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Just to add to this, you also want to prevent one customer from becoming too large a slice of your sales. If we use the Amazon and Best Buy example, if I'm sel

by cepth 8y ago

Just to add to this, you also want to prevent one customer from becoming too large a slice of your sales. If we use the Amazon and Best Buy example, if I'm selling to both Amazon and Best Buy, and Amazon cuts its sale price to the end customer, in the short term this doesn't affect me. Amazon is still paying me wholesale. Long-term however, if Best Buy is unable to compete with Amazon's price to customers, it may stop being a customer altogether. Amazon may now be my biggest, or even only, customer. At that point, they WILL ask for further discounts on the wholesale price. Jeff Bezos has openly and repeatedly said that he read a lot of Sam Walton's writings to help shape the vision for Amazon. CNBC did a 2-part documentary on Walmart a few years back (a "CNBC Original"). The two parts were shot years apart. In part 1, they showed a couple of entrepreneurs who had triumphantly become Walmart vendors, and were delighted that they now had such a huge retail distribution channel. In part 2, many of those vendors had soured, since Walmart had put pressure on them to offer increasingly lower wholesale prices etc. For these vendors, Walmart was often their ONLY large customer, so they had little power in negotiations.

MisterBastahrd 8y ago
Manufacturers usually see this as a boon. In the premium cigar industry, for example, there were three gigantic mail order companies that ate up most of the action in the 90s: Thompson, Mike's, and JR. JR would DEEPLY discount a lot of their merchandise, squeezing both local shops and other online retailers in the process. Some manufacturers proudly proclaimed that they were not in the business of discounting their product, and there were even entire lines created to sell solely to offline realtors aka the local shops. When the USSC ruled that manufacturers had a right to set the prices for their products, suddenly there was a lot more competition in the online market. The big discounters still got a lion's share of business, but it wasn't impenetrable like it used to be. The flip side is that some of the smaller guys came up with the idea of password protected member's only sites with discounted prices which were impossible for the bigger guys to duplicate because of their volume.
- marnett 8y ago
  this is fascinating. did you experience this first hand, or have you read this somewhere? I'm interested in reading more.

by cepth 8y ago

MisterBastahrd 8y ago

Manufacturers usually see this as a boon. In the premium cigar industry, for example, there were three gigantic mail order companies that ate up most of the action in the 90s: Thompson, Mike's, and JR. JR would DEEPLY discount a lot of their merchandise, squeezing both local shops and other online retailers in the process. Some manufacturers proudly proclaimed that they were not in the business of discounting their product, and there were even entire lines created to sell solely to offline realtors aka the local shops. When the USSC ruled that manufacturers had a right to set the prices for their products, suddenly there was a lot more competition in the online market. The big discounters still got a lion's share of business, but it wasn't impenetrable like it used to be. The flip side is that some of the smaller guys came up with the idea of password protected member's only sites with discounted prices which were impossible for the bigger guys to duplicate because of their volume.

marnett 8y ago
this is fascinating. did you experience this first hand, or have you read this somewhere? I'm interested in reading more.