Slotting fees, like buying ads on Amazon, have absolutely nothing to do with inventory costs.

>Supermarkets often have contracts where they can return stock to suppliers if it is defective or not selling well and do not always own their stock.

There's exceptions to everything and the parent explicitly mentioned that.

This is a bit extreme. “Shipped and sold by Amazon” is indeed a large part of their online retail and many people try to buy only directly from Amazon.

Amazon chooses which products to stock and sell direct based on the risk/reward ratio of each individual product. They determine that ratio by analyzing their 3rd party merchants data.

See the problem? Amazon can eliminate/minimize their own risk based on data from their supposed "partners".

You do know that the companies that make the name brand cereals...also make the store brand cereals...

It's about market fit. Price sensitive customers would generally not buy name brand because it's too expensive, and the brands don't won't lower-priced products to "sully" the image of the brand. Hence, they sell white label (aka store brand) products to retail stores that are generally lower quality and thus cheaper.

Supermarkets frequently charge slotting fees to appear on their shelves.

Yes, some do. For new products that they wouldn't otherwise stock on the shelves, because it's in lieu of the anticipated lost revenue from saleable products that would otherwise have gone on the shelves. Note that slotting fees are used alongside consignment arrangements.

Supermarkets often have contracts where they can return stock to suppliers if it is defective or not selling well and do not always own their stock.

Yes, but they've still paid for those products in the first place (in the legal/accounting sense). Refunds come in the form of discounts or credits on future invoices.

Let me clue you in on a few facts.

Retail stores are not paying upfront. Name a single major retailer that does this. I've yet to hear of a single one doing this.

Amazon is a bookstore. Go to any other bookstore or even distributor, and ask how quickly folks get paid who sell into their market. These folks drag the absolute HELL out of payment.

And yes, the local bookstore can return the books. They are generally not taking inventory risk.

Same thing with a grocery store. Want to get on shelf? Pay a fee? Want to sell in store? Until you prove sales volume so risk is gone, you will need to be willing to accept product returns and pay fee to cover whatever you replaced.

Want data on how your product sold at store level / by day / time etc? Be prepared to PAY for that. BTW - amazon merchants get most of this for free.

The time to pay for a product that sells in a retail store and amazon is different, and much WORSE for the retail store. You can get next day payout availability for FBA from amazon. If you sell a product through a distributor into retail - if you think you are going to get next day payment - dream on.

I don't claim that the companies "pay upfront" because that's not how B2B invoicing works. Companies pay invoices on a net-terms basis (ranging between 30 and 180 days after the underlying good or service is provided or received). But they have signed the legal contract agreeing to pay before they received the inventory (and indeed before the inventory was even queued for delivery), and so legally, they are required to pay.

For financial and tax purposes, they are treated as having paid (because the expense has accrued) even if, economically, they have not actually forked over the money.

And yes, the local bookstore can return the books. They are generally not taking inventory risk

This is not true. The local bookstore has taken on inventory risk. B&N takes on inventory risk. They can, however, ask the publisher for discounts or credits for unsold books, and publishers generally give those out like candy.

Same thing with a grocery store. Want to get on shelf? Pay a fee? Want to sell in store? Until you prove sales volume so risk is gone, you will need to be willing to accept product returns and pay fee to cover whatever you replaced.

Yes, and I've never claimed otherwise. If you want to replace items on the shelf that are selling, you need to pay the store for the risk of your replacement product not selling. But once you have established that record of sales, they buy future inventory. Note that for most retail stores we are talking about here (grocery, gas stations, Target, Walmart, etc.), these trials last a day or two; maybe even a week for slower-selling product types; trials may last longer for specialty stores.

Means very different for products with a limited shelf life. The cost to “replace items that are selling” doesn’t just cover the risk, it also covers the items actively sitting on the shelves. A store is only buying new items after the old items have sold, so that continues indefinitely. A store is thus better off of if an item stops selling in 1 year than 1 day, as the replacement item is also subsidized.

It's the same with Amazon. They may not be using the "name brand" manufacturer all the time, but Amazon doesn't own factories that make Amazon brand products. They use OEM's like everyone else. They don't own farms and dairy mills for their grocery products.

If my brand is diluted then there's no reason to keep using me to create the store brand. Being the manufacturer of the store brand is just signing my own death sentence.