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Much of what Amazon does is what other retailers already do. Amazon just does it more overtly and with smaller businesses. In fact, various aspects of this wher

Much of what Amazon does is what other retailers already do. Amazon just does it more overtly and with smaller businesses. In fact, various aspects of this where pioneered by WalMart and Costco. 1. WalMart determines the expected product and expected price and tells vendors to take it or leave it. The agreement often has a stipulation that the same product can never be cheaper elsewhere which is sometimes easy as WalMart gets specific SKUs. 2. On the other side, Costco makes the majority of its money from memberships. The membership is a significant sunk cost and maintains brand loyalty from a mass affluent customer base (notice the similarity to Amazon Prime). Existing vendors will work closely with Costco to tailor products to this desirable market (see Costco specific SKUs for TVs, routers, etc). Upstart brands will go even further to get their wares in front of an audience with ample disposable income. The Amazon policy basically says that the vendor must offer free shipping. Coincidentally, nobody can offer shipping for less than what Amazon offers therefore Amazon(FBA) is by default the lowest price. The only other company that can fight this with a logistics network of its own is...WalMart. Then you have Chinese vendors who sell through networks of dropshippers and resellers at Amazon and other venues. It's why you see many vendors of seemingly the same item. One thing to note is that it's mostly small and medium vendors of relatively low margin items that are the most hurt by Amazon's policies. Seller's of high margin items just eat into their margins while large vendors push back at Amazon and sometimes win e.g. Toilet Paper that comes directly out of a Georgia Pacific warehouse instead an Amazon warehouse despite being labeled as Prime and sold by Amazon.com, not a third party.

jancsika 3y ago
> Much of what Amazon does is what other retailers already do. Walmart and Costco subsidize free shipping by raising prices on the third party businesses who sell through them? Because that's what the article is about.
- thayne 3y ago
  The mechanics might be different, but the "free shipping" is still subsidized by driving the price of the product itself up. Either way, all consumers pay a higher price, so that a subset of them don't have to pay for shipping.
  - Guvante 3y ago
    Historically you are careful with free shipping to ensure the loss is less than say a retail cut of the price. That is why minimum orders were so popular, if it cost say $8 to ship something and a retail margin is 15% I can do the math on a break even point where it is a wash or better for the vendor.
- tick_tock_tick 3y ago
  Yes
  - smt88 3y ago
    Costco doesn't do this because they aren't a marketplace. They only sell products in their own inventory. They aren't gouging small sellers.
dmix 3y ago
> The agreement often has a stipulation that the same product can never be cheaper elsewhere which is sometimes easy as WalMart gets specific SKUs. Are you sure this is done overtly by Walmart? As the article says Amazon had this policy but it was dropped because of EU and US gov pressure. I'd be surprised if Walmart got an exception. Unless there's some distinction for retail stores not just online.
Salgat 3y ago
Amazon's biggest advantage is that they can sell fakes and patent violating products to undercut other retailers.
- time0ut 3y ago
  Don’t forget copyright violating products.
_uhtu 3y ago
I hate that every discussion of reigning in abusive companies has to come with 1000 comments about how other companies are also being abusive, which should apparently make us just wave the white flag. Nah, let's deal with all the monopolies, and Amazon is a good place to start since like you said, they are just incredibly blatant.
- fallingknife 3y ago
  It's a very strong argument to say that the practice currently being pursued by the FTC has been a long standing and generally accepted as legal practice in the retail industry. The fact that they are going after Amazon for this, but have not ever gone after anybody else who has been doing it for decades leads me to the conclusion that this is not about the actual trade practice it claims to be about, but rather a politically targeted attack on Amazon. And the FTC is very much capable of running multiple enforcement actions at once. Why are there no such charges against other companies doing the same thing. They don't have to be one at a time.
  - deleted 3y ago
    [deleted]
  - sli 3y ago
    I checked, Amazon does indeed sell tiny violins. They are keychains that make sounds. Unless there's a claim here that the FTC is working directly for, say, Walmart, everyone else benefits from Amazon being brought down a handful of pegs. Sorry if it makes things hard for some AWS customers, but eggs, baskets, etc.
    - deleted 3y ago
      [deleted]
- danielmarkbruce 3y ago
  "all the monopolies"
  - 3y ago
resoluteteeth 3y ago
> The agreement often has a stipulation that the same product can never be cheaper elsewhere which is sometimes easy as WalMart gets specific SKUs Does the trick of creating different SKUs work for amazon though? If not, it seems like what they're doing might be worse. Since according to the article they're now enforcing the rule against having lower prices elsewhere through software, depending on how it's implemented it could end up having a much broader effect.
bonestamp2 3y ago
> The agreement often has a stipulation that the same product can never be cheaper elsewhere which is sometimes easy as WalMart gets specific SKUs Yep, this is anti-consumer and anti-competitive -- it should be illegal. Here's where it gets interesting though... In wal-mart's case they're trying to win on price competition alone. They're hoping with their volume, operations and efficiency, nobody else can sell with a lower margin. But Amazon is doing the opposite. I looked into selling on Amazon recently and the fees were over 30%! Amazon requiring that sellers can't offer a lower price elsewhere drives the prices up on Amazon and off Amazon. Primarily, they're trying to prevent sellers from directing buyers to their own website where they can offer the product at a lower price because there are no 30%+ fees.
Guvante 3y ago
Amazon Prime isn't the same as Costco Membership unless you ignore everything beyond "richer customers are willing to pay for it". Costco makes its profit off its membership. Amazon Prime offers a product at less than cost and then shifts that cost onto its manufacturers. After all if I am paying Amazon for Prime shouldn't Amazon pay for the difference between more typical free shipping and two day shipping at minimum? Isn't that what the payment is for? The reality is Amazon Prime is more akin to a loss leader and Amazon realized it could use its market position to avoid inflating it's price to reflect that loss by putting pressure on its partners. Of course whether this is legal is an open question obviously but it certainly isn't the same as Costco using a membership as a profit source. Walmart vs Amazon is more nuanced as the difference gets into market overlaps. Should Amazon be able to force you to use its fulfillment service to use its website (which is generally illegal for drop ship style setups like Amazon who doesn't take ownership). So Amazon is certainly rubbing against a "you can't force bundling like that". The question is whether their "forcing" you in the way their website heavily focuses on Prime.
darkarmani 3y ago
Isn't that totally different? I thought brick and mortar stores actually buy inventory (or commit to buy orders in this age of just-in-time) where Amazon is just the middleman connecting buyers and sellers and charging fees on both ends. If Amazon wants to commit to certain sizes of orders, I'm sure the vendors will be happy with contractual price setting.
- viraptor 3y ago
  Amazon warehouse inventory is held ahead of time. That's how the commitment to some stock levels works today.
jedberg 3y ago
> Costco makes the majority of its money from memberships Not really. Their total profits last year were $2.8B and their membership income was $1.5B. It only represents the majority if you assume there is no cost to their membership income. But we know there is, because they have to have employees who do nothing but process memberships and they have to maintain all their membership benefits which also requires employees. It's fair to say that about 1/2 of their income is from memberships though, which is still high.
- recursive 3y ago
  If those numbers are precisely accurate, it should be noted that Costco could be paying up to $100M to process memberships, and it would still literally actually be most of their profit. Also "about 1/2" and "most" are not mutually inclusive. In fact, I'd expect they mutually occur with some frequency.
- pharrington 3y ago
  The assumption is that everything the business does has a cost.
- dragonwriter 3y ago
  > Their total profits last year were $2.8B and their membership income was $1.5B. According to their 2022 annual report, their membership revenue for their reporting year (the 52 week period ending August 28, 2022) was $4.2B, and their net income for the same period was $5.9B, so neither your numbers nor the relationship between them seems to be correct, unless Costco committed massive securities fraud. https://investor.costco.com/financials/annual-reports-and-proxy-statements/default.aspx https://investor.costco.com/financials/annual-reports-and-pr...
ryukoposting 3y ago
To what extent do the randomly-named Chinese Amazon storefronts manage to circumvent Amazon's price-competition algo? If you make a storefront named qwduburtf on Amazon and a storefront named civendntip on eBay, I can't imagine Amazon would be able to match up your product listings between the two sites.

jancsika 3y ago

> Much of what Amazon does is what other retailers already do. Walmart and Costco subsidize free shipping by raising prices on the third party businesses who sell through them? Because that's what the article is about.

thayne 3y ago
The mechanics might be different, but the "free shipping" is still subsidized by driving the price of the product itself up. Either way, all consumers pay a higher price, so that a subset of them don't have to pay for shipping.
- Guvante 3y ago
  Historically you are careful with free shipping to ensure the loss is less than say a retail cut of the price. That is why minimum orders were so popular, if it cost say $8 to ship something and a retail margin is 15% I can do the math on a break even point where it is a wash or better for the vendor.
tick_tock_tick 3y ago
Yes
- smt88 3y ago
  Costco doesn't do this because they aren't a marketplace. They only sell products in their own inventory. They aren't gouging small sellers.

dmix 3y ago

> The agreement often has a stipulation that the same product can never be cheaper elsewhere which is sometimes easy as WalMart gets specific SKUs. Are you sure this is done overtly by Walmart? As the article says Amazon had this policy but it was dropped because of EU and US gov pressure. I'd be surprised if Walmart got an exception. Unless there's some distinction for retail stores not just online.

Salgat 3y ago

Amazon's biggest advantage is that they can sell fakes and patent violating products to undercut other retailers.

time0ut 3y ago
Don’t forget copyright violating products.

_uhtu 3y ago

I hate that every discussion of reigning in abusive companies has to come with 1000 comments about how other companies are also being abusive, which should apparently make us just wave the white flag. Nah, let's deal with all the monopolies, and Amazon is a good place to start since like you said, they are just incredibly blatant.

fallingknife 3y ago
It's a very strong argument to say that the practice currently being pursued by the FTC has been a long standing and generally accepted as legal practice in the retail industry. The fact that they are going after Amazon for this, but have not ever gone after anybody else who has been doing it for decades leads me to the conclusion that this is not about the actual trade practice it claims to be about, but rather a politically targeted attack on Amazon. And the FTC is very much capable of running multiple enforcement actions at once. Why are there no such charges against other companies doing the same thing. They don't have to be one at a time.
- deleted 3y ago
  [deleted]
- sli 3y ago
  I checked, Amazon does indeed sell tiny violins. They are keychains that make sounds. Unless there's a claim here that the FTC is working directly for, say, Walmart, everyone else benefits from Amazon being brought down a handful of pegs. Sorry if it makes things hard for some AWS customers, but eggs, baskets, etc.
  - deleted 3y ago
    [deleted]
danielmarkbruce 3y ago
"all the monopolies"
- 3y ago

resoluteteeth 3y ago

> The agreement often has a stipulation that the same product can never be cheaper elsewhere which is sometimes easy as WalMart gets specific SKUs Does the trick of creating different SKUs work for amazon though? If not, it seems like what they're doing might be worse. Since according to the article they're now enforcing the rule against having lower prices elsewhere through software, depending on how it's implemented it could end up having a much broader effect.

bonestamp2 3y ago

> The agreement often has a stipulation that the same product can never be cheaper elsewhere which is sometimes easy as WalMart gets specific SKUs Yep, this is anti-consumer and anti-competitive -- it should be illegal. Here's where it gets interesting though... In wal-mart's case they're trying to win on price competition alone. They're hoping with their volume, operations and efficiency, nobody else can sell with a lower margin. But Amazon is doing the opposite. I looked into selling on Amazon recently and the fees were over 30%! Amazon requiring that sellers can't offer a lower price elsewhere drives the prices up on Amazon and off Amazon. Primarily, they're trying to prevent sellers from directing buyers to their own website where they can offer the product at a lower price because there are no 30%+ fees.

Guvante 3y ago

Amazon Prime isn't the same as Costco Membership unless you ignore everything beyond "richer customers are willing to pay for it". Costco makes its profit off its membership. Amazon Prime offers a product at less than cost and then shifts that cost onto its manufacturers. After all if I am paying Amazon for Prime shouldn't Amazon pay for the difference between more typical free shipping and two day shipping at minimum? Isn't that what the payment is for? The reality is Amazon Prime is more akin to a loss leader and Amazon realized it could use its market position to avoid inflating it's price to reflect that loss by putting pressure on its partners. Of course whether this is legal is an open question obviously but it certainly isn't the same as Costco using a membership as a profit source. Walmart vs Amazon is more nuanced as the difference gets into market overlaps. Should Amazon be able to force you to use its fulfillment service to use its website (which is generally illegal for drop ship style setups like Amazon who doesn't take ownership). So Amazon is certainly rubbing against a "you can't force bundling like that". The question is whether their "forcing" you in the way their website heavily focuses on Prime.

darkarmani 3y ago

Isn't that totally different? I thought brick and mortar stores actually buy inventory (or commit to buy orders in this age of just-in-time) where Amazon is just the middleman connecting buyers and sellers and charging fees on both ends. If Amazon wants to commit to certain sizes of orders, I'm sure the vendors will be happy with contractual price setting.

viraptor 3y ago
Amazon warehouse inventory is held ahead of time. That's how the commitment to some stock levels works today.

jedberg 3y ago

> Costco makes the majority of its money from memberships Not really. Their total profits last year were $2.8B and their membership income was $1.5B. It only represents the majority if you assume there is no cost to their membership income. But we know there is, because they have to have employees who do nothing but process memberships and they have to maintain all their membership benefits which also requires employees. It's fair to say that about 1/2 of their income is from memberships though, which is still high.

recursive 3y ago
If those numbers are precisely accurate, it should be noted that Costco could be paying up to $100M to process memberships, and it would still literally actually be most of their profit. Also "about 1/2" and "most" are not mutually inclusive. In fact, I'd expect they mutually occur with some frequency.
pharrington 3y ago
The assumption is that everything the business does has a cost.
dragonwriter 3y ago
> Their total profits last year were $2.8B and their membership income was $1.5B. According to their 2022 annual report, their membership revenue for their reporting year (the 52 week period ending August 28, 2022) was $4.2B, and their net income for the same period was $5.9B, so neither your numbers nor the relationship between them seems to be correct, unless Costco committed massive securities fraud. https://investor.costco.com/financials/annual-reports-and-proxy-statements/default.aspx https://investor.costco.com/financials/annual-reports-and-pr...

ryukoposting 3y ago

To what extent do the randomly-named Chinese Amazon storefronts manage to circumvent Amazon's price-competition algo? If you make a storefront named qwduburtf on Amazon and a storefront named civendntip on eBay, I can't imagine Amazon would be able to match up your product listings between the two sites.