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Costco, Target and Safeway have to pay to maintain inventory in their stores, and thus have 'skin in the game'. Amazon can merely 'watch' what sells, and copy.

Costco, Target and Safeway have to pay to maintain inventory in their stores, and thus have 'skin in the game'. Amazon can merely 'watch' what sells, and copy. AFAIK, brick-mortar stores have to buy products; they don't get it for free. If they banked on sales of product A that they thought they could make a generic brand out of, and it didn't work, it cost them some money and real-estate. H However, Amazon just has to watch people's 'browsing history' without paying a dime to the seller. If the product sells well, its good. If not, no loss of any kind for Amazon. Its a win-win for them (alone).

scribu 6y ago
Amazon also has to purchase whitelabeled products and then sell them as their own brand, incurring the same kind of inventory risk.
- feyman_r 6y ago
  I am guessing there is information disparity here. Amazon knows the demand-supply curve really well by the time they get into the market - in fact, not just for Brand A of usb-cable, but for Brands A-to-Z. None of those brands know how their competitors are doing and if there's a better kind out there than what they make. Amazon knows it. Risk to Amazon is no longer 'is this product category good, or whether cloth or plastic sheath sells best on USB cables'. Smaller brands already survived and proved it for them. If Amazon came out with absolutely new products (that are not Alex, Kindle etc, upselling, cross-selling themselves) to test the market out, I'd say risk would be same.
jt2190 6y ago
> Costco, Target and Safeway have to pay to maintain inventory in their stores, and thus have 'skin in the game'. Can you clarify this? No major retailer pays up front for inventory. They do pay rent and other overhead though. Is this markedly different than Amazon?
- mschuster91 6y ago
  Of course the retailers pay for all the stuff they buy, they only have rather large payment windows - I've seen anything from 90 to 180 days. This is also what creates a problem for retailers once the public learns that they are struggling - vendors either shrink their gaps or demand upfront payments for new goods, leading to a further financial crunch. This is in Germany shown with the Galeria Karstadt/Kaufhof chain that has had its faie share of "crunches" over the last years.
treebornfrog 6y ago
Am I missing something here? Their business model is based on high scale, lower cost vs traditional brick and mortar, amazon can iterate quicker. Amazon does have some skin in the game, they still have to stock the items which are FBA (fulfilled by amazon), so they are taking risk there.

scribu 6y ago

Amazon also has to purchase whitelabeled products and then sell them as their own brand, incurring the same kind of inventory risk.

feyman_r 6y ago
I am guessing there is information disparity here. Amazon knows the demand-supply curve really well by the time they get into the market - in fact, not just for Brand A of usb-cable, but for Brands A-to-Z. None of those brands know how their competitors are doing and if there's a better kind out there than what they make. Amazon knows it. Risk to Amazon is no longer 'is this product category good, or whether cloth or plastic sheath sells best on USB cables'. Smaller brands already survived and proved it for them. If Amazon came out with absolutely new products (that are not Alex, Kindle etc, upselling, cross-selling themselves) to test the market out, I'd say risk would be same.

jt2190 6y ago

> Costco, Target and Safeway have to pay to maintain inventory in their stores, and thus have 'skin in the game'. Can you clarify this? No major retailer pays up front for inventory. They do pay rent and other overhead though. Is this markedly different than Amazon?

mschuster91 6y ago
Of course the retailers pay for all the stuff they buy, they only have rather large payment windows - I've seen anything from 90 to 180 days. This is also what creates a problem for retailers once the public learns that they are struggling - vendors either shrink their gaps or demand upfront payments for new goods, leading to a further financial crunch. This is in Germany shown with the Galeria Karstadt/Kaufhof chain that has had its faie share of "crunches" over the last years.

treebornfrog 6y ago

Am I missing something here? Their business model is based on high scale, lower cost vs traditional brick and mortar, amazon can iterate quicker. Amazon does have some skin in the game, they still have to stock the items which are FBA (fulfilled by amazon), so they are taking risk there.