There was a planet money episode about this exact comparison the other day. Basically it comes down to:
When a grocery store puts something on it's shelves, the store itself bought it from the manufacturer. They have already made their money. On Amazon, manufacturers don't make money when the item is listed, they make it only if and when a customer buys the product.
When a grocery store makes its own novel product and puts it on the shelf, it's taking a risk. If they make those products, but they don't sell, they just lost a bunch of money. Or, if their product is a competing one with an existing product, they know that products like that can sell, but now they have to focus on outselling the original product. When Amazon makes its own product, most of the risk has been removed. They pretty much already know it sells well on their platform, and they have enough money that knocking 5 dollars off the price, making it prime recommended, and putting it at the top of the list will cause it to beat the competition 9 times out of 10.
I'm not saying any of this is fair or unfair, because I'm not an economist so I don't believe I have a full understanding of the situation.
I tried to find the exact episode but it seems I can never find them when I need them.
It's way more complicated than that. Manufacturers pay stores to carry their products, feature their products in special places in stores, get forced to take buy back unsold product, get paid way later on invoices, etc etc.
Amazon is not leasing retail floor space, so to GP's point, any comparisons between Amazon's open platform and traditional physical retail spaces are moot.
People don't have an issue with Amazon default sorting to best selling either. The problem is that Amazon is slowly pushing out the competition on their platform to focus their own products and labels. If there's any analogy, it would be similar Google removing search result links to Bing or Yandex.
So, if Amazon marketplace was an invite-only, curated marketplace and not an "open" marketplace, this wouldn't be a problem?
That's not how it works for a some perishable products in grocery stores. For example, bread is stocked daily by the bakeries themselves. Same thing with potato chips.
If a grocery store has their in house bakery up front right when you walk in selling bread, and the vendors bread is all the way in the back, is that unfair to the vendor?
That would be for the vendor to decide when planning out where to sell their product I guess
The store still buys those items from them. Some bigger stores will force the vendor to offer a buyback guarantee, but while the product is on their shelves, the store owns them.
If it is shipped & sold by Amazon, Amazon already paid for it from their supplier. If it is shipped & sold by SomeOtherStore, generally they bought it already from someone. There are a lot of dropshippers also and that is a different story.
Amazon similarly protects itself with onerous contracts that can force suppliers to eat the cost of unsold products at times, and does whatever it can to avoid buying unproven products.
Grocery stores and other retailers in general can be protected by refund policies and buyback policies so they are not necessarily taking as much risk especially on packaged products with long expiry dates. They can also liquidate stuff that doesn't get purchased to recoup some money.
The grocery store's risk on store branded products is about the same as Amazon's risk for Amazon brand products. They have the data to know what sells and what doesn't, they have control of the store layout, and they also have pricing data. There's really no major differentiation besides the physical store front and how manufacturers "rent" space.
On Amazon there are as many shelves as there are product categories and the thing has much much more fluctuation.
What that means is, that a "promoted" product is sometimes the only one which stays at a fixed spot, while all all the others are to be found on the miscellaneous-pile.
It’s unfair.
A better analogy would be a walmart in a small town hosting a bunch of small business to showcase their products, then kicking out the top sellers and replacing them with a store brand version. You could argue that those producers should just open their own store but most people won't go out of their way to a different store to buy paper towels.
Except the analogy falls flat when you actually compare the implementation: Amazon's costs to host listings is negligible to negative (they may get more value from having extra listings than it costs to serve them), but that is far from true for grocery stores.
Grocery stores have a very small, finite, shelf space compared to Amazon; you can put a lot of items in the "..." after page 3, but grocery stores have to expend labor to count and organize each item at least once a month.
Yes stores may be able to return non-selling items for a refund, but do you think it cost them nothing while it was sitting on the shelf? What about the labor of stocking them, cleaning them, heck even packing them back up to return? On Amazon anything that doesn't sell well automagically gets shunted into the depths of page 10+, and they can keep them there indefinitely, at no cost.
Stores have a fixed cost associated with every item stocked, this gives them an inventive to sell every item they stock even if they prefer to sell some items over others. But they still want to sell it, even in they have to discount it by huge margins to get rid of it. By contrast Amazon doesn't give a piss about any one of your items in particular getting sold, it can stay there forever as far as they're concerned.
I like to say, a sufficiently large quantitative change manifests as a qualitative change. By that, I mean yes the only "real" difference between these scenarios is some of the costs are different, but how those costs become incentives when you have multiple parties actually matters.
Amazon is more like shopping mall that decides to start operating their own stores and competing with their tenants.
I think the problem is that they present the results on good faith that "these results are the best match for you based on your search", not the most profitable for them.
I just ran a search and the default search filter was "Featured", which is so ambiguous it could mean anything, so it seems like a classic bait and switch that played out over the course of a decade of consumers getting the best search results based on reviews and sales.
That’s not true though right? Don’t grocery stores buy the products that are on their shelves and they are reselling them? That’s fundamentally different from a marketplace.
No, not usually. Usually the seller pays the grocery to carry items, and the seller owns the items until sold.
For some products the seller even stocks the items on the shelves.
That said, what brands got that special treatment was very much decided by Publix, so they were still curating the selection, they just weren't paying up-front for the goods or responsible for keeping those shelves looking good.
They definitely owned the product, while it was on their shelves.
Even if a vendor has a buyback guarantee for expired product, if someone were to break in and steal all the product, its the store who is liable not the vendor.
That was the original point I was arguing against.
My point is that grocery store is not a good analogy because Amazon is not the same as a retail store, they are a combination store and marketplace.
To be fair, I think I would be more comfortable comparing Amazon to Sears in it's heyday.
I'm sure that exists, but it's not common. Grocery stores often charge slotting fees, but that's not the same as renting shelf space--the store still owns the product (even if there is an agreement to buy it back if it doesn't sell).
Also retail stores take on more product liability than marketplaces like flea markets do.
In the case of items actually run through the register, I'm not sure how that's dealt with from an accounting standpoint. I do know that the stores have the ability to return 100% of unsold goods in those cases.
I'm not trying to defend Amazon, but I don't think that comparison makes sense.
>Amazon gives you distribution, traffic, logistics, etc, with zero risk.
Not everyone uses the distribution, and a mall or flea market also provides traffic to tenants.
If amazon does charge a fee for simply listing a product, tell us. They don’t as far as I know.
https://www.nolo.com/legal-encyclopedia/clb-percentage-rent....
A grocery store owns the goods in their possession even if they have agreements for sellers to buy some unsold product back. Amazon does not own the 3rd party goods in their possession.
Amazon isn’t a grocery store. The majority of their catalog isn’t even available at most grocery stores, maybe excluding WalMart.
My family owned several convenience stores growing up. Some products were bought and it was your problem to move them off shelves. Some were displayed on shelves and you only paid for what was actually sold. This was common with one of the distributors who gave us Frito Lay products. Other products had strict terms - for instance, Pepsi and Coke distributors wouldn’t give you competitive pricing unless you agreed to purchase Y in X quantity, place their mini coolers next to the refrigerator, place signage within x feet, clearly visible from the front entrance, etc. suddenly, you’re the only store in town who sells 16 oz soda for $1.59 just to break even while everyone else is selling the same soda for $1.09 or just 99 cents.
It’s a different model than Amazon and you’re taking liberties to simplify it
No I'm saying it has very important distinctions that make the grocery store analogy inappropriate and that the mall or flea market analogy is closer in some respects, but not all.
>Amazon isn’t a grocery store. The majority of their catalog isn’t even available at most grocery stores, maybe excluding WalMart.
Of course it's not. That's a big part of my original point.
> Some were displayed on shelves and you only paid for what was actually sold.
My dad worked for Lance (and frito lay for a while). I could be wrong and you could have had a very unusual distributor. But my guess is you misunderstood what was happening.
Companies do sometimes offer buyback guarantees and you might even be able to buy items on credit, so that it appears you're only paying for what sells, but that's not actually how it works. Those items are the property of the store while they are on the shelf.
Amazon is totally within their right imo, those sellers can go back to eBay if they dislike amazon.
more like a big box store that allows other stores to operate in them so long as they get a cut.
Amazon does all of these things. They have unlimited shelf space, which reduces constraints.
But vendors can have amazon handle returns, they can be kicked off the platform, and amazon decided how to present vendors.
That content can be uploaded to YouTube.
So it's fine they're shafting other vendors on their platform because their products are good?
I am frustrated by plenty of things that Amazon does, by the way...I just don't think that this is a particularly bad feature of theirs.
They own the store. Shopify is a thing.
Coincidentally, Amazon brand products are usually pretty good in my experience, so this might not be a terrible outcome for users who have already decided to come shop at Amazon's store.