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Great quote: “But Amazon is smart and they know when your — for lack of a better word, addiction — to Amazon increases. Once Amazon is 20% of your business, it

Great quote: “But Amazon is smart and they know when your — for lack of a better word, addiction — to Amazon increases. Once Amazon is 20% of your business, it starts to claw back that profitability.”

delfinom 7y ago
But Walmart does the exact same thing to their suppliers. They attract suppliers with dangling sales numbers in front of them. Next year they demand the suppliers bill of materials and tell them the exact price they are going to pay and not their problem if they can't meet it.
- naravara 7y ago
  If you want a benchmark for "ethical and well liked company that is not chronically plagued by anti-trust concerns" Walmart probably shouldn't be your reference point.
  - dsfyu404ed 7y ago
    Walmart is well liked by the people who shop there.
    - RankingMember 7y ago
      One data point: I have to shop there sometimes and it is the opposite of well-liked. It's a last resort. The employees are miserable, the shelves are disorganized (trash, items in wrong places, just a mess), and the customers are impatient and angry. They do have self-checkout at least now which helps a bit with my biggest complaint (the checkout lines taking forever), but definitely not a place I'd call "well liked". My above criticisms apply uniformly to the 3 Walmarts in my area.
      - dsfyu404ed 7y ago
        Do you live somewhere decently upscale? Walmart in upscale areas tends (in my unscientific observation, n = approx 10) to be full of people who are working there and shopping there as a last resort and it shows.
        RankingMember 7y ago
        I'm in the immediate city suburbs wherein there are some middle to upper-middle class areas with lower income areas right next to them. Interesting thought, but it doesn't play out at least in "my" Walmarts. The Walmart in the lowest income area is the worst in my case. Aisles where there's no order whatsoever and things like a full unopened jug of milk sitting on the shelf (that's warm) like someone just changed their mind, but no employee ever noticed. Perhaps there's something to be made of the fact that this low income area is right next to higher income areas (creates resentment maybe(?)...just spitballing here).
        madcaptenor 7y ago
        My even more unscientific observation (n = 2) - I live near two Walmarts, one of which is in a more upscale area than the other. The one in the upscale area is the better Walmart in terms of cleanliness, keeping things in stock, etc.
    - naravara 7y ago
      https://www.marketwatch.com/story/walmart-and-sears-get-lowest-customer-satisfaction-ratings-2018-03-12 https://www.marketwatch.com/story/walmart-and-sears-get-lowe... >The recently published 2017 American Customer Satisfaction Index (ACSI) for retail stores and websites shows that customer satisfaction is down slightly overall from a record high posted in 2016. The retail sector slipped 0.3% overall from an index score of 78.4 to 78.1. >Department stores and specialty retailers lost the most ground, likely due to continuing satisfaction from shopping online. Walmart Inc. (NYSE: WMT) dropped one point to 71, the lowest among the department/discount stores included in the survey. >Among supermarkets, Walmart again finished dead last with an index score of 73 versus an average of 79 and a high — for Publix — of 86. Costco scored 83 while Kroger Co. (NYSE: KR) and Amazon's Whole Foods both scored 81. >Walmart also was the lowest scoring retailer for health and personal care stores, with an index score of 75 against an average of 79. Sears' Kmart stores tied with Kroger for the top score of 80.
- nicholaides 7y ago
  I have a relative who has a farm that sells products wholesale to a large supermarket chain (not Walmart). One of the supermarket's tactics: place huge orders from you so that you have to ramp up production and invest in new equipment, labor, livestock, etc, and then, once you're ramped up, they stop ordering as much so that your supply is significantly higher than demand and they can dictate very favorable pricing for themselves.
  - holy_city 7y ago
    If taking orders in that volume require significant investment, wouldn't you make sure they commit to the order volume over the next N years until the capital investment is paid off?
    - delfinom 7y ago
      Many "mom and pop" and "small" and medium businesses fall for it. They simply aren't used to implications of what Walmart or large retailer scaling will require or do to them.
zeroego 7y ago
This is not true in my experience. I work for a medium sized CPG in their eCommerce department. We were clearing many millions of dollars through Amazon 1P a couple years ago, but it was nowhere near 20% of our business. Amazon asked for ridiculous price cuts and we walked away. It hurt but there's no point in selling on a platform through which we are not profitable. On a personal level I hate Walmart and their business practices. Not much of a fan of Target either. But, on a professional level, I'm excited to see their marketplaces take off. Amazon is absolutely horrible to work with and their tools for sellers are obnoxious at best. I'd love to see some real competitors in this space.
- socalnate1 7y ago
  I think you just proved the OP's point. It was nowhere near 20% of your business, so you could walk away.
  - zeroego 7y ago
    I feel like OP's quote was saying that the "seller" is beholden to amazon because it's 20% of their business. Amazon realizes this and then puts the proverbial squeeze on them and forces them to lower their prices. What I was saying was we were nowhere near 20% and amazon still tried to squeeze us to a point not being profitable. So what I'm contesting is that amazon is smart about when they try and get more money out of you. They are trying to do it constantly on the 1p platform regardless of the size of your involvement with them.
    - socalnate1 7y ago
      Ah, gotcha. Thanks for clarifying.
- shostack 7y ago
  How do those conversations typically go in the real world? Is it an actual meeting w/ a buyer agent there? An automated message? If a live conversation is it a fairly hostile "look at all the sales we're driving for you. Give us this price or they go away because we have all the leverage here"? Or is it a bit more of a back and forth? Curious to hear any real world examples of how that typically goes.

delfinom 7y ago

But Walmart does the exact same thing to their suppliers. They attract suppliers with dangling sales numbers in front of them. Next year they demand the suppliers bill of materials and tell them the exact price they are going to pay and not their problem if they can't meet it.

naravara 7y ago
If you want a benchmark for "ethical and well liked company that is not chronically plagued by anti-trust concerns" Walmart probably shouldn't be your reference point.
- dsfyu404ed 7y ago
  Walmart is well liked by the people who shop there.
  - RankingMember 7y ago
    One data point: I have to shop there sometimes and it is the opposite of well-liked. It's a last resort. The employees are miserable, the shelves are disorganized (trash, items in wrong places, just a mess), and the customers are impatient and angry. They do have self-checkout at least now which helps a bit with my biggest complaint (the checkout lines taking forever), but definitely not a place I'd call "well liked". My above criticisms apply uniformly to the 3 Walmarts in my area.
    - dsfyu404ed 7y ago
      Do you live somewhere decently upscale? Walmart in upscale areas tends (in my unscientific observation, n = approx 10) to be full of people who are working there and shopping there as a last resort and it shows.
      - RankingMember 7y ago
        I'm in the immediate city suburbs wherein there are some middle to upper-middle class areas with lower income areas right next to them. Interesting thought, but it doesn't play out at least in "my" Walmarts. The Walmart in the lowest income area is the worst in my case. Aisles where there's no order whatsoever and things like a full unopened jug of milk sitting on the shelf (that's warm) like someone just changed their mind, but no employee ever noticed. Perhaps there's something to be made of the fact that this low income area is right next to higher income areas (creates resentment maybe(?)...just spitballing here).
      - madcaptenor 7y ago
        My even more unscientific observation (n = 2) - I live near two Walmarts, one of which is in a more upscale area than the other. The one in the upscale area is the better Walmart in terms of cleanliness, keeping things in stock, etc.
  - naravara 7y ago
    https://www.marketwatch.com/story/walmart-and-sears-get-lowest-customer-satisfaction-ratings-2018-03-12 https://www.marketwatch.com/story/walmart-and-sears-get-lowe... >The recently published 2017 American Customer Satisfaction Index (ACSI) for retail stores and websites shows that customer satisfaction is down slightly overall from a record high posted in 2016. The retail sector slipped 0.3% overall from an index score of 78.4 to 78.1. >Department stores and specialty retailers lost the most ground, likely due to continuing satisfaction from shopping online. Walmart Inc. (NYSE: WMT) dropped one point to 71, the lowest among the department/discount stores included in the survey. >Among supermarkets, Walmart again finished dead last with an index score of 73 versus an average of 79 and a high — for Publix — of 86. Costco scored 83 while Kroger Co. (NYSE: KR) and Amazon's Whole Foods both scored 81. >Walmart also was the lowest scoring retailer for health and personal care stores, with an index score of 75 against an average of 79. Sears' Kmart stores tied with Kroger for the top score of 80.
nicholaides 7y ago
I have a relative who has a farm that sells products wholesale to a large supermarket chain (not Walmart). One of the supermarket's tactics: place huge orders from you so that you have to ramp up production and invest in new equipment, labor, livestock, etc, and then, once you're ramped up, they stop ordering as much so that your supply is significantly higher than demand and they can dictate very favorable pricing for themselves.
- holy_city 7y ago
  If taking orders in that volume require significant investment, wouldn't you make sure they commit to the order volume over the next N years until the capital investment is paid off?
  - delfinom 7y ago
    Many "mom and pop" and "small" and medium businesses fall for it. They simply aren't used to implications of what Walmart or large retailer scaling will require or do to them.

zeroego 7y ago

This is not true in my experience. I work for a medium sized CPG in their eCommerce department. We were clearing many millions of dollars through Amazon 1P a couple years ago, but it was nowhere near 20% of our business. Amazon asked for ridiculous price cuts and we walked away. It hurt but there's no point in selling on a platform through which we are not profitable. On a personal level I hate Walmart and their business practices. Not much of a fan of Target either. But, on a professional level, I'm excited to see their marketplaces take off. Amazon is absolutely horrible to work with and their tools for sellers are obnoxious at best. I'd love to see some real competitors in this space.

socalnate1 7y ago
I think you just proved the OP's point. It was nowhere near 20% of your business, so you could walk away.
- zeroego 7y ago
  I feel like OP's quote was saying that the "seller" is beholden to amazon because it's 20% of their business. Amazon realizes this and then puts the proverbial squeeze on them and forces them to lower their prices. What I was saying was we were nowhere near 20% and amazon still tried to squeeze us to a point not being profitable. So what I'm contesting is that amazon is smart about when they try and get more money out of you. They are trying to do it constantly on the 1p platform regardless of the size of your involvement with them.
  - socalnate1 7y ago
    Ah, gotcha. Thanks for clarifying.
shostack 7y ago
How do those conversations typically go in the real world? Is it an actual meeting w/ a buyer agent there? An automated message? If a live conversation is it a fairly hostile "look at all the sales we're driving for you. Give us this price or they go away because we have all the leverage here"? Or is it a bit more of a back and forth? Curious to hear any real world examples of how that typically goes.