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In this case it's shitty to be a supplier but isn't this great for the consumer?
by ses1984 7y ago
In this case it's shitty to be a supplier but isn't this great for the consumer?
- annoyingnoob 7y 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 7y 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 7y agoWhat's your evidence that we get better outcomes for consumers?
- jacobr1 7y 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 7y 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 7y 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 7y 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.
- plausible 7y agoExcept that they'll quickly recoup that "subsidy" by raising prices after they've dumped their competition.
- bofadeez 7y agoIf they raise prices then they invite an instant flood of competition and lose their monopoly. They have no power to raise prices and restrict competition. Their only competitive advantage is pricing. Amazon's only profitable products are AWS and its stock. The benefit of losing $2 billion a quarter doing retail is debatable. Would you prefer a world without amazon's subsidies given that they have no power to exploit anyone?
- wpietri 7y agoYour theory is that Amazon is spending $2 billion a quarter even though it gets them no long-term advantage? If you're right, then capitalism is hopelessly bad at optimization and we should scrap it. But what I think is more likely here is that Amazon's execs understands the economics of their business way better than a zero-karma free-market fundamentalist whose pseudonym is a genitalia joke.
- bofadeez 7y ago
- annoyingnoob 7y agoFair enough, its not quite the same thing. Though Home Depot has a ton of its own products now too - they are doing the same thing inside physical retail stores rather than online only. For pharmacy items where there is some regulation around the quality of the product, I find generics/store brands to be great. For products that are not regulated in some way quality is all over the place. If you search Amazon for "ul listed usb charger" you will mostly see results for products that are not UL listed - there are probably 5 times more unlisted products for sale there than listed products - Amazon is pushing a bunch of cheap and high-profit crap at me even when I try to avoid it.
- freeone3000 7y agoThe Amazon Basics products I've purchased have been of acceptable quality - and at least I know they're not counterfeit.
- annoyingnoob 7y agoI can't really argue with that.
- zrobotics 7y 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 7y 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 7y 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 7y agoEven worse, assuming the high-grade brand is better to begin with - are you buying the real thing, or a counterfeit?
- MichaelApproved 7y 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 7y 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 7y 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 7y 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 7y 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 7y 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 7y 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.