This strategy has been adopted by eBay as well and artificially drives up prices. Let me elaborate.
Recently, eBay has made it so that only the products with paid ads are shown in places where customers click. This drives up the cost of everything by more than 10% which is eBay's ad fee. I refused to buy a paid ad to sell my MacBook. It sat on the site for a month, which is highly unusual for an in-demand and rightly priced product. Finally I lowered the price enough to get it sold.
Most consumers use the default site, which filters by Recommended (i.e. ads) The play for consumers to win at this new payola ad scheme is to always filter by lowest price (or in amazon's case Prime + lowest price)
But really, consumers don't win (and neither do sellers) because now these ads take up space in supposed "search results" for items which don't match the search terms (but are close enough) This creates frustration when you are looking for something to meet a specification, like E26 light bulbs for example. Here, it is pointless to show anything that doesn't meet that specification and yet the site shows them, and the seller has to pay the ad fee.
You are touching on a point that Benedict Evans has made quite eloquently in the past:
>There was a joke a few years ago that rent is the new [Customer Acquisition Cost], and that now applies to everything. The [Total Addressable Market] for search ads is not ‘advertising’ (let alone online advertising) but everything that is spent to reach and serve a customer, starting with retail rents. This applies to Amazon, but even more to Google - you can ask whether Google’s ads are ‘advertising’ or ‘marketing’, but also ask whether the TAM for buying placement in Google search results is ‘advertising’, ‘marketing’ or just its customers’ operating margins. How do you reach a consumer? Do you spend your budget on TV ads or search ads, or on retail rents, or on giving retailers a margin versus selling direct, or giving the retailer a better price for better placement, or free shipping, or a better returns policy? Everything below P&G’s COGS line is up for grabs.
There will be no site that does not offer advertising, because advertising allows the site to determine which sellers can afford to pay more while still being profitable. It's a scaled version of the same way a landlord will raise rents on a profitable storefront.
>There will be no site that does not offer advertising, because advertising allows the site to determine which sellers can afford to pay more while still being profitable.
It's still possible that people exist who charge "what it's worth" rather than "what they can get". Those people can still make a fine living off of a two sided market place through flat transaction fees. Craigslist is an example that comes immediately to mind. Smart market participants are already punishing providers that maximize profit with payola, which is leading to success of new smaller niche markets - reverb.com comes to mind, or bricklink.com or alibris.com. That is not to say the market of markets is "solving" this problem - we probably want more consumer protection law - but it does show that your startement about ads is, strictly speaking, false.
It's going to be a bit harder to win on this end I think. Manufacturer's require retailers to agree to this type of restriction all the time time (and it's mandatory, not voluntary) like it is with Amazon.
Thats not the only thing I caught, at least with Ebay.
During the pandemic, I decided to sell a bunch of a component I had stockpiled. (Im not a scalper. I got the parts when my dad died.).
I put them for sale with $100 minimum, auction. They ended up selling for $300. I was definitely happy.... until Ebay refused to send me my money, and instead demanded access to a bank account, after the sale was complete. Fuck that.
I found the user who bought it, traced to a business. Cool. I contacted him, explaining what happened. Turns out they did the same to him since he too was a seller. I told him that I'd honor the same price Ebay told me....
Ebay told me (seller) $300. Ebay told the buyer $350......!! Mind you, the fees are taken out of my $300, yet that $50 difference is Ebays scrape off the top.
Obviously, I sold it to them for $300, and provided screenshots of what I was being told, and they did the same. We arranged the sale over Paypal and worked like a charm.
And sure, Ebay's scamming as far as I can tell, everyone. But it's also reminded me to check on websites with a private mode browser and logged in, to see if there's funny games.
It's amazing how quickly I recognized eBay descending into this sort of stuff from its inception. Maybe Amazon did so quickly too, but it's so obviously scummy that even as a teenager I got this impression. Kudos to you for going the extra mile
I recently sold some items on ebay. ebay will not release the funds for 3 weeks. They give no reason for this. However I think the real reason is that if you do this over a large enough user base you can use the "time-value" of money to make extra money. It's nefarious, and I too will never use ebay again.
eBay stole my money and made it impossible to get a refund fifteen years ago. I gave up and stopped using the site. Sorry I don’t have more details; it’s faded from memory. But it was dirty behavior, that’s for sure.
I used to sell items on eBay but I'm back to Craigslist and, for phones and other electronics, I've found Swappa to be a decent marketplace. On the latter products are moderated lightly for validity and, just like eBay, it was easy to build up a very positive reputation by selling items that are clean and have been taken care of well. I do go to eBay as a shopper for random items. But generally if it's on eBay I can find a better price by spending a few minutes looking for a site that specializes in those items.
I lost trust in selling on eBay due to buyers that have tried to scam me in the past. Not sure if it's still that way on the sell side for individuals but I felt like, for a while, eBay was favoring high volume users vs being fair. I sold some SFPs that were way under market value about 6 years ago and had serial numbers of each unit in the auctiom. A guy bought them to resell in his shop a couple states away and he claimed they were defective when he received them. I told him to prove it in a switch showing the serial numbers and the error condition he claimed. He wouldn't do it so I told him to ship them back. He shipped me units with way different serial numbers but eBay still gave him his money back and charged me. That's the last time I sold on eBay.
Thanks for the swappa.com recommendation! I see that I could have made $100 more on my MacBook there than on eBay. Also it was WAY easier to find the exact specs. Thanks again!
It’s the same as Airbnb and Uber and Netflix and literally everything else… they throw in hidden fees and play psychology (eg foot in the door technique) to get us to pay more and more without us realizing it. They preach convenience, but unfortunately use that to their advantage to get our guard down. You pay $X to not have to worry about something/get a service, but when you’re not paying attention they jack up prices.
I looked the other day and it’s like $19/month for Spotify Family now… when did that happen? It was like $14 when I signed up. But all my playlists are set up on Spotify… what’s more, all the fam’s are too. Huge PITA to move to Apple Music.
I hate to tell ya, but Spotify will eternally be stuck between unprofitability and price raises.
Spotify has to negotiate with record labels who mostly act as a unified block, and they have leverage because Spotify needs all major labels or else customers can’t find all their music. No one is a “interscope” loyalist - they’re loyal to artists. This gives them power to basically demand >100% of the profit margin. That’s why they’re trying to get into other markets like podcasts. Record labels get ~50% of revenue, then Apple/Google app stores get 30% from some customers - that doesn’t leave a lot of room for Spotify.
That’s also why YouTube music and Apple Music will be the only long term players - but they need Spotify. They can take a loss to keep customers in the ecosystem BUT they need Spotify to always be the first to break to keep rates tolerable.
I sold it for $540 (without using ads). Same specs are selling on swappa.com for $620-$780. My eBay reputation is 100% and the MacBook was 100% clean. Perhaps I could have sold it for "more" using ads, but then all that money would just go to eBay, which I don't think is fair. They already take a final value fee anyway.
Is that a joke? It's far more of a nightmare. Sort by price and it's only sorting on the 'from' price, which isn't even necessarily the same product, doesn't include the shipping, and doesn't account for wild variation (in not just base price but also inexplicably shipping) when you change quantity or colour.
Amazon binds its sellers over to something called Most Favored Nation status. That means that sellers can't offer their goods more cheaply than they do on Amazon – even if it costs them (lots) less to sell in Target or direct from their websites. This means that every time a seller adds a dollar to their Amazon sale price, they have to add a dollar to the price of their goods everywhere else, too.
After a bunch of state AGs filed lawsuits against Amazon over this, the company promised to cut it out.
They lied.
A new filing in California's suit against Amazon reveals that sellers live "in constant fear" of retaliation from Amazon if they allow their goods to be sold more cheaply elsewhere.
According to the FTC's lawsuit, Amazon no longer binds its sellers with a Most Favored Nation clause. Instead, Amazon now will refuse to promote an offer in its "buy box" space if it detects a lower price for that good on another website.
The FTC alleges that this simply reconstitutes the MFA since most sales on Amazon take place from the buy box. Amazon responds that it is within its rights to not promote uncompetitive offers that make its site look bad for not having the lowest available price.
> Amazon responds that it is within its rights to not promote uncompetitive offers
Sounds to me like Amazon has found a loophole in the law. It agrees to list anything for sale, with no anti competitive conditions, but then only recommends customers buy things that it believes are in the customers best interests.
The FTC will struggle to argue that is illegal. Amazon can't be compelled to recommend stuff. (free speech etc). Also, what they recommend is in the consumers immediate best interests.
It will be hard for the court to argue that amazon should start recommending more expensive items to consumers, just to push consumers into looking for a cheaper platform.
This is a good point and your comment below ( https://news.ycombinator.com/item?id=37768419 ) highlights it well. What people don't realize is that this is in the interest of the consumer. I used to work at Amazon (although not on any of these teams) so that's probably why I know that "see all buying options" means the price is not competitive. As a consumer I value this.
Amazon scours the web to make sure their products are competitively priced. So if a Western Digital external hard drive is $99 on NewEgg, then Amazon wants to sell it for $99 or lower. If it's a 1P product (i.e., Amazon is the seller), they can easily price match in real time. But if it is a 3P (third party seller) product then Amazon cannot take that action unilaterally take that action since it is the seller setting the price. So the best they can do to protect their customer in real time when their crawlers detect a lower price elsewhere is to hide the buy box behind the "see all buying options" button.
I'm sure when this feature was rolled out, Amazon's sales must have dropped. They are taking that short term hit in order to protect customer trust in the long term.
Does anyone have examples of popular / name brand products that are pushed down in ranking due to this? I would love to see for myself how this looks in practice
Amazon is not a neutral entity or a public space. It's a private platform with its own interests that are very often in conflict with sellers.
There is this weird cultural expectation of platforms and platform-like applications (social media, multiplayer video games, online stores, proprietary libraries/engines, even entertainment media "universes" and franchises etc.). Participants and consumers seem to think that these platforms are somehow public spaces that they partially own, or at least they act that way.
But you only own what you actually own.
There are legal instruments and structures that actually let you partially own things and/or grant you rights so you can act on these kinds of expectations: coops, open source and other such licenses etc.
When internet culture and commerce wants to mature, then maybe we should start focusing more on building on _legally_ trustworthy foundations.
Big box stores have a lot more leverage than a small seller on Amazon, who'll just get the "that violates our policies, we're nuking your business, no appeals" treatment.
It is interesting to note that the US government often requires the same kinds of MFN terms, even though it is usually much more expensive to do business with the government than the private sector. There are many ways of constructively working around MFN requirements but it creates collateral damage. For example, the practice of having very high prices that are steeply discounted for most customers is often an artifact of having the US government as one of your customers. For software, it is common to create a new product/service that is trivially different in some way so that you can justify a new SKU that is only sold to the government.
Amazon's practice is bad because it anchors pricing to their mandated cost structure. That the US government engages in similar practices should at least raise questions, because it has the same effect on the marketplace.
It's true that the US government does make those demands, but it's very important to note that the US government organization is not a reseller of goods. It is almost exclusively a consumer. It is not in direct competition in the same marketplace with private industry outside of a few select industries (e.g., USPS, limited healthcare).
Next, MFN tariffs kind of by definition only affect international commerce. For Amazon, a 100% domestic manufacturer producing goods would need to comply.
Finally, MFN is something defined by WTO treaty. If you have to abide by MFN when importing goods into the US, it's almost certainly because your nation is also a WTO member. Because almost all of them are. The General Agreement on Tariffs and Trade requires WTO members to extend MFN treatment to like products of other WTO members. It's literally the the first article of the treaty agreement. [0]
> the practice of having very high prices that are steeply discounted for most customers is often an artifact of having the US government as one of your customers
That's one of the main cases of sticker shock in the healthcare industrial complex. Price a cancer treatment that would still be profitable at $10k/month at $125k/mo and offer sweetheart discounts to insurance companies (and treat self-pay patients as charity case writeoffs).
This sort of practice is not as uncommon as one might assume.
It is extremely common for manufacturers to set a minimum advertised price (MAP) on the products they sell to retailers. This is done to keep the cost of, say, luxury goods above a certain value, or to ensure that even if demand falls off for a product, the product is sold from official channels at a price point that covers the raw-materials-plus-labor cost so the manufacturer isn't fundamentally selling at a loss. These agreements are generally enforced by both contract and tit-for-tat... Sometimes there are contractually-encoded penalties for going under-MAP, but sometimes the agreement is more "off the books..." If Amazon decides those Gucci purses are just taking up warehouse space and slashes their price to clear them, they can do that... If they don't want to have any Gucci purses to sell next year through official channels.
Why is this behavior legal for manufacturers but maybe not for Amazon? I can see no other reason than the law is path-dependent and arbitrary. "Fair trade" is a concept we invent as we go.
(Incidentally... As a consumer, it's useful to remember MAP exists when you hear whispers of "don't buy from unauthorized resellers." Sometimes the goods you get from those channels are shady, but sometimes they're exactly the same as the official-goods channels, shoveled into the back channel by an official retailer to clear warehouse space and reported to the manufacturer as 'damaged, lost' to preserve the MAP kayfabe).
> Why is this behavior legal for manufacturers but maybe not for Amazon? I can see no other reason than the law is path-dependent and arbitrary.
Market share => market power => different regulations.
(Of course, I would personally prefer to ban this behavior across the board; I just wanted to also point out that treating Amazon differently could plausibly be reasonable)
DC AG Karl Racine filed a lawsuit over this in May 2021. The judge threw it out, supposedly for lack of evidence that it actually raised prices: https://www.jurist.org/news/2022/03/dc-trial-court-dismisses... I can't find details; it's unclear what the evidence or lack thereof was.
I know that sometimes these lawsuits can take awhile but scheduling something 3 years away seems excessive. It feels like discovery can take months, but years feels like a very long time here especially since this is something that is actively still ongoing and damaging to the victims
I'm curious... how far does Amazon's MFN policy extend?
For example, let's say I independently decide to import an item from company X and sell it only on a Shopify site for a lower price than company X's items listed on Amazon. Will Amazon exert pressure on company X to stop shipments to me or impose a minimum sale price policy simply because company X's products are available elsewhere cheaper than on Amazon?
This is explained in the OP article linked here...
Although I guess not everyone actually reads the articles so reiterating in the comments is useful.
> Still, why can’t a third-party seller offer a lower price outside of Amazon? Good question! That’s where the scheme gets very clever. Originally, Amazon imposed contracts, as the FTC noted, “barring all sellers from offering their goods for lower prices anywhere else.” But Europeans, and Senator Richard Blumenthal, complained about these price parity agreements, so Amazon dropped its explicit contractual requirements in 2019.
> However, this change was a farce. The firm simply did through code what it couldn’t do through contract. "Amazon,” claims the FTC, “has implemented an algorithm for the express purpose of deterring other online stores from offering lower prices.
> Today, Amazon tells sellers that if it detects a lower price for their products on any other online store, they will be punished, which is to say, their ability to get their products onto a place on the Amazon website where customers click will go away. The net effect, as Amazon itself wrote, is that "prices will go up."
Yes, which is why searching "most favored nation clause" turns up legal advice on how to set that up in a good way.
Note, there is still a valid question on whether or not companies with enough exposure should be held to higher standards. Consider, we hold pro players to tighter requirements than we do local leagues. They both have basically the same rules, of course, but not fully identical. And enforcement is, of course, largely at the discretion of the agencies enforcing them.
The last is obnoxious, if you view the entire field as a homogeneous thing. And I do get the impression that there is something more going on in this case. That said, it is not abnormal to rank ROI on what gets enforced. I wish it was framed directly in those terms, though.
Isn’t this very common among all resellers? For example if you own a hotel and want other websites to sell your availability they will only list you if you don’t list the same availability for less money. They do this in part because people use the service to search for hotels and even they find one they want they go to other places to see if it’s cheaper.
This is an antitrust lawsuit filed by the FTC, not an accusation of specifically illegal conduct.
They're not saying amazon committed a crime by doing this, they're saying that it's evidence of amazon abusing their market position to create a monopoly. "most favoured nation" status is legal, creating a monopoly isn't.
I suppose if ABC LLC makes the devices, and someone sets up ABD LLC to sell them on Amazon and ABE LLC to sell them on Target.com, ABE LLC and ABC LLC aren't bound to ABD LLC's "most favored nation" agreement.
Shell companies are for more than just tax evasion!
> A new filing in California's suit against Amazon reveals that sellers live "in constant fear" of retaliation from Amazon if they allow their goods to be sold more cheaply elsewhere.
Tangential, but out of context quotes used in your sentence makes me think you're lying no matter what you're saying. Or else you would have kept it in context and used the whole quote.
Not to defend Amazon in the slightest. Just tired of seeing Breitbert quality clickbait OOC quotes everywhere.
> That means that sellers can't offer their goods more cheaply than they do on Amazon – even if it costs them (lots) less to sell in Target or direct from their websites.
Is there a way to get around this by having the list price higher than Amazon but run specials for most weeks of the year that undercut Amazon? Could that only be a viable strategy if Target is the final merchant but not on the manufacturer's website?
I don't see the problem with this. They don't have to sell on Amazon to begin with. Amazon obviously wants their customers to have the best price available. Sellers can just go off Amazon if they don't like it. If sellers end up raising the price on other platforms as a result of this rule, then that says more about them than Amazon.
Demanding the lowest price does not harm consumers. Overstock, Wayfair, Walmart and others do the same thing. The result is the lowest price for a given product on all sites. This is unquestionably good for consumers.
If the price is higher then the fault is simply that of the seller for raising it. All e-commerce sites want the lowest price for their customers. Of course, people don't see nuance and just see BigCompany bad.
I'll take the charitable interpretation and assume you just don't understand the mechanics of the policy.
Amazon is saying that sellers cannot offer a fair low price to customers on other platforms if the seller can't also offer it on Amazon. This is 1) anticompetitive, 2) anticonsumer, and 3) insane.
Consider this test:
- Seller buys a crappy LED bulb from China for $0.80
- Seller is happy to list the bulb on Walmart, Target, etc, for $2.00. Net of fees and shipping and stuff they make enough money
- Amazon charges $3 in fees. Obviously the seller can't afford to sell for $2 on Amazon. They sell for $5 instead.
- However, now the seller also can't sell for $2 on competing sites. Amazon, leveraging its market share, has dictated that the seller must price Amazon's fees into pricing on non-Amazon sites, so consumers pay $5 to Target for something the seller would have been happy getting $2 for.
It is none of Amazons business what prices they put when they list their wares on other services, the only reason they care is that they want to crush the competition.
Dictating how retailers can interact with your competitors is anti-competitive. Dictating what prices they can offer when they put up listings is a part of that, it is anti-competitive.
From what I understand, it’s not that simple. Sellers need the sheer volume of Amazon to compete. There is also the risk of Amazon duplicating their product and continuing to sell it on their platform… or their competitors filling the void.
So, to be clear, you have no problem with Amazon writing their own laws and collecting their own taxes? Because that is what they are effectively doing.
You have to add Microsoft to this list unless you live in complete denial about the massive monopoly that they have in office IT. And they are actually the first that should be broken up, splitting the office suite from everything else.
Microsoft should be the first one to be split up. Their dominant position is more pervasive than any other market because the operating system people use in their computers is the gateway to get too these other services.
Make corporation tax progressive, resulting in it being easier for small companies to compete with big ones, without requiring the government to decide what is and what isn't a monopoly.
All of them enjoy market domination in their respective areas of expertise. Their size makes them effective monopolies and their behavior has many times ruled anti-competitive. Competition between them is insufficient and they have been convicted of organizing in monopolistic manners before.
For consumers and the market as a whole it is more healthy if they are broken up into smaller companies.
To me it does feel much worse if one company is singled out. But, yes, bring back the Sherman Antitrust Act with good enforcement.
Personally, I think much of this is in large parts the fault of one party that likes to systematically defund government institutions, so they can say "see big government doesn't work!"
At the very least a line can be drawn when a company cross-subsidizes a barely profitable enterprise to the tune that they're drowning out competitors, or when they exploit workers so absurdly insane that they're forced to resort to piss in bottles because the algorithm penalizes them for taking a civilized bathroom break. AWS makes boatloads of money on AWS and uses that to stay afloat with shipping stuff.
Governments' and companies incentives are highly different. I live in Turkey where not every service is corporate like it is in the US. I can see in practice that a competitor service offered by government happens to be that real competition which drags the prices down.
Capitalism is based on competition, but the rules of said competition are largely written by the winners of said competition - this isn't a perversion of capitalism, this is capitalism as it has always functioned in reality. Like, oil companies get significant political sway over our policy on climate change, which is why over the last 40 years, the biggest sources of emissions reduction were the 2008 GFC and the 2020 lockdowns.
The #1 reason why Comcast hasn't been ousted by local community fiber networks is because Comcast politically lobbied to make it illegal. This is normal. The solution is to cut the moneyed interests out of politics as harshly as possible, because otherwise we'll always require the permission of junk-food companies before we limit how much sodium is permitted in kid's food.
I object a lot less if the trustbusters don’t stop with tech and apply their hammer equally to other industries, agree with telcos/ISPs (I’m not sure how uncompetitive airlines are, they seem really low margin). I haven’t really seen evidence that Khan is interested in going after non-tech companies though. (Would love any pointers to the contrary.)
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.
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.
The top two posts with the most upvotes are "Ebay is just as bad" for the startoff line, and "Everybody's just as bad as Amazon. Why are you being so mean and cruel to Amazon?"
Obvious astroturfing, just like the entire Amazon review ecosystem. Surprise? No.
https://mkorostoff.github.io/1-pixel-wealth/ Bezos' wealth relative to "normal" shown as 1-pixel comparisons. Be careful once you get to the $Trillion portion (you'll be scrolling for the rest of your life.)
In what sense is Costco an "abusive" company? They squeeze their suppliers, but their suppliers legitimately have other options. I'm not aware of any market what Costco is the only game in town.
Legal precedent exists for a reason. It's not waving the white flag, it's having actual standards and rules. I think Amazon is a shithole of a website and one of the worst examples of downward spirals into mediocrity, but there has to be some semblance of fairness.
Targeting amazon for something Walmart or Target does, but without targeting them too is just wack. You can't just handwave that issue by saying that we can just start there! Because it's been decades, it's standard industry practices, and the law hasn't changed (I know that the FTC has a wide executive mandate, but conjuring a rule is still not great).
Even if you want Amazon broken down, you don't want such a process to start on super shaky grounds like this. I don't know how to explain exactly what I mean here, but it just feels off!
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.
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.
> 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.
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.
> 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.
> 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.
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.
> 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.
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.
> 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.
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.
This has been pretty obvious for a while. Whenever I do product searches on Amazon the prime eligible results are more expensive by exactly the shipping costs of the non prime vendors.
The only reason I keep it is for the video service which I'm guessing is the same for a lot of people.
Tangentially related, even in YouTube Premium you can still see ads if the content creator embeds ads as part of their content. This seems like double-dipping to me and I am seeing more and more of this.
The “hidden tax” described in the article is to sellers, not consumers. Free shipping is subsidy for consumers that costs Amazon billions of dollars. I have personally never seen what you’re describing.
Which products do you observe this for specifically? I buy from Amazon US all the time and I can’t say I’ve ever noticed that discrepancy, so I can only assume we’re looking at different products or from a different region.
While this varies by territory, I'm UK based, I find the main benefits of Prime to be the next-day (even weekend) delivery, Saturday (even if not next day) delivery, and sometimes the locker delivery option.
Even where prime price is the same as other+delivery this wins out. Though at each price rise or other change I have to rethink if I consider I'm getting a good deal.
I’m not sure I agree with the opening premise that offering “free shipping” is dangling a free lunch that doesn’t exist.
Technically this is true but it makes a lot of sense by creating an analogous experience as with retail.
If I walk to the corner store to pick up something I’m not paying a line item for the logistics that delivered that item from a factory in China, nor a line item for the rent to keep that item sitting on a shelf in walking distance. I just pay the price of the item, and those costs are baked in.
Maybe an economist can argue this isn’t the most efficient way of paying for externalities but it’s hard to argue it’s without reason. It’s clearly a preferred consumer experience. Amazon prime is like a Costco membership. The only difference is Amazon handles last mile from the fulfillment center, Costco expects me to provide last mile fulfillment with my car.
Offering free shipping is not a problem. The problem is that mandating your suppliers subsidize free shipping and don't sell for cheaper prices elsewhere is blatantly anticompetitive, and has the effect of raising consumer prices on non-Amazon markets.
I agree with that, and I think buy box suppression should be stopped. I’m just responding to the opening paragraphs of the link (and some near the end) where the author appears to be arguing against the very conception of free shipping as if it’s something that can only be offered in distorted and monopolistic markets.
I think a physical retail analogy would be to imagine that every store charges a variable "restocking fee" based on how much it costs to get a replacement for the item that you are purchasing. You don't know what that fee will be until the clerk is ringing you up. Then one day a store decides to bake the restocking fees into the price, and no longer surprises the consumer with a variable fee at the checkout counter.
This is clearly a win for consumers, who can now shop the aisles knowing exactly what they will pay for the item upfront before they put it in the cart and go to check out.
This was blatant monopolistic behavior, control over prices outside your platform with the threat of platform access to enforce it is a slam dunk case.
Legality aside, I'm not sure that Amazon is winning in the long run with this strategy. I mostly buy products direct from the manufacturer these days and virtually all manufacturers have high quality websites with solid ordering experiences. As long as they have the name recognition, they can either sell for higher on Amazon and take the advertising hit or just ignore Amazon altogether.
I continue to buy some stuff on Amazon. Mostly books (they're way cheaper than book stores) and gadgets (I bought a 12 volt car fan recently). The sort of stuff where I don't care who makes it.
i would pay more money to not have to put my credit card into or attach my identity to 100 different random websites all of which almost certainly have worse security practices than amazon and many of which absolutely will have that data stolen at some point.
even for people who don't think about stuff like that, it's way easier for the average person to buy everything from a single place than to go to a bunch of different random websites to buy things they want.
I coded a credit card payment a few times in my career and from what I saw it's always just a token. That token could be only used to make transactions from your account to the specific vendor's account. Of course there's always could be some incompetent developer who thought that saving credit card data into a database is a great idea, but overall it's not as risky as people think.
There was this feature provided by banks. I remember BofA was one. Unfortunately they removed it. You could create a temporary credit card number for specific vendor.
It even had option to set one time limit or recurring limit.
I don't understand why it was taken away, was it giving too much control to the customer?
I don't know why people get paranoid about this, in the US and most Western countries payment processing has minimum security requirements and you have blanket protection from fraud by credit card companies anyway. All of this means in practice consumers are very safe putting credit card details on websites. The websites that don't have the skill to meet minimum security requirements find a payment processor, so a hacker wouldn't get it from website, they'd have to get it from a processor like Stripe or Paypal.
I would (and sometimes do) pay more money to not give money to Amazon. Also, I feel like the vast majority of sites support Google Pay, Apple Pay, PayPal and/or Venmo these days so I rarely find myself entering my credit card number.
> I'm not sure that Amazon is winning in the long run with this strategy
Completely agreed. Anecodotally, I used to shop on Amazon for things. As in, use the search function to find items to buy. These days, that is impossible. The only way to use Amazon today is to know exactly what you want, or for the item's value to be small enough that it doesn't matter (deoderant, ethernet cable, etc...).
It's quite frustrating to shop on the internet today. Google search sucks since SEO has made the results terrible. Amazon search is a frustrating mix of FANPOP brands and Amazon Basics. DDG, Brave, Bing, etc.. are all slightly better, but still very difficult to find anything genuine. Appending " reddit" to searches sometimes help, but the quality of reddit is quickly declining.
It seems like there is a significant opportunity for disruption in this space. The user experience sucks and prices are high. Sure, shipping is fast and free, but that doesn't help with product search.
> I mostly buy products direct from the manufacturer these days and virtually all manufacturers have high quality websites with solid ordering experiences.
I can’t say I agree. I’m not defending Amazon here but shipping is a nightmare with literally every other business. You aren’t going to get 2-day and you’re lucky if it ships within a week of ordering. In most cases there aren’t even options for faster processing/shipping for an increased cost.
I was recently at my parents at they have Bartesian (think Keurig for alcoholic drinks). I wanted to try some drinks they didn’t have so I went to the official site and started adding some stuff to my cart. IIRC the free shipping minimum was higher than Amazon (without prime) and there was _zero_ information on when I could expect the stuff to ship or the shipping time. I did some googling and found people complaining about how long it took to ship and I was only going to be at my parents for a little under a week. I went to Amazon and while there was a significant markup (20-30% IIRC) I was able to get it next day or 2 day depending on what I got. I bit the bullet and ordered from Amazon.
Not everything has to come in 2 days or less but some things absolutely do and I rarely see fast shipping from even big names like Apple that that rival Amazon (I just bought a mouse and keyboard from them and it took 4 days vs same day with Amazon, same price). In a number of cases you have literally no information on processing or shipping time to make an informed decision.
Again, not defending Amazon, I wish there were better alternatives, but it’s not as easy as “just order from the manufacturer”. I’ve been burned so many times doing that.
I do the same. I try to buy on manufacture sites when I can. Mainly because of the 1 bin policy. Feels like some times I get products that a seller bought at a discount because of defects or package damage, and these are treated the same as new.
Readit News
Recently, eBay has made it so that only the products with paid ads are shown in places where customers click. This drives up the cost of everything by more than 10% which is eBay's ad fee. I refused to buy a paid ad to sell my MacBook. It sat on the site for a month, which is highly unusual for an in-demand and rightly priced product. Finally I lowered the price enough to get it sold.
Most consumers use the default site, which filters by Recommended (i.e. ads) The play for consumers to win at this new payola ad scheme is to always filter by lowest price (or in amazon's case Prime + lowest price)
But really, consumers don't win (and neither do sellers) because now these ads take up space in supposed "search results" for items which don't match the search terms (but are close enough) This creates frustration when you are looking for something to meet a specification, like E26 light bulbs for example. Here, it is pointless to show anything that doesn't meet that specification and yet the site shows them, and the seller has to pay the ad fee.
Please somebody make a site with no payola!
>There was a joke a few years ago that rent is the new [Customer Acquisition Cost], and that now applies to everything. The [Total Addressable Market] for search ads is not ‘advertising’ (let alone online advertising) but everything that is spent to reach and serve a customer, starting with retail rents. This applies to Amazon, but even more to Google - you can ask whether Google’s ads are ‘advertising’ or ‘marketing’, but also ask whether the TAM for buying placement in Google search results is ‘advertising’, ‘marketing’ or just its customers’ operating margins. How do you reach a consumer? Do you spend your budget on TV ads or search ads, or on retail rents, or on giving retailers a margin versus selling direct, or giving the retailer a better price for better placement, or free shipping, or a better returns policy? Everything below P&G’s COGS line is up for grabs.
https://www.ben-evans.com/benedictevans/2023/3/6/ways-to-thi...
There will be no site that does not offer advertising, because advertising allows the site to determine which sellers can afford to pay more while still being profitable. It's a scaled version of the same way a landlord will raise rents on a profitable storefront.
It's still possible that people exist who charge "what it's worth" rather than "what they can get". Those people can still make a fine living off of a two sided market place through flat transaction fees. Craigslist is an example that comes immediately to mind. Smart market participants are already punishing providers that maximize profit with payola, which is leading to success of new smaller niche markets - reverb.com comes to mind, or bricklink.com or alibris.com. That is not to say the market of markets is "solving" this problem - we probably want more consumer protection law - but it does show that your startement about ads is, strictly speaking, false.
During the pandemic, I decided to sell a bunch of a component I had stockpiled. (Im not a scalper. I got the parts when my dad died.).
I put them for sale with $100 minimum, auction. They ended up selling for $300. I was definitely happy.... until Ebay refused to send me my money, and instead demanded access to a bank account, after the sale was complete. Fuck that.
I found the user who bought it, traced to a business. Cool. I contacted him, explaining what happened. Turns out they did the same to him since he too was a seller. I told him that I'd honor the same price Ebay told me....
Ebay told me (seller) $300. Ebay told the buyer $350......!! Mind you, the fees are taken out of my $300, yet that $50 difference is Ebays scrape off the top.
Obviously, I sold it to them for $300, and provided screenshots of what I was being told, and they did the same. We arranged the sale over Paypal and worked like a charm.
And sure, Ebay's scamming as far as I can tell, everyone. But it's also reminded me to check on websites with a private mode browser and logged in, to see if there's funny games.
I lost trust in selling on eBay due to buyers that have tried to scam me in the past. Not sure if it's still that way on the sell side for individuals but I felt like, for a while, eBay was favoring high volume users vs being fair. I sold some SFPs that were way under market value about 6 years ago and had serial numbers of each unit in the auctiom. A guy bought them to resell in his shop a couple states away and he claimed they were defective when he received them. I told him to prove it in a switch showing the serial numbers and the error condition he claimed. He wouldn't do it so I told him to ship them back. He shipped me units with way different serial numbers but eBay still gave him his money back and charged me. That's the last time I sold on eBay.
I looked the other day and it’s like $19/month for Spotify Family now… when did that happen? It was like $14 when I signed up. But all my playlists are set up on Spotify… what’s more, all the fam’s are too. Huge PITA to move to Apple Music.
Spotify has to negotiate with record labels who mostly act as a unified block, and they have leverage because Spotify needs all major labels or else customers can’t find all their music. No one is a “interscope” loyalist - they’re loyal to artists. This gives them power to basically demand >100% of the profit margin. That’s why they’re trying to get into other markets like podcasts. Record labels get ~50% of revenue, then Apple/Google app stores get 30% from some customers - that doesn’t leave a lot of room for Spotify.
That’s also why YouTube music and Apple Music will be the only long term players - but they need Spotify. They can take a loss to keep customers in the ecosystem BUT they need Spotify to always be the first to break to keep rates tolerable.
How much did you have to lower the price by? How did that compare to the ad-ransom you would have had to pay?
We gotta get the eyeballs back on craigslist
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Aliexpress?
Amazon binds its sellers over to something called Most Favored Nation status. That means that sellers can't offer their goods more cheaply than they do on Amazon – even if it costs them (lots) less to sell in Target or direct from their websites. This means that every time a seller adds a dollar to their Amazon sale price, they have to add a dollar to the price of their goods everywhere else, too.
After a bunch of state AGs filed lawsuits against Amazon over this, the company promised to cut it out.
They lied.
A new filing in California's suit against Amazon reveals that sellers live "in constant fear" of retaliation from Amazon if they allow their goods to be sold more cheaply elsewhere.
The FTC alleges that this simply reconstitutes the MFA since most sales on Amazon take place from the buy box. Amazon responds that it is within its rights to not promote uncompetitive offers that make its site look bad for not having the lowest available price.
Sounds to me like Amazon has found a loophole in the law. It agrees to list anything for sale, with no anti competitive conditions, but then only recommends customers buy things that it believes are in the customers best interests.
The FTC will struggle to argue that is illegal. Amazon can't be compelled to recommend stuff. (free speech etc). Also, what they recommend is in the consumers immediate best interests.
It will be hard for the court to argue that amazon should start recommending more expensive items to consumers, just to push consumers into looking for a cheaper platform.
Amazon scours the web to make sure their products are competitively priced. So if a Western Digital external hard drive is $99 on NewEgg, then Amazon wants to sell it for $99 or lower. If it's a 1P product (i.e., Amazon is the seller), they can easily price match in real time. But if it is a 3P (third party seller) product then Amazon cannot take that action unilaterally take that action since it is the seller setting the price. So the best they can do to protect their customer in real time when their crawlers detect a lower price elsewhere is to hide the buy box behind the "see all buying options" button.
I'm sure when this feature was rolled out, Amazon's sales must have dropped. They are taking that short term hit in order to protect customer trust in the long term.
“By using this site, you agree you are not an agent of Amazon. You also agree that you will not use pricing information except as allowed herein.”
Those costs are Amazon specific... Way to shoot oneself in the foot.
Why should Amazon get to offload their own uncompetitiveness onto sellers?
Amazon is not a neutral entity or a public space. It's a private platform with its own interests that are very often in conflict with sellers.
There is this weird cultural expectation of platforms and platform-like applications (social media, multiplayer video games, online stores, proprietary libraries/engines, even entertainment media "universes" and franchises etc.). Participants and consumers seem to think that these platforms are somehow public spaces that they partially own, or at least they act that way.
But you only own what you actually own.
There are legal instruments and structures that actually let you partially own things and/or grant you rights so you can act on these kinds of expectations: coops, open source and other such licenses etc.
When internet culture and commerce wants to mature, then maybe we should start focusing more on building on _legally_ trustworthy foundations.
So the item price matches Amazon's, but you pay less in the end, if you're even remotely paying attention.
At least for the $200-300 items I've seen (like dehumidifiers, fancy computer accessories).
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Amazon's practice is bad because it anchors pricing to their mandated cost structure. That the US government engages in similar practices should at least raise questions, because it has the same effect on the marketplace.
It's true that the US government does make those demands, but it's very important to note that the US government organization is not a reseller of goods. It is almost exclusively a consumer. It is not in direct competition in the same marketplace with private industry outside of a few select industries (e.g., USPS, limited healthcare).
Next, MFN tariffs kind of by definition only affect international commerce. For Amazon, a 100% domestic manufacturer producing goods would need to comply.
Finally, MFN is something defined by WTO treaty. If you have to abide by MFN when importing goods into the US, it's almost certainly because your nation is also a WTO member. Because almost all of them are. The General Agreement on Tariffs and Trade requires WTO members to extend MFN treatment to like products of other WTO members. It's literally the the first article of the treaty agreement. [0]
[0]: https://www.wto.org/english/docs_e/legal_e/gatt47_01_e.htm
That's one of the main cases of sticker shock in the healthcare industrial complex. Price a cancer treatment that would still be profitable at $10k/month at $125k/mo and offer sweetheart discounts to insurance companies (and treat self-pay patients as charity case writeoffs).
It is extremely common for manufacturers to set a minimum advertised price (MAP) on the products they sell to retailers. This is done to keep the cost of, say, luxury goods above a certain value, or to ensure that even if demand falls off for a product, the product is sold from official channels at a price point that covers the raw-materials-plus-labor cost so the manufacturer isn't fundamentally selling at a loss. These agreements are generally enforced by both contract and tit-for-tat... Sometimes there are contractually-encoded penalties for going under-MAP, but sometimes the agreement is more "off the books..." If Amazon decides those Gucci purses are just taking up warehouse space and slashes their price to clear them, they can do that... If they don't want to have any Gucci purses to sell next year through official channels.
Why is this behavior legal for manufacturers but maybe not for Amazon? I can see no other reason than the law is path-dependent and arbitrary. "Fair trade" is a concept we invent as we go.
(Incidentally... As a consumer, it's useful to remember MAP exists when you hear whispers of "don't buy from unauthorized resellers." Sometimes the goods you get from those channels are shady, but sometimes they're exactly the same as the official-goods channels, shoveled into the back channel by an official retailer to clear warehouse space and reported to the manufacturer as 'damaged, lost' to preserve the MAP kayfabe).
Market share => market power => different regulations.
(Of course, I would personally prefer to ban this behavior across the board; I just wanted to also point out that treating Amazon differently could plausibly be reasonable)
DC AG Karl Racine filed a lawsuit over this in May 2021. The judge threw it out, supposedly for lack of evidence that it actually raised prices: https://www.jurist.org/news/2022/03/dc-trial-court-dismisses... I can't find details; it's unclear what the evidence or lack thereof was.
CA AG Rob Bonta filed another lawsuit over the same issue in Sept 2022. Some juicy quotes here (although only one side of the story): https://oag.ca.gov/news/press-releases/attorney-general-bont... The CA lawsuit is set to go to trial in 2026.
For example, let's say I independently decide to import an item from company X and sell it only on a Shopify site for a lower price than company X's items listed on Amazon. Will Amazon exert pressure on company X to stop shipments to me or impose a minimum sale price policy simply because company X's products are available elsewhere cheaper than on Amazon?
Although I guess not everyone actually reads the articles so reiterating in the comments is useful.
> Still, why can’t a third-party seller offer a lower price outside of Amazon? Good question! That’s where the scheme gets very clever. Originally, Amazon imposed contracts, as the FTC noted, “barring all sellers from offering their goods for lower prices anywhere else.” But Europeans, and Senator Richard Blumenthal, complained about these price parity agreements, so Amazon dropped its explicit contractual requirements in 2019.
> However, this change was a farce. The firm simply did through code what it couldn’t do through contract. "Amazon,” claims the FTC, “has implemented an algorithm for the express purpose of deterring other online stores from offering lower prices.
> Today, Amazon tells sellers that if it detects a lower price for their products on any other online store, they will be punished, which is to say, their ability to get their products onto a place on the Amazon website where customers click will go away. The net effect, as Amazon itself wrote, is that "prices will go up."
Note, there is still a valid question on whether or not companies with enough exposure should be held to higher standards. Consider, we hold pro players to tighter requirements than we do local leagues. They both have basically the same rules, of course, but not fully identical. And enforcement is, of course, largely at the discretion of the agencies enforcing them.
The last is obnoxious, if you view the entire field as a homogeneous thing. And I do get the impression that there is something more going on in this case. That said, it is not abnormal to rank ROI on what gets enforced. I wish it was framed directly in those terms, though.
They're not saying amazon committed a crime by doing this, they're saying that it's evidence of amazon abusing their market position to create a monopoly. "most favoured nation" status is legal, creating a monopoly isn't.
Is it possible the loophole here is to provide discount codes at checkout for “20% off” on website only, and now magically it’s cheaper than Amazon?
Shell companies are for more than just tax evasion!
Tangential, but out of context quotes used in your sentence makes me think you're lying no matter what you're saying. Or else you would have kept it in context and used the whole quote.
Not to defend Amazon in the slightest. Just tired of seeing Breitbert quality clickbait OOC quotes everywhere.
Is there a way to get around this by having the list price higher than Amazon but run specials for most weeks of the year that undercut Amazon? Could that only be a viable strategy if Target is the final merchant but not on the manufacturer's website?
Demanding the lowest price does not harm consumers. Overstock, Wayfair, Walmart and others do the same thing. The result is the lowest price for a given product on all sites. This is unquestionably good for consumers.
If the price is higher then the fault is simply that of the seller for raising it. All e-commerce sites want the lowest price for their customers. Of course, people don't see nuance and just see BigCompany bad.
Amazon is saying that sellers cannot offer a fair low price to customers on other platforms if the seller can't also offer it on Amazon. This is 1) anticompetitive, 2) anticonsumer, and 3) insane.
Consider this test:
- Seller buys a crappy LED bulb from China for $0.80
- Seller is happy to list the bulb on Walmart, Target, etc, for $2.00. Net of fees and shipping and stuff they make enough money
- Amazon charges $3 in fees. Obviously the seller can't afford to sell for $2 on Amazon. They sell for $5 instead.
- However, now the seller also can't sell for $2 on competing sites. Amazon, leveraging its market share, has dictated that the seller must price Amazon's fees into pricing on non-Amazon sites, so consumers pay $5 to Target for something the seller would have been happy getting $2 for.
This is insane.
Dictating how retailers can interact with your competitors is anti-competitive. Dictating what prices they can offer when they put up listings is a part of that, it is anti-competitive.
Amazon is not exactly cheap for sellers, so the price has to go up everywhere.
Amazon demands that sellers increase their prices on selling platforms with lower overhead. A demand to increase prices does harm consumers.
The second should be Apple for the same reasons.
Then Amazon.
For consumers and the market as a whole it is more healthy if they are broken up into smaller companies.
Personally, I think much of this is in large parts the fault of one party that likes to systematically defund government institutions, so they can say "see big government doesn't work!"
I’m not sure how you would translate that to limits on the size of a company though as every sector would be different.
Also add most major telcos, ISPs and airlines to the list as well.
We love capitalism. It’s basis is competition. Let’s get us some of that.
The #1 reason why Comcast hasn't been ousted by local community fiber networks is because Comcast politically lobbied to make it illegal. This is normal. The solution is to cut the moneyed interests out of politics as harshly as possible, because otherwise we'll always require the permission of junk-food companies before we limit how much sodium is permitted in kid's food.
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.
The top two posts with the most upvotes are "Ebay is just as bad" for the startoff line, and "Everybody's just as bad as Amazon. Why are you being so mean and cruel to Amazon?"
Obvious astroturfing, just like the entire Amazon review ecosystem. Surprise? No.
https://mkorostoff.github.io/1-pixel-wealth/ Bezos' wealth relative to "normal" shown as 1-pixel comparisons. Be careful once you get to the $Trillion portion (you'll be scrolling for the rest of your life.)
Targeting amazon for something Walmart or Target does, but without targeting them too is just wack. You can't just handwave that issue by saying that we can just start there! Because it's been decades, it's standard industry practices, and the law hasn't changed (I know that the FTC has a wide executive mandate, but conjuring a rule is still not great).
Even if you want Amazon broken down, you don't want such a process to start on super shaky grounds like this. I don't know how to explain exactly what I mean here, but it just feels off!
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.
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.
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.
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.
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-pr...
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.
If Amazon wants to commit to certain sizes of orders, I'm sure the vendors will be happy with contractual price setting.
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.
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.
The only reason I keep it is for the video service which I'm guessing is the same for a lot of people.
Which will start having ads unless you pay a fee for the ad-free experience starting next year [1]
[1] https://www.npr.org/2023/09/22/1201028854/amazon-prime-video...
Even where prime price is the same as other+delivery this wins out. Though at each price rise or other change I have to rethink if I consider I'm getting a good deal.
Technically this is true but it makes a lot of sense by creating an analogous experience as with retail.
If I walk to the corner store to pick up something I’m not paying a line item for the logistics that delivered that item from a factory in China, nor a line item for the rent to keep that item sitting on a shelf in walking distance. I just pay the price of the item, and those costs are baked in.
Maybe an economist can argue this isn’t the most efficient way of paying for externalities but it’s hard to argue it’s without reason. It’s clearly a preferred consumer experience. Amazon prime is like a Costco membership. The only difference is Amazon handles last mile from the fulfillment center, Costco expects me to provide last mile fulfillment with my car.
This is clearly a win for consumers, who can now shop the aisles knowing exactly what they will pay for the item upfront before they put it in the cart and go to check out.
I continue to buy some stuff on Amazon. Mostly books (they're way cheaper than book stores) and gadgets (I bought a 12 volt car fan recently). The sort of stuff where I don't care who makes it.
even for people who don't think about stuff like that, it's way easier for the average person to buy everything from a single place than to go to a bunch of different random websites to buy things they want.
It even had option to set one time limit or recurring limit.
I don't understand why it was taken away, was it giving too much control to the customer?
Completely agreed. Anecodotally, I used to shop on Amazon for things. As in, use the search function to find items to buy. These days, that is impossible. The only way to use Amazon today is to know exactly what you want, or for the item's value to be small enough that it doesn't matter (deoderant, ethernet cable, etc...).
It's quite frustrating to shop on the internet today. Google search sucks since SEO has made the results terrible. Amazon search is a frustrating mix of FANPOP brands and Amazon Basics. DDG, Brave, Bing, etc.. are all slightly better, but still very difficult to find anything genuine. Appending " reddit" to searches sometimes help, but the quality of reddit is quickly declining.
It seems like there is a significant opportunity for disruption in this space. The user experience sucks and prices are high. Sure, shipping is fast and free, but that doesn't help with product search.
I can’t say I agree. I’m not defending Amazon here but shipping is a nightmare with literally every other business. You aren’t going to get 2-day and you’re lucky if it ships within a week of ordering. In most cases there aren’t even options for faster processing/shipping for an increased cost.
I was recently at my parents at they have Bartesian (think Keurig for alcoholic drinks). I wanted to try some drinks they didn’t have so I went to the official site and started adding some stuff to my cart. IIRC the free shipping minimum was higher than Amazon (without prime) and there was _zero_ information on when I could expect the stuff to ship or the shipping time. I did some googling and found people complaining about how long it took to ship and I was only going to be at my parents for a little under a week. I went to Amazon and while there was a significant markup (20-30% IIRC) I was able to get it next day or 2 day depending on what I got. I bit the bullet and ordered from Amazon.
Not everything has to come in 2 days or less but some things absolutely do and I rarely see fast shipping from even big names like Apple that that rival Amazon (I just bought a mouse and keyboard from them and it took 4 days vs same day with Amazon, same price). In a number of cases you have literally no information on processing or shipping time to make an informed decision.
Again, not defending Amazon, I wish there were better alternatives, but it’s not as easy as “just order from the manufacturer”. I’ve been burned so many times doing that.