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I would compare this to a supermarket allocating shelf space to maximize its profits, either by placing its own brands front and center or by featuring brands t
by monitron 7y ago
I would compare this to a supermarket allocating shelf space to maximize its profits, either by placing its own brands front and center or by featuring brands that have made a deal for prime shelf placement. I don't see this as scandalous or even new.
Coincidentally, Amazon brand products are usually pretty good in my experience, so this might not be a terrible outcome for users who have already decided to come shop at Amazon's store.
- learc83 7y agoGrocery stores don't operate as a "marketplace" though. Grocery stores curate their offerings, vet vendors, deal with returns etc... Amazon is more like shopping mall that decides to start operating their own stores and competing with their tenants.
- skybrian 7y agoOn the other hand, it's somewhat unlike a regular marketplace since Amazon requires vendors to match or exceed their own return policy.
- EGreg 7y agoAmazon does that with A-Z guarantee and helping resolve disputes and presenting listings and having Amazon Basics and Amazon’s Choice.
- whoisjuan 7y agoIs it really? I don't see how this comparison works at all. Amazon gives you distribution, traffic, logistics, etc, with zero risk. They just take a fee if you sell. The only upfront cost is if you pay the premium FBA and that's still a like a 40 bucks per month fee. I'm not trying to defend Amazon, but I don't think that comparison makes sense.
- learc83 7y agoIt's obviously not a perfect metaphor, but neither is a grocery store. >Amazon gives you distribution, traffic, logistics, etc, with zero risk. Not everyone uses the distribution, and a mall or flea market also provides traffic to tenants.
- tracer4201 7y agoAt a mall you pay a fixed cost in terms of rent, regardless of sales. Amazon doesn’t charge you to simply list your product, right? If vendors were being charged a fee just for the listing itself without any sales, your argument would be more valid. If amazon does charge a fee for simply listing a product, tell us. They don’t as far as I know.
- learc83 7y agoNo analogy is perfect. Amazon obviously isn't a mall, but it's not a grocery store either. A grocery store owns the goods in their possession even if they have agreements for sellers to buy some unsold product back. Amazon does not own the 3rd party goods in their possession.
- tracer4201 7y agoYou’re dismissing the mall call by saying no analogy is perfect since it doesn’t work for your argument but then you’re comparing against grocery stores, which is a pretty gross simplification. Amazon isn’t a grocery store. The majority of their catalog isn’t even available at most grocery stores, maybe excluding WalMart. My family owned several convenience stores growing up. Some products were bought and it was your problem to move them off shelves. Some were displayed on shelves and you only paid for what was actually sold. This was common with one of the distributors who gave us Frito Lay products. Other products had strict terms - for instance, Pepsi and Coke distributors wouldn’t give you competitive pricing unless you agreed to purchase Y in X quantity, place their mini coolers next to the refrigerator, place signage within x feet, clearly visible from the front entrance, etc. suddenly, you’re the only store in town who sells 16 oz soda for $1.59 just to break even while everyone else is selling the same soda for $1.09 or just 99 cents. It’s a different model than Amazon and you’re taking liberties to simplify it
- berdon 7y agoDoesn't a grocery store give their product manufacturers those things as well? Distribution, traffic, logistics, marketing.
- whoisjuan 7y agoPerhaps, but with minimal control, larger risks and upfront costs. Especially if you're a small company selling under consignment.
- ses1984 7y agoI don't really see how important that distinction is.
- encoderer 7y agoFacile argument. Grocery stores actually rent shelf space in many cases and do not take on product liability. It’s a different business entirely. Amazon is totally within their right imo, those sellers can go back to eBay if they dislike amazon.
- learc83 7y agoRetail stores absolutely take on more product liability than marketplaces do.
- everythingswan 7y agoYou have a point but I think the fact that grocery stores sell private label goods is the counter-point. Grocery stores re-package goods like rice, beans, paper towels, etc. to compete with their vendors all the time. We call them supermarkets, right? A grocery store is simply a more organized open market. Which is very comparable to Amazon. I think the problem is that they present the results on good faith that "these results are the best match for you based on your search", not the most profitable for them. I just ran a search and the default search filter was "Featured", which is so ambiguous it could mean anything, so it seems like a classic bait and switch that played out over the course of a decade of consumers getting the best search results based on reviews and sales.
- learc83 7y ago>Grocery stores re-package goods like rice, beans, paper towels, etc. to compete with their vendors all the time. That was the original point I was arguing against. My point is that grocery store is not a good analogy because Amazon is not the same as a retail store, they are a combination store and marketplace.
- PorterDuff 7y agoI would argue that a grocery store is a combination store and marketplace in that case. Stores have plenty of in-house brands, they also have racks of goods that are stocked and sold by third parties wherein they get a cut. To be fair, I think I would be more comfortable comparing Amazon to Sears in it's heyday.
- ummonk 7y agoWhat store / grocery store has goods stocked by third parties? (Rather than purchased from the third party by the grocery store)?
- PorterDuff 7y agoAll of the ones around here do. Used DVD racks still exist. Soft drink vending machines. Seasonal items. Newspaper racks. In the case of items actually run through the register, I'm not sure how that's dealt with from an accounting standpoint. I do know that the stores have the ability to return 100% of unsold goods in those cases.
- graeme 7y ago>Grocery stores curate their offerings, vet vendors, deal with returns Amazon does all of these things. They have unlimited shelf space, which reduces constraints. But vendors can have amazon handle returns, they can be kicked off the platform, and amazon decided how to present vendors.
- toasterlovin 7y agoMalls curate the stores that they lease space to. That's why some malls are very high end and others are not.
- LegitShady 7y ago>Amazon is more like shopping mall that decides to start operating their own stores and competing with their tenants. more like a big box store that allows other stores to operate in them so long as they get a cut.
- bantunes 7y ago> Coincidentally, Amazon brand products are usually pretty good in my experience, so this might not be a terrible outcome for users who have already decided to come shop at Amazon's store. So it's fine they're shafting other vendors on their platform because their products are good?
- ryanmarsh 7y agoshafting other vendors They own the store. Shopify is a thing.
- jonknee 7y agoWhy not? If I search and find a reasonably priced product that fits my needs that is a success. Squeezed vendors is just how the world works, do you think Walmart just sits back and lets its suppliers dictate pricing or promotion?
- monitron 7y agoSorry, no, that's not the argument I was trying to make. I was trying to show this by starting the sentence with "Coincidentally." It was just a separate observation about the same topic. I am frustrated by plenty of things that Amazon does, by the way...I just don't think that this is a particularly bad feature of theirs.
- hummusoiler 7y agoThat's peculiar. Here the market's products are placed in the bottom and top, whilst third party brands reserve all the immediate-view space
- m_ke 7y agoSupermarkets purchase the inventory from suppliers so they have an incentive to move everything that's in their stores. It costs amazon nothing to host 3rd party inventory so they get to prioritize whatever maximizes their profits, including screwing over their top sellers. A better analogy would be a walmart in a small town hosting a bunch of small business to showcase their products, then kicking out the top sellers and replacing them with a store brand version. You could argue that those producers should just open their own store but most people won't go out of their way to a different store to buy paper towels.
- namdnay 7y agoWell yes and no. Most grocery chains have more than enough weight to make sure they can return whatever they can’t sell. And the pay their suppliers so late that 99% of the time they’ve already made the sale before even paying for the inventory
- m_ke 7y agoThe product is still taking up their limited shelf space so it's in their best interest to see it get moved. Amazon made their business on the long tail of products that rarely get bought but in aggregate add up to a large portion of total sales because they don't have the same physical constraints.
- toasterlovin 7y agoAmazon also has an equivalent of shelf space: search results. They are just as incentivized to maximize revenue per customer search as super markets are incentivized to maximize revenue per shelf space.
- infogulch 7y agoSearch results are an interesting comparison because their consumer-facing functionality is the same: They both have some limited consumer attention while they are present, and they both want to guide that attention to products that make them more profitable. Except the analogy falls flat when you actually compare the implementation: Amazon's costs to host listings is negligible to negative (they may get more value from having extra listings than it costs to serve them), but that is far from true for grocery stores. Grocery stores have a very small, finite, shelf space compared to Amazon; you can put a lot of items in the "..." after page 3, but grocery stores have to expend labor to count and organize each item at least once a month. Yes stores may be able to return non-selling items for a refund, but do you think it cost them nothing while it was sitting on the shelf? What about the labor of stocking them, cleaning them, heck even packing them back up to return? On Amazon anything that doesn't sell well automagically gets shunted into the depths of page 10+, and they can keep them there indefinitely, at no cost. Stores have a fixed cost associated with every item stocked, this gives them an inventive to sell every item they stock even if they prefer to sell some items over others. But they still want to sell it, even in they have to discount it by huge margins to get rid of it. By contrast Amazon doesn't give a piss about any one of your items in particular getting sold, it can stay there forever as far as they're concerned. I like to say, a sufficiently large quantitative change manifests as a qualitative change. By that, I mean yes the only "real" difference between these scenarios is some of the costs are different, but how those costs become incentives when you have multiple parties actually matters.
- ryanmcbride 7y agoEDIT: I didn't explain this well at all because I couldn't find the episode and haven't listened since it came out, I highly suggest someone better than me find the episode because it makes much more sense and has WAY more information than me. There was a planet money episode about this exact comparison the other day. Basically it comes down to: When a grocery store puts something on it's shelves, the store itself bought it from the manufacturer. They have already made their money. On Amazon, manufacturers don't make money when the item is listed, they make it only if and when a customer buys the product. When a grocery store makes its own novel product and puts it on the shelf, it's taking a risk. If they make those products, but they don't sell, they just lost a bunch of money. Or, if their product is a competing one with an existing product, they know that products like that can sell, but now they have to focus on outselling the original product. When Amazon makes its own product, most of the risk has been removed. They pretty much already know it sells well on their platform, and they have enough money that knocking 5 dollars off the price, making it prime recommended, and putting it at the top of the list will cause it to beat the competition 9 times out of 10. I'm not saying any of this is fair or unfair, because I'm not an economist so I don't believe I have a full understanding of the situation. I tried to find the exact episode but it seems I can never find them when I need them.
- jonknee 7y ago> When a grocery store puts something on it's shelves, the store itself bought it from the manufacturer. They have already made their money. On Amazon, manufacturers don't make money when the item is listed, they make it only if and when a customer buys the product. It's way more complicated than that. Manufacturers pay stores to carry their products, feature their products in special places in stores, get forced to take buy back unsold product, get paid way later on invoices, etc etc.
- bduerst 7y agoOnly certain big box retailers do that, like Best Buy, whose business model have them leasing floor space in their physical locations, which has tangible scarcity. Amazon is not leasing retail floor space, so to GP's point, any comparisons between Amazon's open platform and traditional physical retail spaces are moot.
- dclusin 7y agoIt's also understood by all who pass by store isles that the store is giving its own products prominence. Tweaking an algorithm that historically featured products based on users purchasing behavior to instead favor its own products without disclosing it is doing so is misleading.
- justinmchase 7y agoIt should be scandalous in those cases too. Having a company be both the distributor and producer and have a monopoly is problematic. This is sort of the problem of cable TV also, where companies like comcast tries to be a producer and distriutor and have a monopoly. In the past we have had unions fight against this sort of thing but unions have been busted to hell in this country over the last few decades to the point where even smart people don't even understand why its bad for a company like amazon to do this, we don't remember why.
- scarface74 7y agoYour argument may have held weight in the past, but now, anyone can distribute video without going through the cable providers regular cable distribution. It’s quite simple technically to provide on demand video at scale, including creating apps for all the platforms. The only issue now is when/if cable companies as internet providers start deprioritizing competitors.
- justinmchase 7y agoIts really not simple, technically. So I don't understand what you're saying.
- scarface74 7y agoIt really is. You can use manage services through AWS to set this up at almost any scale including encoding, transcoding, global CDNs, etc.
- aty268 7y agoI don't think you understand what simple means for the vast majority of Americans.
- scarface74 7y agoThe vast majority of Americans aren’t trying to release content that would have been delivered via cable. Except maybe the public access channels. That content can be uploaded to YouTube.
- bufferoverflow 7y agoOr an OS manufacturer to preinstall their brand of the browser. Oh wait.