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EDIT: 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

EDIT: 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 ago
  Only 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.
  - jonknee 7y ago
    I think retail stores controlling what you see based on how much money they get which is quite similar to Amazon controlling what you see in a search result based on profitability, but I guess we can agree to disagree. However, it's not just stores like Best Buy. Your local grocery store almost certainly makes a large percentage of their profit from companies paying for shelf space. End caps don't come out of thin air.
    - bduerst 7y ago
      Again, comparisons with physical retail are moot because, in your grocery store, nobody can walk in off the street and start selling off the shelves. The grocery store is not an open e-commerce platform but a curated service with physical scarcity. People don't have an issue with Amazon default sorting to best selling either. The problem is that Amazon is slowly pushing out the competition on their platform to focus their own products and labels. If there's any analogy, it would be similar Google removing search result links to Bing or Yandex.
      - vinay_ys 7y ago
        > Again, comparisons with physical retail are moot because, in your grocery store, nobody can walk in off the street and start selling off the shelves. The grocery store is not an open e-commerce platform but a curated service with physical scarcity. So, if Amazon marketplace was an invite-only, curated marketplace and not an "open" marketplace, this wouldn't be a problem?
- deleted 7y ago
  [deleted]
johnqpub 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. That's not how it works for a some perishable products in grocery stores. For example, bread is stocked daily by the bakeries themselves. Same thing with potato chips. If a grocery store has their in house bakery up front right when you walk in selling bread, and the vendors bread is all the way in the back, is that unfair to the vendor?
- ryanmcbride 7y ago
  >If a grocery store has their in house bakery up front right when you walk in selling bread, and the vendors bread is all the way in the back, is that unfair to the vendor? That would be for the vendor to decide when planning out where to sell their product I guess
  - toasterlovin 7y ago
    Right, just like all of the sellers on Amazon know that they have to take potential competition from Amazon into account when deciding how to participate in Amazon's marketplace.
- learc83 7y ago
  > For example, bread is stocked daily by the bakeries themselves. Same thing with potato chips. The store still buys those items from them. Some bigger stores will force the vendor to offer a buyback guarantee, but while the product is on their shelves, the store owns them.
chaostheory 7y ago
> 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. The grocery store's risk on store branded products is about the same as Amazon's risk for Amazon brand products. They have the data to know what sells and what doesn't, they have control of the store layout, and they also have pricing data. There's really no major differentiation besides the physical store front and how manufacturers "rent" space.
j-c-hewitt 7y ago
This isn't true in most cases. Amazon does buy stuff wholesale through their Vendor program. Almost all sellers are also buying wholesale apart from manufacturers going direct to consumer. If it is shipped & sold by Amazon, Amazon already paid for it from their supplier. If it is shipped & sold by SomeOtherStore, generally they bought it already from someone. There are a lot of dropshippers also and that is a different story. Amazon similarly protects itself with onerous contracts that can force suppliers to eat the cost of unsold products at times, and does whatever it can to avoid buying unproven products. Grocery stores and other retailers in general can be protected by refund policies and buyback policies so they are not necessarily taking as much risk especially on packaged products with long expiry dates. They can also liquidate stuff that doesn't get purchased to recoup some money.
atoav 7y ago
But the shelves of Grocery stores are different: you cannot just change things around all the time without your customers complaining or going to another market with better offers. The amount of shelves is more or less constant throughout the life of a store and promoting your own brand often means you lose out on the money others offer you to get a good spot. On Amazon there are as many shelves as there are product categories and the thing has much much more fluctuation. What that means is, that a "promoted" product is sometimes the only one which stays at a fixed spot, while all all the others are to be found on the miscellaneous-pile.
twsted 7y ago
> 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. It’s unfair.

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 ago
Only 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.
- jonknee 7y ago
  I think retail stores controlling what you see based on how much money they get which is quite similar to Amazon controlling what you see in a search result based on profitability, but I guess we can agree to disagree. However, it's not just stores like Best Buy. Your local grocery store almost certainly makes a large percentage of their profit from companies paying for shelf space. End caps don't come out of thin air.
  - bduerst 7y ago
    Again, comparisons with physical retail are moot because, in your grocery store, nobody can walk in off the street and start selling off the shelves. The grocery store is not an open e-commerce platform but a curated service with physical scarcity. People don't have an issue with Amazon default sorting to best selling either. The problem is that Amazon is slowly pushing out the competition on their platform to focus their own products and labels. If there's any analogy, it would be similar Google removing search result links to Bing or Yandex.
    - vinay_ys 7y ago
      > Again, comparisons with physical retail are moot because, in your grocery store, nobody can walk in off the street and start selling off the shelves. The grocery store is not an open e-commerce platform but a curated service with physical scarcity. So, if Amazon marketplace was an invite-only, curated marketplace and not an "open" marketplace, this wouldn't be a problem?
deleted 7y ago
[deleted]

johnqpub 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. That's not how it works for a some perishable products in grocery stores. For example, bread is stocked daily by the bakeries themselves. Same thing with potato chips. If a grocery store has their in house bakery up front right when you walk in selling bread, and the vendors bread is all the way in the back, is that unfair to the vendor?

ryanmcbride 7y ago
>If a grocery store has their in house bakery up front right when you walk in selling bread, and the vendors bread is all the way in the back, is that unfair to the vendor? That would be for the vendor to decide when planning out where to sell their product I guess
- toasterlovin 7y ago
  Right, just like all of the sellers on Amazon know that they have to take potential competition from Amazon into account when deciding how to participate in Amazon's marketplace.
learc83 7y ago
> For example, bread is stocked daily by the bakeries themselves. Same thing with potato chips. The store still buys those items from them. Some bigger stores will force the vendor to offer a buyback guarantee, but while the product is on their shelves, the store owns them.

chaostheory 7y ago

> 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. The grocery store's risk on store branded products is about the same as Amazon's risk for Amazon brand products. They have the data to know what sells and what doesn't, they have control of the store layout, and they also have pricing data. There's really no major differentiation besides the physical store front and how manufacturers "rent" space.

j-c-hewitt 7y ago

This isn't true in most cases. Amazon does buy stuff wholesale through their Vendor program. Almost all sellers are also buying wholesale apart from manufacturers going direct to consumer. If it is shipped & sold by Amazon, Amazon already paid for it from their supplier. If it is shipped & sold by SomeOtherStore, generally they bought it already from someone. There are a lot of dropshippers also and that is a different story. Amazon similarly protects itself with onerous contracts that can force suppliers to eat the cost of unsold products at times, and does whatever it can to avoid buying unproven products. Grocery stores and other retailers in general can be protected by refund policies and buyback policies so they are not necessarily taking as much risk especially on packaged products with long expiry dates. They can also liquidate stuff that doesn't get purchased to recoup some money.

atoav 7y ago

But the shelves of Grocery stores are different: you cannot just change things around all the time without your customers complaining or going to another market with better offers. The amount of shelves is more or less constant throughout the life of a store and promoting your own brand often means you lose out on the money others offer you to get a good spot. On Amazon there are as many shelves as there are product categories and the thing has much much more fluctuation. What that means is, that a "promoted" product is sometimes the only one which stays at a fixed spot, while all all the others are to be found on the miscellaneous-pile.

twsted 7y ago

> 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. It’s unfair.