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I keep wondering why Amazon deals with guys like this instead of going to Calvin Klein’s wholesaler. He wouldn’t have better prices for legit merchandise, right

I keep wondering why Amazon deals with guys like this instead of going to Calvin Klein’s wholesaler. He wouldn’t have better prices for legit merchandise, right?

ethanwillis 6y ago
I think the idea is that it allows for Amazon to remove some strength from the official wholesaler side. If the wholesaler isn't the only source of goods they have less bargaining power. But at the end of the day the wholesaler has to sell to someone. Here are my thoughts on how this relationship could work to Amazon's advantage. Think of this scenario: **Wholesaler**: Give us $10 per unit to list our products on Amazon. **Amazon**: No, we'll pay $15 per unit from a 3rd parties you sell to, but we won't tell you who. **Wholesaler**: Whatever, we'll still make sales at the end of the day. -- Some time passes -- **Amazon**: Hey 3rd parties, if you store all of our stuff in the warehouse we'll be an awesome partner and increase your profits a bit! **3rd parties**: This is an awesome deal! *3rd Parties* who are unaware of the fight between the wholesaler and Amazon sees their business going great buys lots of stock from the wholesaler, sends it all to Amazon, has a lot of their sales going through Amazon, etc. -- Some more time passes -- **Amazon**: Hey Wholesaler, we have these 3rd parties and 90% of their revenue is through our platform. You are going to list your product on our platform at $5 per unit or we're going to either A: Delist the products and kick the sellers off our platform and/or B: We're going to use our business intelligence to launch AmazonBasics™ versions of your product(s) and throw your customers to the wolves while your demand crumbles into to dust. Today YOU are here. This is how they use their monopoly power to get an unfair benefit over the existing manufacturers/wholesalers. And they can use 3rd parties, small businesses, as a way to get leverage. These 3rd parties will go and get business loans, they'll build up their inventories, they provide an abstraction that's hard for the wholesalers to fully peer through to, etc. These 3rd parties are just a pawn in Amazon's games with wholesalers. For every dollar Amazon burns giving these 3rd parties more money than the wholesaler they're really just leveraging indirectly the credit of these 3rd parties and throwing them to the wolves if they don't get their way. Simply a pawn in a game for Amazon to consolidate more power.
- gruez 6y ago
  >or we're going to either A: Delist the products and kick the sellers off our platform Is there evidence of this happening?
  - ethanwillis 6y ago
    This was just my attempt at reasoning how this could work. I did some searching and this was one of the first few things I found. https://www.vox.com/2019/3/8/18252606/amazon-vendors-no-orders-marketplace-counterfeits https://www.vox.com/2019/3/8/18252606/amazon-vendors-no-orde... It's not exactly what I'm saying, but still an interesting scenario playing out nonetheless.
ikeboy 6y ago
Selection and risk. In clothing especially, people can have hundreds of thousands of individuals skus and only a handful of units on most of them. Amazon doesn't want to stock the long tail. In some areas people have unique deals and ways to get products cheaper than Amazon, or they pay more but accept a lower profit margin.
stjohnswarts 6y ago
Amazon lets small businesses sell stuff on their web site and it's a big part of their business, why wouldn't they let middle men sell stuff on there? It also has served as portion of their business to point at and say "see we're fair and not a malicious monopoly, we let others use our platform to sell"

I keep wondering why Amazon deals with guys like this instead of going to Calvin Klein’s wholesaler. He wouldn’t have better prices for legit merchandise, right?

ethanwillis 6y ago

I think the idea is that it allows for Amazon to remove some strength from the official wholesaler side. If the wholesaler isn't the only source of goods they have less bargaining power. But at the end of the day the wholesaler has to sell to someone. Here are my thoughts on how this relationship could work to Amazon's advantage. Think of this scenario: **Wholesaler**: Give us $10 per unit to list our products on Amazon. **Amazon**: No, we'll pay $15 per unit from a 3rd parties you sell to, but we won't tell you who. **Wholesaler**: Whatever, we'll still make sales at the end of the day. -- Some time passes -- **Amazon**: Hey 3rd parties, if you store all of our stuff in the warehouse we'll be an awesome partner and increase your profits a bit! **3rd parties**: This is an awesome deal! *3rd Parties* who are unaware of the fight between the wholesaler and Amazon sees their business going great buys lots of stock from the wholesaler, sends it all to Amazon, has a lot of their sales going through Amazon, etc. -- Some more time passes -- **Amazon**: Hey Wholesaler, we have these 3rd parties and 90% of their revenue is through our platform. You are going to list your product on our platform at $5 per unit or we're going to either A: Delist the products and kick the sellers off our platform and/or B: We're going to use our business intelligence to launch AmazonBasics™ versions of your product(s) and throw your customers to the wolves while your demand crumbles into to dust. Today YOU are here. This is how they use their monopoly power to get an unfair benefit over the existing manufacturers/wholesalers. And they can use 3rd parties, small businesses, as a way to get leverage. These 3rd parties will go and get business loans, they'll build up their inventories, they provide an abstraction that's hard for the wholesalers to fully peer through to, etc. These 3rd parties are just a pawn in Amazon's games with wholesalers. For every dollar Amazon burns giving these 3rd parties more money than the wholesaler they're really just leveraging indirectly the credit of these 3rd parties and throwing them to the wolves if they don't get their way. Simply a pawn in a game for Amazon to consolidate more power.

gruez 6y ago
>or we're going to either A: Delist the products and kick the sellers off our platform Is there evidence of this happening?
- ethanwillis 6y ago
  This was just my attempt at reasoning how this could work. I did some searching and this was one of the first few things I found. https://www.vox.com/2019/3/8/18252606/amazon-vendors-no-orders-marketplace-counterfeits https://www.vox.com/2019/3/8/18252606/amazon-vendors-no-orde... It's not exactly what I'm saying, but still an interesting scenario playing out nonetheless.

ikeboy 6y ago

Selection and risk. In clothing especially, people can have hundreds of thousands of individuals skus and only a handful of units on most of them. Amazon doesn't want to stock the long tail. In some areas people have unique deals and ways to get products cheaper than Amazon, or they pay more but accept a lower profit margin.

stjohnswarts 6y ago

Amazon lets small businesses sell stuff on their web site and it's a big part of their business, why wouldn't they let middle men sell stuff on there? It also has served as portion of their business to point at and say "see we're fair and not a malicious monopoly, we let others use our platform to sell"