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.
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.
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?
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.
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.
> 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.
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.
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...
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.
b. This 1945 precedent is not the standard that most modern antitrust (post-Bell breakup) cases are held to.
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.
Also I think there's 0 chance that wouldn't be overturned if tested today.
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.
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.
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.
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.
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.
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.
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
In the long term, Amazon undercuts suppliers who have to exit the market. 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.
You say it as if that was a bad thing. More competition is good for the consumer, bad for the oligopolists.
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?
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.
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.
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?
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)
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.
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.
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.
The Amazon Basics company could buy some market information or behavioural stats from the Amazon Dotcom company at a rather steep price, for example.
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 think 'brands' like Kirkland are a net good for the consumer.
*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.
If you think there's something abusive going on, email [email protected] so we can look into it.
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.
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.