server all along, voluntarily.
The key difference between what Amazon does and Costco/Walmart etc does, is that regular retail takes the risk of buying the product to resell, prior to gathering data and considering whether to clone it.
Amazon is able to snoop on all the sales data without any risk.
We sell an ERP catered to distributors and many do sell on Amazon. I’ve always wondered why on earth they would continue to sell on a platform that’s constantly gathering their selling data, or even inventory if they’re going FBA, and eventually try to undercut them if their products sell well.
Their response is usually “I’m making enough money now, why worry about later?” or “our product category is too niche for Amazon to enter.” It seems like that kind of reasoning makes sense for traditional retailers like Costco/Walmart/Macy’s etc., but not Amazon where Amazon virtually has no risk in listing a product.
The other thing is that Amazon effectively has unlimited funds to fight a seller for control of an ASIN. They can sell at a loss for as long as it takes to squeeze you out. They have a massive unfair advantage.
When your customers say that their product is too niche, they're probably right in a lot of cases. The argument that Amazon can enter every niche and cater to every consumer want is essentially saying that planned economies can actually function. But they can't. Amazon is skimming the highest volume product categories and that's it. They couldn't manage the complexity of branching out into every single long tail product.
And how would you ever know either of these two (volume, margin) if you were an arbitrary 3rd party?
Amazon doesn't need to branch out into every single long tail product to cause severe disruption to a retail sector that is often predicated on low single digit margins.
Amazon know volume, Amazon goes to suppliers on alibaba and gives them the quantity they require and then Amazon figures out what margin they'll be making if they sell it at the same or lower price than the original seller.
If you can't see volume, you can't estimate profit, and you can't differentiate which products are worth considering as a primary seller.
Start with volume as a suggestion of which products to investigate for purchase price with sellers. If you can get the "right" price with the "appropriate" volume, start selling the product direct.
Also, at Amazon scale, you can estimate margin by looking at price variation over time and throwing in some well tested assumptions.
> Also, at Amazon scale, you can estimate margin by looking at price variation over time and throwing in some well tested assumptions.
You really can't. You have to do research and modeling to figure out margins. There are probably half a dozen factors that determine a product's margin.
Yes they can't but what Amazon is usually doing is pretty simple.
It gets into things where not much is needed.
For example, USB cables, laptop sleeves, kettle bells, dumbell, weight plates, led light and this kind of category is simply too big and it will put whoever ever discovered a new niche which doesn't require anything more than the physical product get outcompeted by Amazon.
Oftentimes this is done to circumvent paying patent license fees- for example if a patented component in a BOM would cost 75 cents per unit from the manufacturer, and the in-house team found a way to perform the equivalent function for 15 cents then it would instantly allow your product to undercut the competition. In Amazon's case, all it takes is a query to find high margin items in which knockoffs can be made and self-promoted to eventually outrank sales of the original item.
Another approach ... they could also identify which products either have wide-supplier diversity for the same thing (commodities) or narrow supplier density with many branded variants (OEM suppliers). In either case, they can go direct to the manufacturer without ANY innovation, slap the label on, and cut out the middle-man/sub-retailer costs. I think Amazon, in particular, has a team analyzing these factors as input into their sourcing (on top of general considerations like margin).
Is there any Business to Consumer intermediary/platform that doesn't do this?
All big retailers (Walmart, Costco, etc)
Apple
Google
Amazon.
Once you sell or distribute through a marketplace where they also sell or offer products to the same audience, expect the best ideas to be copied by the platform owners.
That's one of the downside retailers have to deal with.
Any seller will do this, it is natural. Watch how WholeFoods for years has replaced successful independent brands with "365" competitors. Any seller will act this way; only regulation will prevent it.
Regulation would not prevent Whole Foods and “some independent company” sharing data and producing these white label products to be sold exclusively at Whole Foods.
This very easily defeated regulation is a perfect example why they aren’t a silver bullet. Throwing your hands up and saying “just make government fix everything” isn’t realistic, there is overhead and cost and bad precedent in that.
Anti trust and anti monopoly oversight is urgently needed. Amazon is growing like a rapidy mutating weed on coronapocalypse fallout and the centralization is rapidly getting out of control imo.
https://slopeofhope.com/2020/04/locking-in-amazon-gains.html
Sometimes I wonder if Shopify’s long-term plan is to do something like this.
It's probably the leading direct-to-consumer platform out there right now, it’s touted sometimes as the anti-Amazon. The leading D2C brands I’ve seen are on there (Allbirds, Atoms, Untuckit) as well as random drop shippers. Shopify is also expanding into a fulfillment network too: https://www.shopify.com/fulfillment
Maybe. But I think the first step is that Shopify creates a means of unified discovery across its many merchants. Maybe not quite a unified store front like Amazon, but maybe a unified search listing, like Google Shopping. Probably also get into recommendations across stores as well. There is a lot of related opportunities here once Shopify starts to link data and search and recommendations (and eventually ads) across their various stores.
I think they want to do something like this. The problem is that Shopify has zero traction with consumers. Until they solve the problem of getting consumers to search for products on their platform, they'll have no success. That's a tall mountain to climb.
This reinforces the belief I have that antitrust regulation of online companies needs to force them to pick between being a platform or being a store (or publisher), but they're not allowed to be both.
every major retailer has store brands, and I fully expect they all use their sales data to inform their generic products business, and all of their suppliers expect that too. As a consumer, I like that Amazon is upfront about what products come from their brand. Good luck browsing through the plumbing and electrical fixtures at Home Depot or Lowes and figuring out what crappy store brand stuff and whats not.
> figuring out what crappy store brand stuff and whats not.
Don't they usually have only one store brand? Or maybe two, if there's a premium option? I don't think I've ever questioned which is the store brand. I know I've questioned which non-store brands are of dubious origin though (e.g., knockoffs)
(1) it's not just about generic products. Amazon uses the same approach to decide what non-generic products it should become a direct seller of, potentially (and normally) negatively impacting 3rd party sellers.
(2) HD and Lowes have almost no generic/store brand stuff at all. There are a few exceptions, and they likely do represent fairly profitable sections of their overall business. The main ones I am aware of: lighting, ceiling fans, toilets/sinks, flooring. That leaves huge sections of these stores without generics.
(1) You don't think HD and Lowes and Safeway and Walmart and every big retailer doesn't use their sales data to decide which products to try to disintermediate distributors and other middle-men in the supply chain?
(2) I'll concede HD and Lowes have a lot of departments without store brands [1], but raise you the local grocery store, which doesn't.
[1]: The pattern I see is that the stuff marketed mostly to contractors is less likely to be infected with crappy store brands than the stuff marked mostly to DIY'ers. I suspect its in part because pros will learn whats quality and whats crap a lot faster than DIYers, because the latter only buy a ceiling fan or whatever once a decade.
Amazon has done a lot more than you describe. Their marketplace has been a major online venue for retailers not just manufacturers and distributors. Companies (typically small) that focused on small niches (e.g. triathlon equipment). Amazon has siphoned off the best-sellers and high margin items from these sellers, making their businesses somewhere between less profitable and completely unviable.
The model here is not "Safeway and Walmart and every big retailer [ using their sales data]". It's more akin to the flagship store in a mall actually owning the mall, and requiring that all customers check out via their registers. Every other vendor in the mall surrenders all their sales data to the flagship, which it uses to decide how to use its own internal spaces to sell with higher volume and/or profit.
The own-brand stuff that Amazon is doing is dubious, but sure, I agree that many large retailers do it. Most large retailers do not operate 3rd party retail marketplaces, however, where they can siphon sales data from largely unsuspecting 3rd party retailers.
Wow, lots of comments stating that it was common knowledge, but some fact doesn't become common knowledge simply because everyone knows it. Everyone should also know that everyone knows it and know that everyone knows that etc. which only becomes true after the article is published. The situation is materially different - this is illustrated e.g. by the famous 'island with a blue eyed population' puzzle: https://en.wikipedia.org/wiki/Common_knowledge_(logic)
In this case one of consequences could be that previously during negotiations with Amazon suppliers couldn't effectively use the fact that Amazon would scoop them (even if both parties knew that it was true), and now they can.
Sure, not going to quibble about word choice. The point is that many comments are like "so what, everybody knew this", but there is a material difference between "everybody knows" and "everybody knows that everybody knows".
726 comments
[ 5.0 ms ] story [ 379 ms ] threadThere is a supermarket chain called Aldi who's entire business seems to rely upon copying branded products yet they are lauded for offering great value?
They're the only game in town at this point.
https://en.wikipedia.org/wiki/Slotting_fee
https://en.wikipedia.org/wiki/Wikipedia:Chesterton%27s_fence
[1] https://www.thenation.com/article/archive/amazon-doesnt-just...
i know a number of people that derive decent income from those affiliate channels that are scrambling right about now.
Most brands at Walmart and other stores are sold many other places.
I would love to hear of consumer facing (B2C) online businesses who are successfully operating without any Google or Amazon dependencies to see if it's even possible in the current online ecosystem.
My hypothesis is that it isn't, and as such Amazon and Google should be broken up. They have close to a functional monopoly on consumers, but I'm putting forward that they also have a functional monopoly on online businesses in commerce.
Our sales are from word of mouth and direct marketing.
Without google search in anyway? There are some ig direct marketing businesses or ebay businesses.
This is part of the reason systems like the patent system were created for inventions: to encourage people to bother exploring risky unknown spaces to develop inventions by granting them essentially a short term monopoly to harvest their reward which they would then compete against after a time period so society could further benefit from their finding by allowing competition to drive prices down and iterate on those inventions.
Obviously the patent system doesn't really serve this purpose anymore like so many systems that have been sidestepped/bypassed, changed through regulatory capture and corrupted by pure profit seeking behaviors.
https://www.cnbc.com/2019/07/16/amazon-tells-house-it-doesnt...
For example, ARM licenses CPU core designs to chip manufacturers, but they don't make their own chips, as doing so would turn their customers into their competitors.
Businesses like contract manufacturers are similar - Foxconn wouldn't start making their own smartphone.
Of course, not every company takes that approach.
That happens to be ARM's business model at the moment. It isn't guaranteed to be their model tomorrow, nor are they doing it be friends with partners.
I think the real question to ask is whether or not Amazon has a monopoly and whether they are abusing it to gain an unfair advantage over the producers of the stuff they sell. I mean when you mention other stores, I don't know if you mean this but I'm picturing e.g. a grocery store - where I come from there's usually three competing ones in the neighbourhood. They will all sell products from a premium brand, alongside their own (cheaper) store brand. But the premium brand is usually available at all competitors at similar prices.
It's one thing to see that unbleached toilet paper is selling well, and getting a supplier to sell you a store brand version. But it's completely different to see that a particular office stand is selling very well, determine that it has a 20% margin, and have someone build an identical product which you sell 5% margin.
If you look at many Amazon Basics products, they are clear ripoffs of existing products. To the point where they are indistinguishable from the images. I was looking for a Lodge braisier just yesterday and saw that AB produced an identical product, down to the unique blue color Lodge uses in their enamel.
I guess you could go through the trouble of suing Amazon, assuming you had the resources. But then you'd be booted from the platform and they'd still be selling your knockoffs for years.
I think it's fine if Amazon sees that cast iron cookware is selling well and decides to enter that market. What's not fine is to blatantly steal the design of the best selling product in a category, then make your ripoff more visible on your site. At least make an attempt to differentiate the product.
Those two sound like the exact same thing to me. There is no real difference.
It even happens between electronics manufacturers; you'll see a company noticing a competitor's product is successful, dissecting it to figure out the manufacturing costs and estimated margin, and tailoring its product line to provide a competitive product.
(Aside from all that, I though HNers didn't believe in IP?)
There's a difference between a clean room design that takes inspiration from a product and an identical copy. I can write and perform a song in the style of The Beatles, but I cannot write and perform "Hey Jude" without paying royalties.
They don’t. Amazon isn’t being asked to produce a product for a vendor then taking that and selling it themselves, that would be wrong. This is Amazon doing exactly what other stores do, seeing what sells well and making their own version.
B. The main reason that products, in general, look alike is because they're all being produced at the same 3 factories in China. And for lots of products, there's no reason to deviate significantly from the house design that the factory offers.
B. I used Lodge as an example because I know they make their own products in the US and they do not produce generics. Ergo, I'm quit confident Amazon ripped them off.
Of course, Amazon has been sued over this before [1] [2] [3]. Is three references lawsuits enough evidence for you, or should I dig up some more? And there are many reports of them ripping off vendor products, as I described, from smaller vendors who never sue because they lack the means [4].
Finally, here's evidence from a former Amazon employee claiming they do exactly what I said they do. [5]
[1] https://www.bloomberg.com/news/articles/2018-12-18/williams-...
[2] https://www.forbes.com/sites/wadeshepard/2018/01/14/fuse-chi...
[3] https://www.reuters.com/article/us-amazon-com-counterfeit-la...
[4] https://www.geek.com/news/amazonbasics-is-copying-all-the-be...
[5] https://www.businessinsider.com/amazon-third-party-sellers-d...
Particularly given the current administrations disposition, I think pinning your hopes to anti-trust is like financially planning around lottery tickets.
I'd imagine if the administration goes through with the antitrust investigations, Bezos would just show up with a suitcase saying "Here's my offer to your 2020 reelection campaign" (not literally, he could put it through a Super PAC) and Trump would say "Art of the deal!" and that threat would disappear...
Or Bezos could double down and get a law firm very rich trying to prove that the suit would be unfair because it's driven by the president's little ego...
Yes, lots [1][2]. (I count fourteen cases year to date.)
[1] https://www.ftc.gov/enforcement/cases-proceedings/terms/217
[2] https://www.ftc.gov/news-events/press-releases/terms/217
In any case, I do wonder if Amazon's treatment of folk like you would improve considerably if Amazon had competition. It seems they can push you around because there are no consequences to pay.
I disagree. If Amazon had great customer service, there wouldn't be a large volume of people complaining.
"In any case, I do wonder if Amazon's treatment of folk like you would improve considerably if Amazon had competitio"
I agree with you here. The only two marketplaces that actually get traffic are Ebay and Amazon. I've tried them all over the years and the rest combined don't even come close.
Volume of complainers is an absolute number. Customer service can only reduce the proportion of complainers. If you have 50 complainers on 100 customers, bad customer service. If you have 50 complainers on 1,000,000 customers, good customer service.
You can conclude nearly nothing based on the absolute number of complainers in isolation.
> a practice at odds with the company’s stated policies...
> .. as stated to congress
edit: it was mostly a joke, calm down.
In speaking with Congress, they're stating to everyone that they are there to act as a platform for third parties. They're a "pass-thru" service.
That implies that while metadata may be being collected, you shouldn't be looking at it, as it isn't "yours". It would be like a cloud provider going into business undercutting their client's because they weren't savvy enough to encrypt their business records. Or the post office going through your B2B mailings, figuring out your footprint, them becoming a competitor.
You have one job. That's it. Once you start abusing your access to your seller's transaction data to figure out where to or whether to diversify into their vertical, there is a fundamental breach of trust, and a very reasonable case to be made in having exploited something you shouldn't be.
That's the Hobbesian Leviathan for you; you don't need all those little businesses anyway!
Just get big enough, and you can lie in front of everyone without penalty it looks like.
Does anyone really think that any retailer launches a competing product in a category without looking at all their supplier data?
If you want distribution you risk this. The only way to avoid it, it's to do direct to consumer or having a product that is extremely hard to copy.
Interesting
https://en.wikipedia.org/wiki/Mossimo#IPO_(1996)_and_relatio...
>On March 28, 2000, Mossimo, Inc announced a major, multi-product licensing agreement with Target stores, for $27.8 million.
>In 2017, Target underwent a makeover, introducing new smaller lines and eliminating bigger billion-dollar lines, including Mossimo.
>Target distanced itself from Mossimo amid Mossimo Giannulli's alleged involvement in the 2019 college admissions bribery scandal, saying that Target had not been involved with Giannulli in over a decade
The idea that corporate directors (of whichever kind) have an legal obligation to maximize profits/shareholder value is a myth. Taken directly from Alito's (non-dissenting) opinion in Hobby Lobby:
"While it is certainly true that a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so."
Additionally, even if there were such a requirement, it would be toothless. The corporate directors of a company facing criticism from its shareholders that it is not maximizing profits (in the short-term) could simply retort that they are pursuing a strategy that maximizes profits in the long-run, and that investors should look elsewhere for short-term gains.
As a practical example, consider any company that pursues more environmentally sound practices, or tries to source materials more ethically. By doing more than the bare minimum, they are surely cutting into short-term profits, however they may in the process be building a more resilient and popular brand that profits more in the long-run.
I doubt it would pass the threshold of "grossly negligent" that you'd typically need to sue a CEO as a shareholder, but it's certainly different from an otherwise positive action that simply uses company resources - like raising salaries or making charitable donations.
I mean seriously, if this is end-game capitalism what’s the added value?
You can see this in how Salesforce and Shopify are leveraging their platforms to learn what is popular and produce/buy their own products to sell to their customers to capture 100% of the value, rather than 30% of the value of the solution to the customer.
They could copy products and launch them abiding by the same guidelines, policies and everything else.
That's not the case, and that's where the unfairness comes to play: Amazon plays on their market place by a different set of rules.
It's not only Amazon. Google, Apple, and so on. The question starts to arise, if they want such massive platforms and play on such marketplaces, they must obey their own guidelines, else they are either stripped from the playground or someone else should own the play ground.
So here's a question: Is a store really a marketplace? It seems to me that Amazon, Target, Macys, etc, do a lot of curation and editorial work with regards to standards of production and marketing for items in their stores. Isn't that more akin to publishing?
I think the grey area and critical zone is this: Should a company be allowed to advertise their ecosystem/playground as akin to a "marketplace" when what's really happening, is that they are tightly controlling the product and harvesting the information for themselves? Seems like a bait and switch to me! ("Your margins are our opportunities," is the most fundamentally aggressive business statement I can possibly imagine, and Jeff Bezos said it!)
Apple, Amazon, and YouTube all seem to fall into this general pattern: A "marketplace" or "ecosystem" which is less bazaar and more their tightly planned cathedral. "Partners" who are put upon, data-analyzed, and sometimes cannibalized. This pattern seems to be very widespread, and it only stands to reason, given the tremendous increase in the ability of companies to leverage technology to harvest such data in their own playgrounds.
The first reason is, Amazon isn't doing much curation (if any), due to their size they can't do proper curation, and bots are terrible at it (either based on keywords or reporting). This is proven by counterfeit items being sold, listings being stolen/manipulated, biased report systems.
Then Amazon claims they aren't liable for the products sold - the customer belongs to Amazon (you can't even have access to their names anymore), the listings belong to Amazon, everything except what arrives at the door.
At last, Sellers pay for the product advertising Amazon does, it's called a Referral Fee (ranges from 8% to 15%). In fact, the Seller pays for everything (and they should, yet the amounts are up for discussion).
So they have all the symptoms of a marketplace, yet Amazon plays what ever role is more suitable for them.
I only think they should be enforced the rules of a market place in any developed place in the world.
No real private marketplace would be open if they were selling counterfeits. Even if they sold legit products as well, until they purged everything counterfeit they would not be open, and they'd pay fines for it.
I bet if any public Health/Goods inspection force would be deployed on ANY amazon warehouse, they'd find shady shit. But such public organizations don't have the tools/protocols to do what they do in the real world.
I agree with you when you say, this isn't limited to Amazon.
For example, why can't we get the full data from the customer that purchases from us? Why can't they be our customer on Amazon? Amazon hoards everything, and we get the scraps.
It seems as if Amazon, likely prodded by the GDPR and CCPA, is limiting the personal information they share with third parties. I think that's a good thing, for the consumer at least.
Their name was an example of something required to provide feedback, make amendments, or any kind of engagement that's required with that customer.
Anonymity is one of the reasons review manipulation thrives on Amazon.
Honestly I doubt it was due to GDPR/CCPA, or user privacy concerns, and more turning FBA into a pipeline of homogeneous suppliers that race to the bottom.
https://www.marketplacepulse.com/articles/amazon-is-a-monopo...
Additionally, most other retailers actually BUY the third parties products and take the risk of promoting and selling it. On Amazon third parties take the inventory and many other risks and may have to pay amazon to promote their product.
The story here is that amazon has testified it does not do something, has supposedly the "highest ethical principals" - yet goes ahead and does exactly that which it said it doesn't do.
Do that not matter to you from a trust / credibility perspective?
https://www.cnbc.com/2019/07/16/amazon-tells-house-it-doesnt...
> The online retailing giant has long asserted, including to Congress, that when it makes and sells its own products, it doesn’t use information it collects from the site’s individual third-party sellers—data those sellers view as proprietary.
'"However, we strictly prohibit our employees from using nonpublic, seller-specific data to determine which private label products to launch." Amazon said employees using such data to inform private-label decisions in the way the Journal described would violate its policies, and that the company has launched an internal investigation.'
(Which by the way, I’m totally fine with, because there’s no reasonable way to prove you’re not doing it and any brick-and-mortar retailer is almost surely doing it as well.)
What they promise not to do is take a look at seller specific data. That makes sense because it won't get them much extra compared to looking at categories, and the sellers ethically claim it's their data.
Making decisions on the aggregate data doesn't violate this policy.
My comment got voted to zero and negative initially - does HN not understand that lying DAMAGES even capitalistic economies and functioning markets?
"why not do this?" - because you promised you would not.
This is stuff we teach 6 year olds - but apparently the most rudimentary form of ethics is too much for amazon.
This whole issue stinks of monopoly.
I can't understand this at all. Retailers create in-house brands all the time. Do they somehow make decisions of which products to create in a black box? How would they even do that?
If you go into the Walmart pharmacy, their store-brand equivalents are full of statements such as "Compare to the active ingredient in Advil".
a) actually sell their product to walmart, even the branded product is owned, priced and managed by WALMART. So there is much less SELLER specific data to datamine.
b) sellers to walmart AGREE that the data on products priced, sold, and promoted by walmart (even branded one) belongs to walmart, and in many cases the seller has to pay extra if they want day/store level detail on sales. So in most cases it is a very upfront relationship, and walmart takes a lot more risk in pricing, promoting etc.
Here Amazon has enticed sellers by reassuring them that in CONTRAST to target, Amazon will NOT use the data they provide amazon to market against them AND sellers give amazon a lot more "seller" data because the sellers are often doing their own price management etc etc.
Let's not forget that many of these large retailers have moved to the practice of taking up to 90 days to pay their suppliers. 90 DAYS! That's three months before you see the money of the product you sold through their channels. And they do this because they simply can.
I believe that there's not a single retailer that doesn't leverage its distribution advantage to squeeze their suppliers. If you're not Coca Cola, PepsiCo, Unilever, Procter and Gamble or Colgate Palmolive, you have little to no room for negotiation.
Other stores are very very UPFRONT on what they will do. Many make the small mfg sign an agreement that not only will the store have all the data, but the mfg will need to pay the STORE if they want the data.
The difference here is that a) it is all upfront and b) the mfg can make an informed decision - is this worth it.
If you need store / day detail on sales because you are running promos and in-store marketing vs just being a low cost volume seller - all affect your view of this.
Finally, in grocery retail - once you have the order and deliver, you DO get paid regardless of whether product sells. This is an important positive even selling through Target in some cases especially with more perishable goods. Amazon as a seller you can't plan as well - their alog or someone else paying for promo could cut your demand in half overnight.
Additionally retail stores actually drive demand / discover ability when they purchase your product in a way amazon often does not.
You sign the same deal when you sell on Amazon, probably even signing away more rights. I'm not sure I haven't read the full EULA when you sign up to sell.
> Amazon as a seller you can't plan as well - their alog or someone else paying for promo could cut your demand in half overnight.
This is about the only thing you've said I agree with. But it's not due to lack of data, it's due to barrier to entry with retail sales you have less competition. Right for the wrong reason here.
> Additionally retail stores actually drive demand / discover ability when they purchase your product in a way amazon often does not.
Amazon drives way WAY more discoverability than any retailer.
Pretty much your entire argument contradicts real world experience, common sense, and actual reality from what I know of the situation. I can tell you for a fact your assertion that 'Amazon doesn't do this' everything you're saying is 100% false.
This is completely false. Amazon provides significantly less discoverability than a retailer. With a retailer, you get a product that actually shows up in front of people's eyeballs, and the ability to provide in-store promotions to attract customers, and, most crucially, the store lets you know how the promotions perform. A small minority of retailers make you pay for this data, but most don't because they want products to sell through. Many stores will even work with new brands to promote their products, such as (temporary) eye-level product placement, end-of-aisle placement, special displays, etc.
Source: Before going in-house I used to rep manufacturers of all sizes from startups to billion-dollar behemoths selling to major, regional, and local retail chains. Grocery stores are the best at working with brands (but also the fastest to drop products that don't sell), Target is about average, and Walmart was the worst at the time though I hear they've gotten better.
The schlock sellers I think are more expert in the amazon game (image / product swapouts and seller targeting, review spiking games, competitor flag and return / hazard attacks etc). So much BS and so little real recourse - the scale of marketplace must be nuts.
Do you have a reasonably high volume ($1M+ sales) amazon account to compare to?
I just ask because for such strong opinions "everything you're saying is 100% false" you don't seem like you have actually worked with businesses in this way.
Beleive it or not, you can actually talk to real human beings at your local retail stores. And yes, you can talk to real people at amazon, but if issue is outside their box (on seller side) you get little mercy. If inside box some of the treatment is amazing (amazon payments for goods they show as lost by them as a sale with no return risk)
It's been quite a long time since I worked in the grocery business, but I don't think this is accurate. A lot of vendors stock their products themselves or use food brokers that do it, and they are on the hook for expired and returned product. And there was a shitload of bribery and corruption happening to steal shelf space and end unit space from competitors. It's a surprisingly cut throat business.
Remember, for major retailers, a) THEY are the seller in most cases and b) in most cases they get mfg's to agree to whatever is going on in the agreement UPFRONT.
https://www.cnbc.com/2019/07/16/amazon-tells-house-it-doesnt...
"Nate Sutton, associate general counsel at Amazon, told lawmakers the company doesn’t tap data from individual third-party merchants to determine what new products to create."
Of course they don't use data from individuals, they use all of the data, in aggregate, from everyone including themselves.
Despite the ludicrous lengths Amazon goes here to say there were multiple sellers and so this data was aggregate, we all understand (and amazon did too) that if you generate statistics such as median sale price per month / day etc where 99.95% of the data comes from one seller, you have the data from that seller.
Again, there's that word. Individual.
They get off on a technicality with that comment to congress. The second you have even 0.05% (Your example, not mine.) of any category occupied by a second reseller, you're no longer targeting individuals -- you're entering a 'product vertical'.
Amazon does exactly what you're claiming they do not.
So, if cars are inevitably becoming computers with wheels, what's going to happen to insurance companies? The major weapon of underwriting is data, and a company like Tesla is going to have a huge advantage in data over external insurance companies.
Is it really a societal good for big companies to control all of this data, or should the data belong to the consumer/owner/user? I suspect it's the latter which gives people the most choice and freedom by fostering the most competition.
I was debating on whether I should include mention of these apps. Here's the thing about that: The data available to these apps is nothing compared to the data available to Tesla. Tesla can figure out how often you get close to bumping into something, exactly how far, how fast you were going, and what the lighting/weather conditions were like at the time. That data is orders of magnitude better than the stuff coming out of the app.
It's very analogous to iOS app makers competing with in-house Apple iOS apps. It's hard to compete, when your competitor controls the APIs.
(BTW, Assuming a deal with your credit card company, they probably can approximate your tire age too).
Only 'kinda'. You might get 1 camera feed, and you can see what the weather report was for the area. Tesla has something like 8 camera feeds, and they can tell if visibility was compromised because the other car situated at 7-o'clock to the rear was in a building's deep shadow. The app could only kinda get that if one were lucky.
suddenly about the only thing they don't have is whether you were looking at the road, and the condition of your tires and other vehicle specific metrics
That and a lot more! Also, with far superior granularity, and with fewer data quality problems.
(BTW, Assuming a deal with your credit card company, they probably can approximate your tire age too).
Again, mostly. I would agree that the apps could compete. They're competing at a significant disadvantage, though.
I think the insurance companies are doing what they can to compete but wont be able to match the platform builders offering.
Perhaps they look at licensing data from other platforms like Ford, Yota, etc.
Right now, very safe and low risk drivers can use these companies to get discounted insurance.
Eventually, every safe driver willing to install these trackers will do so for the lower insurance rates, leaving a much higher risk pool with the non-tracking insurance plans, and it will become very expensive to not be tracked by your car insurance company.
Nothing, though I'm guessing they will be far behind for a year or so even after they deploy. (Unless that team is super competent, and they have absolute management backing.)
Look, I get that you can't get the same data with a 3rd-party kit but if you're an insurance company you're gonna be working with car manufacturers anyway.
It completely changes the dynamic of the business. One won't be able to compete, except as a manufacturer partner, and not all manufacturers will be equal. It will limit choices to consumers, and very strongly drive consolidation. I'm not saying only Tesla will be able to do it. What I'm saying, is that the nature of the business will change massively, in a way where customers will wind up with fewer coices.
In fact, many people here contradict their own argument by saying that they are forced to go to other websites or direct to the supplier. Stating as much is tantamount to admitting that the market is functioning correctly.
Amazon is great for some things and bad for other things. If it doesn’t meet your needs, go elsewhere instead of rewarding it with your business and then complaining that it’s too big and powerful because people like yourself keep rewarding it with your business.
IIRC, many traditional white label brands are actually manufactured by the name brands themselves, and they're part of a strategy to segment the market.
The difference here seems to be that Amazon has been cloning relatively unique products made by smaller companies, while traditional white label brands are fungible commodities made by large players with little differentiation. From the OP:
> Because of the limitations of shelf space, traditional retailers stock far fewer products than Amazon’s hundreds millions of items. Typically, they create private-label products to compete in generic categories such as paper towels, rather than copycat versions of items created by smaller entrepreneurs, private-label executives said.
There tend to be specialist manufacturers who fill the store brand niches. E.g. in pharma, close to 90% of the pills, tabs, and liquids sold in front of the pharmacy counter are made by one company, Perrigo, whose entire model is predicated on being a store brand supplier.
I don't think Kimberly Clark makes the store brand paper products, nor does P&G make the store brand beauty/cleaning supplies.
We were constantly competing with the other manufacturers for the Wal-Mart, Walgreens, CVS, etc white label brands. It was increased volume for our plants and they would usually suck up surplus supply.
The catch was that your contract was continually up for renewal and you had to beat the others on price and other criteria. After all, nobody else would know that the rack at Wag's was half-bunny and half-coppertop, right?
It was also a headache because defective parts and customer complaints counted against you hard. We actually tested our white label products more than the name brand SKUs.
Many retailers are beginning tie production of private labeled products in with being the captain of a category - which begins to create incentive for companies to start to pursue these private label opportunities.
K-C and P&G are two examples of companies who largely resist the private label trends in the US - you could counter with ConAgra and Treehouse.
A lot of that has to do with the product and what-not, of course.
[ed: fixed a misspeak]
For me, Amazon has been a shitshow for the last month. For in-stock product, they project delivery for Memorial Day and deliver in 24 hours, or promise prime and deliver not-so-much. Other retailers seem to be fine. Target, NewEgg, Walmart, etc seem to be fine. Small online retail seem to be fine.
I wonder that their awful practices are biting them now... once they hit a bump the whole system jams up.
Retail is ruthless.
[0]: https://old.reddit.com/r/Kirkland/
I always thought it was funny, as a young kid, that my city’s name was on all sorts of products, not making the connection.
So I can sell my small company's products through Costco's web platform without Costco ever directly purchasing my product?
Should amazon start paying small companies at the same margin that costco does?
Are you sure? My understand was the Kirkland is mostly just a re-badge for already existing manufacturers.. Kirkland usually buys up their "B" stock/bin of items and just rebrands them.
You're either a platform/retailer or you're a manufacturer. You don't get to be both because we see the perverse incentive that happens when it's allowed.
Its kind of the same thing with Home Depot. I used to be able to buy quality hardware from a local store. Now all I have is Home Depot and they sell mostly imported junk hardware. I have to go somewhere like McMaster-Carr now for quality hardware. Home Depot has not been good for me, Home Depot has only been good for itself.
The other problem the article and parent comments are describing relates to the distributor/retailer creating or sourcing generic alternatives to the items sold by their existing suppliers and informing their decisions to do so based on the sales data from their own partners/suppliers.
This latter case seems ok to me, even if it sucks for suppliers, in the sense that we generally get better outcomes for customers. As long as the general regulations for consumer protection are in-place such as preventing confusion between brands and generics.
If you're right, then capitalism is hopelessly bad at optimization and we should scrap it. But what I think is more likely here is that Amazon's execs understands the economics of their business way better than a zero-karma free-market fundamentalist whose pseudonym is a genitalia joke.
Also, I only made fun of your username and your lack of karma because you were making absurd unevidenced claims like, "They have no power to raise prices and restrict competition." If you're going to say things like that, then it's not so much making a point as doing what Frankfurt calls bullshiting. [1] That combined with your very low karma suggests you're not really worth the time of a serious reply. Note the link in my bio: http://www.penny-arcade.com/comic/2004/03/19
[1] https://en.wikipedia.org/wiki/On_Bullshit
For pharmacy items where there is some regulation around the quality of the product, I find generics/store brands to be great. For products that are not regulated in some way quality is all over the place. If you search Amazon for "ul listed usb charger" you will mostly see results for products that are not UL listed - there are probably 5 times more unlisted products for sale there than listed products - Amazon is pushing a bunch of cheap and high-profit crap at me even when I try to avoid it.
In the long term, Amazon undercuts suppliers who have to exit the market. That reduces competition and allows Amazon to charge more.
If you're hungry, a soda is "great for the consumer". For 15 minutes, it alleviates that feeling. Does it follow that everyone should consume only soda?
You say it as if that was a bad thing. More competition is good for the consumer, bad for the oligopolists.
that never happens, unless there's a regulation in place that prevents new sellers to get into the market as quickly as they can. When a price for the product begins to rise, it attracts new sellers, as now there's a wider price range to position your competing product.
But if the reward for success is just having Amazon come in and hoover up the money you would have gotten by launching a knockoff, then suddenly there's a lot less incentive to invest in novel products. That's true both for categories where Amazon is competing and ones where it isn't currently.
I wouldn't be surprised if Amazon's replacement product is sometimes modestly worse, because a) they don't have the kind of deep expertise in a product that the original creators do, and b) it doesn't have to be as good to get the money.
And then there's after-sale support. Amazon's customer support is atrocious. The one thing they're good at is taking things back. But anything more complex and it's a nightmare.
That depends on the significance of economies of scale and barriers to entry in a particular market. The term “natural monopoly” (as it’s used in economics) refers to a particular market where, because of barriers to entry, the optimal number of firms is one. Two firms would not be able to produce their good for cheaper than one firm.
I also suspect the notion of "natural monopoly" is oversold and too simple. Would it be more efficient if we had exactly one ISP for the country? In theory, yes, because then we only have to run one set of wires everywhere, and we'd get rid of a lot of duplicative equipment and staff. But in practice, monopoly and oligopoly ISPs are generally both expensive and bad. I just moved from a competitive area to a "natural monopoly" area; my internet now costs twice as much for 10% of the bandwidth, much lower quality, and much worse service.
I think that's because companies aren't static entities that reliably produce goods, even though that's what most people imagine. Instead they're temporary coalitions of individual actors hopefully prodded into optimal behavior by external forces like competition. Especially so given American business culture, which often refuses to recognize ways of thinking that might mitigate the problems.
Once there is only one paper towel manufacturer left, what is to prevent it from raising prices?
Admittedly those are public utilities but the attitude seems to hold true in antitrust as well. Walmart is probably the best example there, or now Amazon as evidenced by TFA.
Sometimes I wonder why Walmart and Comcast are allowed to behave this way while T-Mobile is not. (EDIT: Google says “nevermind”: https://www.nytimes.com/2019/12/19/technology/sprint-t-mobil...)
As a super-obvious example, an accountant looking to cut costs at a hamburger chain might first suggest reducing the amount of meat or using old meat. But that reduces value as much or more than costs, so it's a bad optimization.
*just noticed I was down voted, likely by MichaelApproved because he has 7500 Karma and I only have 156.
I'm starting to really hate contributing to HackerNews discussions because it's fully of a bunch of bullies who pound on your karma if you don't agree with their viewpoints. Bring on the downvotes, I know HN hates any mention of it's imperfections as well. At least my conscious is clear.
How so? Amazon is the one reducing competition, stopping Amazon from doing that would increase competition. That's a good thing for consumers.
Please don't comment about the voting on comments. It never does any good, and it makes boring reading.
To your point, though, lower competition is not always bad. I as a consumer very much prefer having to deal with fewer toilet paper suppliers if they are of good enough quality. The toilet paper industry is not one where I expect dramatic innovation brought by competition. I just want the cheapest pack that won't feel like sand paper on my delicate behind.
There are, surprisingly, quite a lot of similar industries where consumer would prefer cheap and fast rather than elaborate and innovative products.
P.S. making comments without a basic education of a topic is equally boring to read. I would rather you say it and have the chance to learn than silence you though.
The general point is that it is generally possible to keep fair competition flowing between a smaller group of companies, as long as that group is large enough for its members' respective interests not to align completely.
All other things being equal, there can be only one cheapest pack of toilet paper in a given market, which immediately disproves your argument. After all, having 5000 toilet paper manufacturers all competing among themselves is certainly no guarantee of any improvement to the consumer for that particular criteria, because 1000, 500, 100 or even 2 would have sufficed barring collusion.
Now we can add many other qualities to toilet paper that make discerning customers keener to see past price when they're buying between competing suppliers. However, in mature markets with proven, stable demand, there comes a point where adding more actors does not bring value. Those additional entities are merely tapping into existing market value without providing marginal benefits and without forcing others to improve.
Do you believe the toilet paper industry is so ripe with innovation that its warrants as many competing manufacturers as possible, with as much competitive spirit among them as possible? Nope. In a supermarket, the pack of toilet paper that's put in shelves slightly above eye-level will be chosen way more often by consumers than other packs located a bit below. Companies do not compete on the quality of their products, they compete on the amount of money they pay for their products to be stacked the right way on the right shelves at the right location.
Back in the real world, across many industries, going from thousands of competing companies to a few hundreds is definitely not worse for the consumer.
If you think there's something abusive going on, email hn@ycombinator.com so we can look into it.
https://news.ycombinator.com/newsguidelines.html
Outside of dealing with negative externalities, regulation is a poor-man’s trust busting anyway.
Regulation can help prevent harmful economic behaviour.
It can also create anti-competitive environments that protect incumbents at the expense of new entrants, often by regulatory capture.
> "The solution is to create regulations & laws that prevent this behavior."
I'll take a slightly contrived and simplified set of examples to illustrate why a lot of free-market advocates don't agree with this sentiment as being correct.
1. We identify this "market failing" behavior of Amazon. I.e. Amazon does it a few times and after a while, public starts to
2. Legislators make it illegal for a platform to sell the same products as their suppliers. Easy, right?
3. Amazon alters products to not be technically "the same" so they skirt regulation. E.g. Renames "Plain Artisan Soap" to "Amazon Artisanal Soap", never mind that the product they "copied" was called "Joe's Plain Artisan Soap", and Amazon's product is advertised as "cheap alternative to expensive artisan soaps".
4. We notice and we complain.
6. Amazon complains back (maybe even a few court-cases along the way?), says certain products aren't the same. E.g. Supplier sells artisan soap, but Amazon argue their white-label "soap" isn't the same, it's just soap.
7. So to be fair, legislators start coming up with a reasonable system to identify similar products, which forces amazon to identify "similar" products in order to get them off.
8. Legislators followup and create reasonable rules and exclusions how Amazon can market their branded soap, or how closely the soap can resemble an existing product.
9. Amazon happens to also have a bunch of their own genuine products that it manufactures cheaply. Perhaps a byproduct of some sort of warehouse process they have, and they use their idle machines to make it, or something. But new suppliers come on that happen to sell something that according to regulations is "similar" to those products, and Amazon gets into hot water.
10. Amazon has to put rules, processes, maybe software algorithms to identify such a case. Remember, at Amazon scale, they have thousands of new suppliers and orders of magnitude more "products" that get added each day.
11. Regulators realize it's too difficult to figure this problem out and go to court over it. So they come up with a complaints + arbitration system to address it fairly with a "human in the loop". Think DMCA, takedown requests, etc.
12. Above regulations require paperwork, and you have to register as a platform if you get requests, you're obligated to address complaints of "similar products", etc.
Amazon implements all these rules at each stage, neverminding the "good-faith" interpretation of the original and subsequent laws put in place each time. I.e. "We just don't want platforms abusing their power to undercut genuine businesses." But at this stage we've, through genuine and honest market "interventions" and reasonable rules that seem straightforward and simple and cheap to implement, created regulatory costs that by default get applied to every new "platform" that competes in a space similar to Amazon. You've now successfully put in place regulations that inhibit and prevent competitors manifesting to compete with the existing monopoly or oligopoly.
The Amazon Basics company could buy some market information or behavioural stats from the Amazon Dotcom company at a rather steep price, for example.
Do you really think that if Amazon couldn't use the data from its own site that it wouldn't procure it elsewhere? Before any product is developed there is extensive market research done to get an idea of how much money this product could make.
Anyone can and does do this, why should Amazon be punished that its data collection mechanism is cheaper than others?
Amazon may or may not legally be a retail monopoly - I do not know the answer. But your question can be rephrased for any monopoly and the answer would be “monopolies should be punished for leveraging their monopoly power in other markets, because that ruins the market for everyone else.”
Free markets and democracies are good at a lot of things, but self preservation is not one of them - therefore you need anti-freedom laws.
This is a very common misconception in the United States. It’s how a lot of defenders of antitrust law want antitrust law to work, but it is not how antitrust law does work.
This Supreme Court case explicitly establishes that antitrust laws can be used against companies which obtain a high market share simply by anticipating future demand and responding effectively and efficiently.
https://en.wikipedia.org/wiki/United_States_v._Alcoa
Also I think there's 0 chance that wouldn't be overturned if tested today.
https://en.wikipedia.org/wiki/The_Antitrust_Paradox
This would make sense as a feature. If you subscribe to the view that competitive pressure is the source of progress, then you never want any company to actually win. Like a donkey chasing a carrot on a stick, you want companies to endlessly run towards market dominance, but never actually get there - because once they do, they stop contributing to progress.
b. This 1945 precedent is not the standard that most modern antitrust (post-Bell breakup) cases are held to.
The issue is that over the long term, Amazon is lowering the ROI on innovating and taking risks in the consumer goods space. It's able to do this because of its dominance as a marketplace.
They already did this years ago. Amazon has 80+ private-label brands.
https://www.businessinsider.com/amazon-owns-these-brands-lis...
This issue us that Amazon also dictates what you are allowed to sell your product for elsewhere. It would be one thing if they just used your own data and created a competing product, but the fact you cannot sell your product cheaper elsewhere is the issue.
Anticompetitive practices include activities like price fixing, group boycotts, and exclusionary exclusive dealing contracts or trade association rules, and are generally grouped into two types: agreements between competitors, also referred to as horizontal conduct.
1. Amazon clones independent manufacturer's product.
2. Amazon strangles manufacturer because they can promote their own product more and have lower overhead because they control the entire chain.
3. Competitor dies.
4. Amazon has no competition on this product.
5. They raise prices and/or lower quality.
6. Consumers pay more for a shittier product.
Sun pushed OpenOffice to cut MS's profits from Office
Google and MS are pushing into the Cloud to reduce Amazon's influence
Amazon is creating its own ad network and offering Twitch to reign in Google
Walmart is slowly creating its own global online shopping platform to compete with Amazon
Should Amazon ever have no competitor, monopoly regulations would kick in. But usually, all the other big players will make sure that Amazon has enough competition to not be invincible. It's not fun for small players, but they obviously don't care enough to organize and take their products off Amazon.
Btw, Amazon does not necessarily have less overhead due to Price's law: [1]
>The square root of the number of people in a domain do 50% of the work.
Should Amazon expand into every business, they would be so huge that all their efficiencies and more would be eaten up by the overhead.
[1]https://brainlid.org/general/2017/11/28/price-law.html
I'm a bit confused. Are you claiming that because of Price's law, Amazon doesn't actually benefit from it's monopoly position?
As a consequence, there will be an optimal size where Amazon is serving many markets, most likely the most profitable ones, thus massively benefiting [ * ], but they leave every other market open.
Depending on the future, this is not necessarily a bad position because low interest rates could seed plenty of startups which means that competitors could operate below break even points.
The question is: will Amazon ever reach that position or will its competitors make sure that all its profitable markets will dry up and its growth will be limited?
[*] Actually, not Amazon is profiting because the value of that dominant position would be priced into Amazon shares in advance. Amazon would just execute its dominant position that its investors had foreseen.
If what you said about amazon having less overhead prevents the above hypothetical from happening, then what's the problem? It's apparently more efficient for Amazon to supply this good and that's what an omnipotent benevolent economic dictator would choose anyways.
> 6. Consumers pay more for a shittier product.
Or a competing product emerges with a lower price and/or better quality. Step 6 would only happen if competing products are not allowed to be sold on Amazon. And even if Amazon does that, I would assume that if the delta in price and quality is big enough people would switch to buying the product on Shopify, eBay, or any other platform the manufacturer can use to sell.
This is flat out silly and has never been observed. Monopolies cannot significantly raise their prices, or competitors instantly appear.
Ok, done.
Now what are manufacturers supposed to do when Amazon and Walmart start bullying them some other way? You just made shipping their product directly to the customer against the law.
Are manufacturers legally barred from linking to the marketplaces of its peers?
Could Amazon not just maintain two websites, and shut down the marketplace for certain goods when it feels it has enough information to sell its own versions on the other site?
If not, could Amazon not just sell the information it would have used to develop its own products to another company (which we'll assume is totally unrelated) to develop its own off-brand products, and then treat those products preferentially?
If you're the supplier with a Shopify and Amazon Merchant account, or a local grocery store with white label products, none of this applies to you because you don't have the capability to effectively hold other businesses or markets hostage, no matter how aggressive you are.
https://www.digitalcommerce360.com/2019/02/01/new-ecommerce-...
>The new rules could wipe out nearly half the products on Amazon.in, said Satish Meena, an analyst at Forrester Research Inc. “It’s likely to disrupt availability for customers,” he said.
>The biggest beneficiary from the tightened rules could be Reliance, which is India’s largest private company and owns the country’s biggest brick and mortar retail chain.
In theory India standing up to giant foreign corporations. In practice, a huge giveaway to another giant corporation at the expense of Indian consumers and a big warning to other companies hoping to expand to or invest in India.
That portion of the article is basically the opinion part. I didn't find great coverage over the full details of the regulations themselves.
And private label doesn't mean you have to manufacture anything at all. Sometimes, you will go to the company whose marketshare you are trying to take and they will manufacture the product for you.
When Joe's Custom Bike shop isn't allowed to be a manufacturer and a retailer of someone else's bike equipment, the customer is going to go to Amazon or Wal Mart to buy it. And retail giants, buoyed by the government killing half their competitors, will still find a way of squeezing their suppliers and funnelling sales data to preferred suppliers or related entities.
We don't need laws to restrict one party from taking advantage of another in a deal... it just takes brains and some companies are using theirs to partner with other platforms or sell DTC(Direct To Consumer)
I would think 'brands' like Kirkland are a net good for the consumer.
The point is that competitive data is what drives decisions for product and segments in all areas of retail and business. Either in house or outside. Gathering that data from within your property is no different than using an outside agent.
You are acting as if they're spying on their customers, when the customers are you and me, not the reseller using their platform/space/warehouse/services.
Anyone can host a website, market their product, ship with FedEx/UPS. Preach people do that instead, rather than bow down to our government stamped and approved overlord Amazon.
Every single platform company, whether online or offline, does this. Apple does this with their appstore. Microsoft did this with their windows platform. Every retail or grocery store does this by developing their own native brand that blatantly copy existing products but with a bit lower quality and lower price.
Is this good or bad? Well this is how the vendors are forced to innovate, and that's good for the consumers! If we just all become social justice warriors and shame all these platform companies to do nothing because their products shouldn't hurt others like a bunch of communists, then it is US, the consumers, who lose from this. And even these social justice warriors, at the end of the day, are all consumers.
I also find it weird how they say Amazon "scooped up data", when all that data has been on Amazon's own server all along, voluntarily.
> a practice at odds with the company’s stated policies...
> .. as stated to congress
(per the comment of user "so_tired" above)
Amazon is able to snoop on all the sales data without any risk.
Their response is usually “I’m making enough money now, why worry about later?” or “our product category is too niche for Amazon to enter.” It seems like that kind of reasoning makes sense for traditional retailers like Costco/Walmart/Macy’s etc., but not Amazon where Amazon virtually has no risk in listing a product.
Highest gross profit (volume * margin).
And how would you ever know either of these two (volume, margin) if you were an arbitrary 3rd party?
Amazon doesn't need to branch out into every single long tail product to cause severe disruption to a retail sector that is often predicated on low single digit margins.
Amazon know volume, Amazon goes to suppliers on alibaba and gives them the quantity they require and then Amazon figures out what margin they'll be making if they sell it at the same or lower price than the original seller.
Start with volume as a suggestion of which products to investigate for purchase price with sellers. If you can get the "right" price with the "appropriate" volume, start selling the product direct.
Also, at Amazon scale, you can estimate margin by looking at price variation over time and throwing in some well tested assumptions.
You really can't. You have to do research and modeling to figure out margins. There are probably half a dozen factors that determine a product's margin.
It gets into things where not much is needed.
For example, USB cables, laptop sleeves, kettle bells, dumbell, weight plates, led light and this kind of category is simply too big and it will put whoever ever discovered a new niche which doesn't require anything more than the physical product get outcompeted by Amazon.
All big retailers (Walmart, Costco, etc) Apple Google Amazon.
Once you sell or distribute through a marketplace where they also sell or offer products to the same audience, expect the best ideas to be copied by the platform owners.
That's one of the downside retailers have to deal with.
This very easily defeated regulation is a perfect example why they aren’t a silver bullet. Throwing your hands up and saying “just make government fix everything” isn’t realistic, there is overhead and cost and bad precedent in that.
It's probably the leading direct-to-consumer platform out there right now, it’s touted sometimes as the anti-Amazon. The leading D2C brands I’ve seen are on there (Allbirds, Atoms, Untuckit) as well as random drop shippers. Shopify is also expanding into a fulfillment network too: https://www.shopify.com/fulfillment
Don't they usually have only one store brand? Or maybe two, if there's a premium option? I don't think I've ever questioned which is the store brand. I know I've questioned which non-store brands are of dubious origin though (e.g., knockoffs)
(2) HD and Lowes have almost no generic/store brand stuff at all. There are a few exceptions, and they likely do represent fairly profitable sections of their overall business. The main ones I am aware of: lighting, ceiling fans, toilets/sinks, flooring. That leaves huge sections of these stores without generics.
(2) I'll concede HD and Lowes have a lot of departments without store brands [1], but raise you the local grocery store, which doesn't.
[1]: The pattern I see is that the stuff marketed mostly to contractors is less likely to be infected with crappy store brands than the stuff marked mostly to DIY'ers. I suspect its in part because pros will learn whats quality and whats crap a lot faster than DIYers, because the latter only buy a ceiling fan or whatever once a decade.
The model here is not "Safeway and Walmart and every big retailer [ using their sales data]". It's more akin to the flagship store in a mall actually owning the mall, and requiring that all customers check out via their registers. Every other vendor in the mall surrenders all their sales data to the flagship, which it uses to decide how to use its own internal spaces to sell with higher volume and/or profit.
The own-brand stuff that Amazon is doing is dubious, but sure, I agree that many large retailers do it. Most large retailers do not operate 3rd party retail marketplaces, however, where they can siphon sales data from largely unsuspecting 3rd party retailers.
In this case one of consequences could be that previously during negotiations with Amazon suppliers couldn't effectively use the fact that Amazon would scoop them (even if both parties knew that it was true), and now they can.
Common knowledge: something that many or most people know.
https://www.merriam-webster.com/dictionary/common%20knowledg...