A factor here is that many vendors on Amazon, even major household brands, are surprisingly unsophisticated about how they structure their business with Amazon. I know someone whose entire business is helping major brands structure their Amazon business correctly to get what they want out of that relationship. They are overwhelmed with new work from companies that you'd think would be competent to do this themselves.
Most manufacturers with their own storefronts won't discount product unless they've allowed it in other storefronts and / or until the product has been discontinued. Don't bite the hand that feeds you.
On the other hand, Amazon enforcing this as a rule is sort of ass-backwards.
I remember a 2007ish USSC case that utterly changed the premium cigar market because it allowed manufacturers to enforce MSRP against gigantic volume discounters, which raised prices across the board overnight but also gave the manufacturers breathing room when it came to their own profit.
We sell on Amazon. The fees are not insane. It varies by category, but typically they range from 10-15%. Amazon brings tons of value to the relationship, so we're happy to pay that fee.
THIS X10000! Happened to a colleague of mine not too long ago. She developed a product, and sold on Amazon as well as her own storefront. As soon as she started seeing solid volume on Amazon, her product became an "Amazon preferred product" or something like that. However, within 2 weeks of getting that distinction, her sales dropped to 0 on Amazon. Why? Amazon started selling a nearly identical product - Amazon used the sales data to understand her product was popular, and went right to her supplier and cut her out of the equation.
Amazon does this constantly.
This is not a new thing either. Or unique to amazon. This has been going on for decades (or as long as retailers have had own label products). Every Walmart/safeway/target/kroger branded product is essentially a clone of somebody else's product that they figured out they could do cheaper.
Years ago my MiL was selling her baked goods directly to a local grocery chain. They then decided to bring baking in house and came out with an almost identical product line.
If you have a product that is easily copied/reproduced (and not patentable) then a retailer can remove your margin by doing it themselves and in this case your value becomes the brand/brand recognition and not the product itself.
Yup. Amazon provides an extremely valuable service to us: they provide a stream of customers who are at the end of the sales funnel and ready to convert because they trust Amazon's platform.
> What happens when Amazon starts private labeling the same things you sell? Or your supplier starts selling on Amazon and undercutting you?
This is going to blow your mind, but we compete against both Amazon Basics and our factory.
We compete with Amazon Basics by selling a differentiated product. Amazon will never be able to compete in every product niche and at every level of quality/differentiation. It's actually not possible for the same reason that a centrally planned economy breaks down above a certain level of complexity: there are simply too many different niches that need to be addressed and the profit motive is the only system we've discovered which ensures that they get addressed.
And we compete with our supplier by understanding the market better. They're good at manufacturing, but they don't really understand the end user. The type of personality that is good at operating a factory tends not to be the type of personality that is good at marketing. HN doesn't really like to hear this, but sales and marketing are actually an important part of running a business, especially one that sells to consumers.
It is very easy for me to not type Amazon.com and type any other website address. In fact, I am easily able to avoid Amazon for any non garbage goods I’m looking for. I can even go to eBay.com or aliexpress.com if I want equivalent garbage sold on Amazon.com
I struggle to see how it is a monopoly in any sense. On the seller side, they can choose to use USPS/FedEx/UPS to ship.
And if you make a product getting it off Amazon is basically impossible, so it's in your interest to use it and maintain your own listings. If you don't, someone else will.
We expect people to learn how to read, how to drive, how to do basic math, I do not see why the line would be drawn before learning how to go to different URLs or using a search website.
> And if you make a product getting it off Amazon is basically impossible, so it's in your interest to use it and maintain your own listings. If you don't, someone else will.
This is a not so easy issue, but if the problem is counterfeits, then the government should pursue that.
With Amazon, as with local retail, there are people who are willing to pay more simply for the convenience. Elasticity varies by category and item, of course, but people would be surprised just how many manufactures do undercut retailers and distributors that they sell to.
Part of this is that retail has tried to maintain its >50% margin for items that it doesn't even sell in store anymore. Manufactures know this and effectively cut their discount by selling an item $10 themselves, while only giving the retailer 40% discount. Retail still wants their >50% margin, so they will sell that same item for $11 both online and at B&M. In many cases this actually works out well for everyone. You would think that everyone would just buy direct and save a dollar, but you'd be surprised how many people want the convenience or simply have loyalty to a retailer for some reason.
So far most of the discussion is about pricing on Amazon vs. other retailers, but Amazon also does this between sellers of the same product on Amazon. If there are multiple sellers of the same product, Amazon will funnel their customers to the seller offer with the lowest price. The jargon term for this is "getting the buy box".
Nonsense. Selling on Amazon takes a 18-33% markup on the price of the product. Amazon forces this margin consumers by requiring sellers to not sell cheaper elsewhere; even though selling elsewhere may cost the seller less.
Amazon charges a referral fee on all 3rd party transactions. It varies by category, but is typically 8-15%. All retailers take similar margins. For instance, the largest retailer in the US is Walmart. Here is a list of their 3rd party referral fees: https://marketplace.walmart.com/referral-fees/.
Given that the retailers all take similar margins, I think it's crazy to somehow paint this as Amazon forcing a markup on customers. All Amazon is doing is refusing to show products if the price on Amazon is higher than at a competitor. It's the seller who chooses what to do about that. They can either raise the price at the competitor, or they can lower the price on Amazon.
Again, the retailer's margins are similar, so it shouldn't matter.
> Given that the retailers all take similar margins, I think it's crazy to somehow paint this as Amazon forcing a markup on customers. All Amazon is doing is refusing to show products if the price on Amazon is higher than at a competitor. It's the seller who chooses what to do about that. They can either raise the price at the competitor, or they can lower the price on Amazon.
Think of it this way: If that was the case, then why does Amazon require them to sell it for the lowest price on Amazon?
Amazon has a dominant market position, extracting more margin then competitors, yet they engage in this anti-competitive and consumer damaging behavior of requiring sellers to sell products at low or below cost in order to 'play' on the amazon.com marketplace.
Shameful.
eBay charges similar fees: https://www.ebay.com/help/selling/fees-credits-invoices/sell...
Shopify is not a meaningful comparison, since it is not a marketplace. They don't bring customers to you. They're essentially a hosting and payments provider. You have to get traffic yourself.
> yet they engage in this anti-competitive and consumer damaging behavior of requiring sellers to sell products at low or below cost
Is your position that they are increasing the prices consumer pay or that they're decreasing them?
How does this damage the consumer?
Those two statements sound like the same thing from different perspectives.
Consider the counterfactual case: if there was an Amazon competitor with higher efficiency they could compete by offering a lower take-rate. Sellers could then sell the same product with the same margin at a lower price, and buyers would benefit from those lower prices.
Instead, Amazon is using its market power to prevent alternative stores from competing with it on price by hamstringing sellers. This means that while the sellers’ margin is exposed to competitive pressure, Amazon’s margin is not. And that means higher prices.
In most industries, MSRP agreement rules are pretty tightly enforced. California winning this case seems like it could make for a weird precedent.
I think though as comparison that the power dynamic is flipped. Exclusivity agreements usually were to the benefit of the store (against big brands at least). But against the small brands on Amazon, they favor Amazon.
https://www.ftc.gov/advice-guidance/competition-guidance/gui...
And it usually has to do with brand perception. Nordstrom doesn't want you selling that same product at Target because it devalues the brand.
In the case of Amazon though (and I caveat this with the fact that I’m not aware of the full details) this is about being able to sell on Amazon at all, there are no extra perks involved for the sellers.
The analogy in a retail setting might be losing your signage or being yanked from a good location.
"Reducing the listing" can potentially mean being pushed to page 23 of search results. In retail, that would be equivalent to never leaving the warehouse, available only upon specific request by a customer.
1. It hinders competition. You can't really provide a marketplace thay competes with Amazon by having lower prices (for example by taking a smaller cut from sellers), because sellers aren't allowed to list lower prices on your marketplace. Or alternatively, you can't compete by selling directly from you website, because you can't offer a lower price than on Amazon.
2. It means even if you buy directly from the seller, you have to pay a higher price because it is listed on Amazon. In effect people who bu directly are subsidizing a lower price for people who buy on Amazon. This applies to the credit card case as well.
Just imagine I want to by a widget, and there are many manufacturers. I can search on Amazon, and get all of the prices for all the manufacturers right in one place, and I know that each price I see is the cheapest. I don’t have to search for 10 different manufacturer websites and check each price. I can just sort by it, and then one click buy.
I understand the anticompetitive concerns, but there is also a big advantage for consumers to be able to have a single market that has the lowest prices available and easy ordering.
Yeah, but it isn't. I suggest you at least check the price on eBay before you buy from Amazon, if not Froogle and Walmart.
Amazon's anti-competitive behavior here ONLY applies to a single seller, NOT to a manufacturer or a specific product. So while "Steve's Discount Stereo" can't sell that stereo for a lower price outside of Amazon, "Dave's Discount Stereo" certainly can.
Maybe they both outsource inventory and order processing to the parent company only having distinct sales and marketing.
If I am a widget manufacturer, selling on Amazon means I am no longer competing for your purchase with just my market peers. On some level, I am now competing against all listings in that category, including grey market resellers because Amazon doesn’t police for shit.
No one is forcing you to comparison shop. You're trying to take freedom from others so you can financially justify being lazy.
> I understand the anticompetitive concerns, but there is also a big advantage for consumers to be able to have a single market that has the lowest prices available and easy ordering.
Not when that "lowest price available" is now inflated from what it would have been. Consumers lose because now they pay higher prices than they otherwise would have.
Also, the only reason we want competition is because it should get lower prices for consumers. Competition isn't a good in and of itself, it's just a means to an end. So if more competition means higher prices for the same goods, then who needs it?
I don't quite get your second point: if the consumer is paying the same price, why do they care whether 100% goes to the supplier, or 99% or 0.01? If an item costs me 10USD, I don't care who get's that money, I just care that I don't get to keep it right
If another marketplace takes a lower cut, allowing the seller to set a lower price while keeping margins, they can’t do so under this arrangement without taking a hit on Amazon sales.
The market should be encouraging finding the lowest-margin distribution path, not artificially propping up prices elsewhere to match Amazon’s margins.
But you care if it costs you $10 instead of $9. My point is that Amazon's rules means the price is higher for everyone, in order to cover Amazon's fees. Without them, if you are willing to buy from somewhere less convenient than amazon, you can get a better price.
That is not the only reason free market capitalists want competition. Competition should also promote a variety of choice, innovation, and dynamism in other services to consumers, not just low product prices.
For example, you are selling a Widget for $20. Amazon says "we'll take $10 of that ourselves". You can sell your Widget elsewhere at lower overhead, but you can't pass those savings on to the buyer, which means the buyer has no incentive to shop elsewhere, which means there are no market forces encouraging Amazon to reduce their cut.
There are also no market forces preventing Amazon from increasing their cut. Tomorrow, they'll want $15 of that $20.
If an item is 100$, seller gets 95.
Ok their own website, noone takes a cut, all money goes to seller.
In this case they might want to sell for 98$, and then both customer and seller wins.
But the reality is they are a store that dwarfs every other in customer reach making it difficult for small businesses to grow without utilizing Amazon as one of their sales channel. Hence, Amazon's 15% commission gets baked into everything even if it's not sold on Amazon. I think the law needs to evolve in a way to recognize scenarios like this where there is massive asymmetry - not necessarily a monopoly - between one dominant market player and others which is harming the consumer.
Amazon's response of course would be "no fair; you're using us for product discovery but then giving the sale to the brand owner". Which has some validity. If you took away the commission, then they would be relegated to a search engine that relies on ad revenue only. But that would mean lower prices so consumers would win in the end.
Almost as bad as someone walking into a brick and mortar store and then going to some big website to actually buy the TV. No fair indeed.
If I'm at the store and i can put something in my cart and buy it then I'm not going to order it online and wait for delivery to save $5. Also delivery is extremely unreliable these days...
From watching other people at stores, it's maybe 15%? For goods that need to be installed or carefully handled, it's less common. Headphones? Pricecheck. Mechanical Keyboard? Pricecheck. Washer and Dryer? Most people pricecheck even though it seems like something they wouldn't. Turns out that most people shop around for those, so internet pricechecking is part of it. Food items that seem too expensive? Pricecheck. You can save a bunch on dry/bottled goods. Amazon Prime feels like a Costco membership. You have to make sure you use it, to justify it.
No they are not. They are setting the price on their platform to be the minimum price. That's very different and bad for consumers.
They'd also still be a major corporation / quasi-monopoly that powers like 80%+ of the internet and is wildly profitable. I see no problem with taking a small cut of their revenue away that they only have due to shady business practices. But Wall Street would cry Won't anyone think of the shareholders?
I wouldn't give a shit if that caused Jeff's net worth to drop 5% or 10% - the guy would still have more money than the rest of the world save for 4 or 5 people rather than just 1 or 2 people.
No, they are making sure they get the biggest cut
They use the ad money to give five percent cash back on purchases.
Manufacturer advertises "effectively pay 5% more on our web site or Amazon will club a baby seal (or worse)!"
The advertising campaign falls flat.
Consumers are killed/maimed by a counterfeit item they bought on Amazon.
Manufacturer costs go up 10% (spent on lawyers and training customer support as emergency response workers).
Amazon begins production of a higher-margin, but less expensive and non-deadly knock off, and promotes it above the original product.
Repeat.
Play around with this (and don't enter 0 for shipping, because they have a divide by zero error):
https://sellercentral.amazon.com/hz/fba/profitabilitycalcula...
The higher margin on the left is what amazon charges for fulfillment (which can be quite a lot).
To me, this is akin to the credit card companies disallowing a discount for paying with cash/check. Which was made illegal. Though I'm not sure if by law or legal case.