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The solution isn't hoping the free market would solve this with a competing platform. The solution is to create regulations & laws that prevent this behavior.
by MichaelApproved 6y ago
The solution isn't hoping the free market would solve this with a competing platform. The solution is to create regulations & laws that prevent this behavior.
You're either a platform/retailer or you're a manufacturer. You don't get to be both because we see the perverse incentive that happens when it's allowed.
- ses1984 6y agoIn this case it's shitty to be a supplier but isn't this great for the consumer?
- annoyingnoob 6y agoNo, this is not great for the consumer. It lowers the bar for everyone. What I find mostly on Amazon in the past year or so is cheaper imported versions of decent products. The decent products are hard to find or I have to look outside of Amazon. They've pushed out the quality and replaced it with higher profit junk. Its kind of the same thing with Home Depot. I used to be able to buy quality hardware from a local store. Now all I have is Home Depot and they sell mostly imported junk hardware. I have to go somewhere like McMaster-Carr now for quality hardware. Home Depot has not been good for me, Home Depot has only been good for itself.
- jacobr1 6y agoDifferent problems. One is the regulation of which suppliers can distribute on a platform, deceptive advertising, right-to-repair, and similar consumer protection considerations. The other problem the article and parent comments are describing relates to the distributor/retailer creating or sourcing generic alternatives to the items sold by their existing suppliers and informing their decisions to do so based on the sales data from their own partners/suppliers. This latter case seems ok to me, even if it sucks for suppliers, in the sense that we generally get better outcomes for customers. As long as the general regulations for consumer protection are in-place such as preventing confusion between brands and generics.
- wpietri 6y agoWhat's your evidence that we get better outcomes for consumers?
- jacobr1 6y agoGood question. Actually I don't have any data for that. Anecdotally many "store brand" items of things that seem commodity-like, are things that I can get the same quality as a name brand at a lower price. This is better for me, and I suspect better for most consumers in a static situation. But the market is dynamic. Does this stifle innovation of new products? Does the reduced revenue of "brand" named producers, especially smaller ones hurt? Does the price competition produce a race to the bottom that ultimately doesn't benefit consumers? I don't know. But I would say that the considerations of increased regulations of "generics" vs increased regulation of "online markets" seem to me to involve different tradeoffs.
- wpietri 6y agoSadly, the American grocery store is not optimized for consumers, so we can't draw many inferences from it. It's true that no-frills versions of commodity products are a good deal compared with heavily marketed products. But I don't see any reason to think letting individual stores dominate that market segment would be necessarily better for consumers.
- bofadeez 6y agoGiving consumers the same basket of goods at a lower cost just increases their real income, purchasing power, and overall standard of living. Amazon is effectively distributing billions of dollars of charity to those who need it the most. They lose $2 billion a quarter on retail. That's $2 billion per quarter in subsidies to consumers.
- arrosenberg 6y ago...which is classic anti-competitive behavior. That isn't a free and fair market - it's one that's in the process of being captured by a few large incumbents.
- freeone3000 6y agoThe Amazon Basics products I've purchased have been of acceptable quality - and at least I know they're not counterfeit.
- annoyingnoob 6y agoI can't really argue with that.
- zrobotics 6y agoTip- check out Fastenal. They don't tend to have small retail packages, so you need to buy larger quantities, but it's really nice not to have to wait for shipping. They're an industrial supplier, but all the stores I've been in were perfectly happy to sell to the general public.
- annoyingnoob 6y agoIf I place a McMaster order by 10:30am I get it the same day, if not its tomorrow. Easier than going to the store.
- omniscient_oce 6y agoI tried to look for a decent priced backpack on Amazon a few months ago but there are a gazillion listings for what appears to be the same backpack, only the names differ. I ended up just buying it straight from Aliexpress from where it undoubtedly has been sourced from one of the same (or single?) factories. There's basically cheap-as-chips level products, and then 'high-grade' which is still dubious at times whether the quality of materials is better or not. Middle of the pack product pricing seems to just be swallowed up in a race for the bottom or the top.
- docandrew 6y agoEven worse, assuming the high-grade brand is better to begin with - are you buying the real thing, or a counterfeit?
- MichaelApproved 6y agoIn the short term it creates competition and lower priced products. In the long term, Amazon undercuts suppliers who have to exit the market. That reduces competition and allows Amazon to charge more.
- supercanuck 6y agoPeople seem to think "capitalism" produces the best results simply because of privatization, but it is the competition that is created. It doesn't matter if the one producer is Soviet Russia or Amazon, it hurts everyone in the long run when their is one supplier.
- _jal 6y agoThis is a frequent trick in econ 101-style defenses of anarchic markets - play with the time horizon. If you're hungry, a soda is "great for the consumer". For 15 minutes, it alleviates that feeling. Does it follow that everyone should consume only soda?
- dubcanada 6y agoYou're focused to much on Amazon. Every company does this just go to your local Walmart, everything is white-label. A law like this would have to be applied to them as well.
- wpietri 6y agoDefinitely not. Consumers are best served when you have a bunch of relatively equal players competing for their business, and where success is rewarded financially. That gives everybody an incentive to focus on continuously getting better at serving the customer through R&D, etc. But if the reward for success is just having Amazon come in and hoover up the money you would have gotten by launching a knockoff, then suddenly there's a lot less incentive to invest in novel products. That's true both for categories where Amazon is competing and ones where it isn't currently. I wouldn't be surprised if Amazon's replacement product is sometimes modestly worse, because a) they don't have the kind of deep expertise in a product that the original creators do, and b) it doesn't have to be as good to get the money. And then there's after-sale support. Amazon's customer support is atrocious. The one thing they're good at is taking things back. But anything more complex and it's a nightmare.
- baddox 6y ago> Consumers are best served when you have a bunch of relatively equal players competing for their business, and where success is rewarded financially. That depends on the significance of economies of scale and barriers to entry in a particular market. The term “natural monopoly” (as it’s used in economics) refers to a particular market where, because of barriers to entry, the optimal number of firms is one. Two firms would not be able to produce their good for cheaper than one firm.
- wpietri 6y agoConsumers are definitely better served by competitive markets than monopolies, natural or otherwise. I agree that's not always possible, and where it isn't, we generally get bad monopolist behavior, heavy regulation, or both. I also suspect the notion of "natural monopoly" is oversold and too simple. Would it be more efficient if we had exactly one ISP for the country? In theory, yes, because then we only have to run one set of wires everywhere, and we'd get rid of a lot of duplicative equipment and staff. But in practice, monopoly and oligopoly ISPs are generally both expensive and bad. I just moved from a competitive area to a "natural monopoly" area; my internet now costs twice as much for 10% of the bandwidth, much lower quality, and much worse service. I think that's because companies aren't static entities that reliably produce goods, even though that's what most people imagine. Instead they're temporary coalitions of individual actors hopefully prodded into optimal behavior by external forces like competition. Especially so given American business culture, which often refuses to recognize ways of thinking that might mitigate the problems.
- johnmarcus 6y agothat solves the problem for suppliers, but creates one for consumers with lower competition. Less competition, higher prices. *just noticed I was down voted, likely by MichaelApproved because he has 7500 Karma and I only have 156. I'm starting to really hate contributing to HackerNews discussions because it's fully of a bunch of bullies who pound on your karma if you don't agree with their viewpoints. Bring on the downvotes, I know HN hates any mention of it's imperfections as well. At least my conscious is clear.
- tingol 6y agoHow? Everyone else can compete...
- johnmarcus 6y agoIf you regulate that Target can't compete, than that is one less competitor.
- luckylion 6y ago> that solves the problem for suppliers, but creates one for consumers with lower competition. Less competition, higher prices. How so? Amazon is the one reducing competition, stopping Amazon from doing that would increase competition. That's a good thing for consumers.
- vntok 6y agoPlease don't submit comments saying that HN is turning into Reddit. It's a semi-noob illusion, as old as the hills. Please don't comment about the voting on comments. It never does any good, and it makes boring reading. To your point, though, lower competition is not always bad. I as a consumer very much prefer having to deal with fewer toilet paper suppliers if they are of good enough quality. The toilet paper industry is not one where I expect dramatic innovation brought by competition. I just want the cheapest pack that won't feel like sand paper on my delicate behind. There are, surprisingly, quite a lot of similar industries where consumer would prefer cheap and fast rather than elaborate and innovative products.
- AbrahamParangi 6y agoIt’s regulation like this that causes industry monopolies by raising the complexity of entering the space. Outside of dealing with negative externalities, regulation is a poor-man’s trust busting anyway.
- simonw 6y agoIt's possible for both of these to be true at the same time. Regulation can help prevent harmful economic behaviour. It can also create anti-competitive environments that protect incumbents at the expense of new entrants, often by regulatory capture.
- sp332 6y agoThe alternative to introducing this regulation is not going to a system with no regulation, it's continuing with the current framework where Amazon is actively driving competition out of the market. Opposing this regulation without an actual alternative is just defending the status quo.
- AbrahamParangi 6y agoIf the free market has overly concentrated power in a party, the solution is to create competition by dividing that party.
- sp332 6y agoIsn't that exactly what MichaelApproved said?
- zo1 6y agoOP said: > "The solution is to create regulations & laws that prevent this behavior." I'll take a slightly contrived and simplified set of examples to illustrate why a lot of free-market advocates don't agree with this sentiment as being correct. 1. We identify this "market failing" behavior of Amazon. I.e. Amazon does it a few times and after a while, public starts to 2. Legislators make it illegal for a platform to sell the same products as their suppliers. Easy, right? 3. Amazon alters products to not be technically "the same" so they skirt regulation. E.g. Renames "Plain Artisan Soap" to "Amazon Artisanal Soap", never mind that the product they "copied" was called "Joe's Plain Artisan Soap", and Amazon's product is advertised as "cheap alternative to expensive artisan soaps". 4. We notice and we complain. 6. Amazon complains back (maybe even a few court-cases along the way?), says certain products aren't the same. E.g. Supplier sells artisan soap, but Amazon argue their white-label "soap" isn't the same, it's just soap. 7. So to be fair, legislators start coming up with a reasonable system to identify similar products, which forces amazon to identify "similar" products in order to get them off. 8. Legislators followup and create reasonable rules and exclusions how Amazon can market their branded soap, or how closely the soap can resemble an existing product. 9. Amazon happens to also have a bunch of their own genuine products that it manufactures cheaply. Perhaps a byproduct of some sort of warehouse process they have, and they use their idle machines to make it, or something. But new suppliers come on that happen to sell something that according to regulations is "similar" to those products, and Amazon gets into hot water. 10. Amazon has to put rules, processes, maybe software algorithms to identify such a case. Remember, at Amazon scale, they have thousands of new suppliers and orders of magnitude more "products" that get added each day. 11. Regulators realize it's too difficult to figure this problem out and go to court over it. So they come up with a complaints + arbitration system to address it fairly with a "human in the loop". Think DMCA, takedown requests, etc. 12. Above regulations require paperwork, and you have to register as a platform if you get requests, you're obligated to address complaints of "similar products", etc. Amazon implements all these rules at each stage, neverminding the "good-faith" interpretation of the original and subsequent laws put in place each time. I.e. "We just don't want platforms abusing their power to undercut genuine businesses." But at this stage we've, through genuine and honest market "interventions" and reasonable rules that seem straightforward and simple and cheap to implement, created regulatory costs that by default get applied to every new "platform" that competes in a space similar to Amazon. You've now successfully put in place regulations that inhibit and prevent competitors manifesting to compete with the existing monopoly or oligopoly.
- hanniabu 6y agoWouldn't solve anything. They'd just split their company to be separate entities but still share all the information and operate as if nothing has changed.
- mtone 6y agoIsn't that collusion?
- toasterlovin 6y agoWhat they would probably do is form special relationships to give certain brands special placement and/or endorsement, but charge those brands a larger fee for the special treatment. The end result is basically the same.
- deleted 6y ago[deleted]
- Shivetya 6y agoDisagree, what I do think we need is any retailer who has their own product lines in store must clearly identify that they are store brands.
- vntok 6y agoThat's what Amazon Basics is and does.
- throwaway2048 6y agoAmazon basics isnt the only amazon store brand, it has many others that are not labeled amazon in any way.
- chairmanwow1 6y agoWhat really is the issue? That Amazon is leveraging its success to be successful? It's unfair that Amazon is able to see that a product category is doing well so it invests its own money into manufacturing a product to sell through its site? Do you really think that if Amazon couldn't use the data from its own site that it wouldn't procure it elsewhere? Before any product is developed there is extensive market research done to get an idea of how much money this product could make. Anyone can and does do this, why should Amazon be punished that its data collection mechanism is cheaper than others?
- beagle3 6y agoIt is not illegal to have a monopoly; but it is illegal to use a monopoly you have in one area to get an unfair advantage in another. Amazon may or may not legally be a retail monopoly - I do not know the answer. But your question can be rephrased for any monopoly and the answer would be “monopolies should be punished for leveraging their monopoly power in other markets, because that ruins the market for everyone else.” Free markets and democracies are good at a lot of things, but self preservation is not one of them - therefore you need anti-freedom laws.
- baddox 6y ago> It is not illegal to have a monopoly; but it is illegal to use a monopoly you have in one area to get an unfair advantage in another. This is a very common misconception in the United States. It’s how a lot of defenders of antitrust law want antitrust law to work, but it is not how antitrust law does work. This Supreme Court case explicitly establishes that antitrust laws can be used against companies which obtain a high market share simply by anticipating future demand and responding effectively and efficiently. https://en.wikipedia.org/wiki/United_States_v._Alcoa https://en.wikipedia.org/wiki/United_States_v._Alcoa
- xxpor 6y agoTechnically not a supreme court case, but kind of close enough. Also I think there's 0 chance that wouldn't be overturned if tested today.
- allemagne 6y ago>You're either a platform/retailer or you're a manufacturer. You don't get to be both Ok, done. Now what are manufacturers supposed to do when Amazon and Walmart start bullying them some other way? You just made shipping their product directly to the customer against the law.
- rsanek 6y agoNo, that's not what a platform is. You can always sell your product direct to consumer. You just can't be the intermediary for both your own and other companies' products on the same site.
- vntok 6y agoOK, done. Now you have Amazon Basics' products competing with Amazon Fulfillment's products on Amazon Dotcom's website. Different entities, not even under the same corporate governance.
- rsanek 6y agoIf they are different entities, how come Amazon Basics can use the same name as the platform? Did Amazon sell the rights to another company to use their brand?
- vntok 6y ago"Did Amazon sell the rights to another company to use their brand?" But of course, why not? These kinds of trademark licensing agreements are all over the place, there would be no difference here.
- rsanek 6y agoThen I'm not sure why it's a problem. Ostensibly anyone could have bid to license that name; I see no issue with that.
- allemagne 6y ago
- stronglikedan 6y agoWhat perverse incentive? Competition?
- malandrew 6y agoAs a consumer, I disapprove. Your regulatory proposal is anti-competitive.
- dv_dt 6y agoThat's what India basically regulated with Amazon. i.e. a company can't sell proudts on their open-market platform from companies you have a stake in (or your own generics presumably?). https://www.digitalcommerce360.com/2019/02/01/new-ecommerce-regulations-in-india-foil-amazon-and-walmarts-plans/ https://www.digitalcommerce360.com/2019/02/01/new-ecommerce-...
- allemagne 6y agoFTA: >The new rules could wipe out nearly half the products on Amazon.in, said Satish Meena, an analyst at Forrester Research Inc. “It’s likely to disrupt availability for customers,” he said. >The biggest beneficiary from the tightened rules could be Reliance, which is India’s largest private company and owns the country’s biggest brick and mortar retail chain. In theory India standing up to giant foreign corporations. In practice, a huge giveaway to another giant corporation at the expense of Indian consumers and a big warning to other companies hoping to expand to or invest in India.
- dv_dt 6y agoOr it will allow small businesses space to compete in India instead of taking a shortcut of allowing unfettered access by large corps to increase commerce, but in a way that funnels profits away from India itself. That portion of the article is basically the opinion part. I didn't find great coverage over the full details of the regulations themselves.
- x86_64Ubuntu 6y agoHow come we don't see this kind of angst with other store brand items. I can't imagine these comments being lobbed at Wal-Mart's Great Value, Costco's Kirkland Signature, or Bi-Lo's SE Grocers items. And private label doesn't mean you have to manufacture anything at all. Sometimes, you will go to the company whose marketshare you are trying to take and they will manufacture the product for you.
- dopamean 6y agoProbably because no one feels sympathy for General Mills having their shitty cereal knocked off by walmart.
- notahacker 6y agoIf the aim is to curb monopoly powers of Amazon etc this would be disastrously counterproductive When Joe's Custom Bike shop isn't allowed to be a manufacturer and a retailer of someone else's bike equipment, the customer is going to go to Amazon or Wal Mart to buy it. And retail giants, buoyed by the government killing half their competitors, will still find a way of squeezing their suppliers and funnelling sales data to preferred suppliers or related entities.
- mtnGoat 6y agoI would disagree, the free market is working just fine. Many brands are no longer selling on Amazon and doing very well. We don't need laws to restrict one party from taking advantage of another in a deal... it just takes brains and some companies are using theirs to partner with other platforms or sell DTC(Direct To Consumer)
- Cd00d 6y agoTo clarify, you're calling for a full ban on private label goods? I would think 'brands' like Kirkland are a net good for the consumer.
- wonderwonder 6y agoI agree. I am hard pressed to think of a recent time that I advocate for an anti - monopoly government action, but Amazon and its current practices is one of those times. If they provide the platform they should not be able to compete with and undercut those using their platform. They are at such as scale that they can basically put anyone out of business to the detriment of all other businesses. This is what the legislation is designed for and it should be used in this case. Pro sellers on amazon also have to pay a fee averaging 13% per sale, while amazon products don't suffer that handicap. Its a competitive advantage the sellers cannot overcome.
- 12xo 6y agoMany years ago I worked for a small analytics company bought by Amazon. My job was to analyze and report on the rise and fall of various product sectors on the web. We were in a unique position at the time, with the ability to see what URL's people were visiting. Reports we presented to Bezos, Jason Kilar and team, were used to make acquisition and growth decisions. In one case we found that that toys and plus size women's clothes were the top sellers for ecommerce in the US. They looked at the data and backed out of buying one of the major e-commerce players in toys and instead launched their own toy site / section. It was the beginning of Amazon moving away from Books and Music and into all other products. The point is that competitive data is what drives decisions for product and segments in all areas of retail and business. Either in house or outside. Gathering that data from within your property is no different than using an outside agent. You are acting as if they're spying on their customers, when the customers are you and me, not the reseller using their platform/space/warehouse/services.
- jberm123 6y agoSounds nice in theory, but deferring to the government for this is how to fuel the lobbyist industry and end up with regulatory capture. Anyone can host a website, market their product, ship with FedEx/UPS. Preach people do that instead, rather than bow down to our government stamped and approved overlord Amazon.