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Thought exercise because I legitimately struggle with this. Is this fundamentally different than Costco using sales data to choose which Kirkland products to la

Thought exercise because I legitimately struggle with this. Is this fundamentally different than Costco using sales data to choose which Kirkland products to launch/sell? If so, how? If not, then why do we not pursue Costco with the same gusto as Amazon? To me this behavior by Amazon seems worse, but I can't figure out why.

poidos 5y ago
I'm not sure if it's fundamentally different, but maybe you're just (like I am) more inclined to perceive Amazon as a "bad" company. Costco has a lot of goodwill with the public.
MengerSponge 5y ago
Imagine if a Costco sales rep offered to swap something in your cart with the Kirkland clone, or if they suggested the Kirkland product as you reached to grab something else off the shelf.
- notyourwork 5y ago
  Are businesses in the business of increasing efficiencies (more revenue, more profit, lower costs) or are they in the business of doing what is in the best interest of consumers or both? I don't think your example really holds weight. I goto Costco because they offer products I want at a price I like. If during shopping they were trying to give suggestions to better deals I'm not sure as a consumer I get to complain about it do I?
- cptskippy 5y ago
  I've never had amazon offer to swap anything from my cart.
- tylerrobinson 5y ago
  Aren't traditional grocery stores doing the same thing but using price, sales, positioning, name, and label imitation? When I reach for Quaker Oatmeal Squares, and Wholesome Oatmeal Squares Cereal is right next to it, for cheaper, also in a blue box?
  - nerdponx 5y ago
    It's a lot easier to comparison shop. Also you can trust that the Quaker on the shelf is real name-brand Quaker. So you can look at the store brand prices, packaging, etc. and make a reasonably informed and quick decision. I wouldn't be surprised if Amazon lets the fraud and ratings scams go somewhat unchecked so as to make their own house brand look "safe" and desirable.
  - dathinab 5y ago
    And they have gotten into lethal trouble because of it, I think there is a ongoing case against Oreo because they abused their market power to affect in shelf positioning in a way which likely counts as unfair/illegal abuse of marked power. Most important grocery stores and similar are resellers, Amazon is a proxy. Sure that pretend they sell you things but actually you just buy things through them, not from them. (Except their own products.)
- krumpet 5y ago
  Take a quick trip the Costco website and you'll see they use the same recommendation tactics. Looking at a bag of Peet's brand coffee, I see Kirkland Signature brand coffee sitting in the "Similar Product". Just saying...
notyourwork 5y ago
Disclaimer: I'm not a legal expert, just an engineer with my own opinions. I struggle with it as well because conceptually in my mind this is the same as a grocery store using customer buying data to inform itself. Grocery chains have been using private label brands to compete with name brands for years. Check your cereal aisle for the "fruit loops" in the back without a box that are ~50% cheaper than the name brand boxed real fruit loops. I never saw this as wrong growing up. I saw this as the store offering a cheaper comparable and consumers were able to chose which they want. In fact, the grocery store also controls what is on the end cap and what is on top and bottom of each shelf. I think the landscape is heavily skewed in favor of the dominant online retail merchant. This skew and dominance is what causes people to claim afoul behavior is going on.
- dathinab 5y ago
  Grocery stores select which products they want to sell and have limited capacity. Amazon provides a platform through which "everyone" can sell "anything" with no tightly constrained space/slots. As far as I know Amazon is legally closer to a market place where everyone is up their own stand (but they are required to look mostly the same) and which happens to also require you to use their payment system. I.e. Amazon is just a proxy while the grocery store legally buys and resells the products.
- _up 5y ago
  I am not from the US but I think Amazon has much more market dominance than Costco. If Amazon had 20% market share nobody would mind, but they don't have real competition that comes close.
  - deleted 5y ago
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  - ls612 5y ago
    Amazon has less than 20% market share in retail overall. Remember their competitors are not just the online sellers who are pushing this antitrust angle. It’s Walmart and Target and grocery chains and CVS and Walgreens and brick and mortar department stores and so on.
jagged-chisel 5y ago
Suppose Costco allowed other vendors to be present and selling in their stores. Costco requires these vendors to use Costco's checkout systems. Costco then takes the data gleaned from those sales to determine which products to compete with and then begins aggressively pushing their competing product. Is this fair to the vendors?
- nerdponx 5y ago
  This is an interesting thought experiment. Maybe the objection is that Amazon is erroneously considered a neutral marketplace, and not a "store". But practically is there a difference between these arrangements, other than the incidence of who technically is the retailer and who is the wholesaler? I think the real issue is how people shop online versus in stores. Online, they see a linear feed of individual products and buy whatever is near the top. In a store, they see a variety of displays, and it's almost hard not to comparison shop even a little bit. It's much, much easier to be "anti-competitive" on a web store than a physical store. Imagine if Costco did what Amazon does, deliberately making Kirkland products easier to find in the store and look more reputable/trusted compared to other brands. So I don't think the problem is that this particular move by Amazon is any more anti-competitive than anything a normal store with store brand would do. The problem is that Amazon already engages in other anti-competitive activity, so pretty much anything they do related to their own store brand is distasteful.
- dathinab 5y ago
  No in that case Costco would likely get into legal problems. Actually there had been legal cases with unfair market practices in grocery stores between different competing products sold there. I think there is currently a ongoing case with Oreo.
chii 5y ago
> To me this behavior by Amazon seems worse only seems worse because amazon is so big, and so monopolistic, that a lot of people hold them to different standards. It's the same idea that people expect a rich person to pay more taxes, or contribute more philothropically.
- notyourwork 5y ago
  I'd rephrase this: "only seems worse because amazon is so big, and so monopolistic" as: "only seems worse because amazon is so big, and so dominant" I don't think monopolistic is a fair adjective because it has an implied legal connotation. Is Amazon a monopoly or just the largest e-commerce retailer today?
  - selectodude 5y ago
    Monopoly isn't the best term either, there's definitely other companies that are vertically integrated and are single-sources. What they don't do (or try to avoid?) is leveraging their position to unfairly complete with other companies. Amazon launching new product lines and boosting them to the top of the search results is almost textbook leveraging. Having information showing they used their internal data to find which products to market is basically icing on the cake. Google has already been dinged for this with their Google Apps boosterism on their search results. I can't imagine this goes any differently from that.
  - BlueTemplar 5y ago
    Monopoly does NOT mean being the only seller. According to US law, having 50% of the market can be enough.
    - dragonwriter 5y ago
      > According do US law, having 50% of the market can be enough. Having much less than 50% of a descriptive market can be enough, if, e.g., you have pricing power, which demonstrates that irrespective of what other players may be described as being in the same market, they are not actually competing with you.
deleted 5y ago
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zachware 5y ago
This is a good point. I don’t think Amazon’s practices are structurally different than those historically of Walmart or Costco. Each captured sales data and built private label alternatives to key brands on a regular basis. Small differentiator in the case of Costco is that they have a practice (though not a policy) of offering the leading vendor the opportunity to produce the private label before doing it themselves. But that’s a small detail. Besides the fact that headlines about this get traction, there is a differentiator with Amazon in that they actively market themselves as a marketplace for small businesses in the way we’ve come to view Shopify. Costco and Walmart were always very clearly retailers...they buy stuff and sell stuff at a margin. So while I think a lot of the blowup about this is overdone, there is a legitimate argument about the difference between how Amazon markets itself and what it does. But, frankly, for anyone with any level of experience with retailers or, frankly, tech platforms, this kind of capture behavior should be expected.
Y-bar 5y ago
I used to stuff shelves at a grocery chain ~20 years ago and one difference seldom mentioned is that grocery chains bought from the manufacturers. That meant that we as a grocery chain were responsible for the sale to consumer, we were not merely a marketplace for a bunch of different brands. So, even if we had our own competing labels for some products, the manufacturers would never be left in the cold with unsold stock (if for example we chose to drop one brand or run a promotion for our own).
- zachware 5y ago
  This is generally not how grocery operates today. Most large grocers: - Sell shelf location slots to the highest bidder. - Include a consignment clause in their vendor agreements requiring vendors to take back spoiled, customer-damaged, and unsold inventory at X point or on-demand. - Require merchandisers to keep inventory in-stock for as many products as they can get vendors to manage (e.g. the coke delivery person is in-store several days a week.) All of this is especially true for shelf stable products and beverages. The modern grocery store is effectively managed like a flea market and is allowed to do so because the chains have so much leverage. So while we can take issue with Amazon’s practices, we have to remember that most of large-scale retail operates in ways that if written about to the level of Amazon, we’d also be griping about.
  - Y-bar 5y ago
    Are you maybe describing US practices? Some of these practices has been prohibited for a decade in EU and it was recently broadened to include agricultural and perishable products: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019L0633&from=en https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELE...
    - zachware 5y ago
      Yes, US. Possibly related is that EU grocery margins are amongst the lowest in the world.
  - gamblor956 5y ago
carlps 5y ago
I'm not intimately familiar with either side, but I see it as: - Costco buys x amount of product at y price from seller and then sells it in its store. - Amazon provides a platform for sellers to sell with a cut going back to Amazon. There is a fundamental difference between being a retailer and providing a retail platform. All Costco would really have access to is how much they've bought and how that has performed for them. Meanwhile Amazon is providing a platform for companies with a policy that they will only use their data to help them, which is what is allegedly not happening.
- PoignardAzur 5y ago
  > I'm not intimately familiar with either side, but I see it as: - Costco buys x amount of product at y price from seller and then sells it in its store. - Amazon provides a platform for sellers to sell with a cut going back to Amazon. This isn't really how it works. Retailers very often have arrangements to defer payments until after the product is sold. In fact, in France, retail margins are so thin that supermarket chains reportedly make most of their profit by selling the inventory, investing the money in short-term funds, then paying the suppliers one month later and keeping the interest.
  - hnburnsy 5y ago
    With short term interest rates in the negative in France, I wonder what their business model is now... https://data.oecd.org/interest/short-term-interest-rates.htm https://data.oecd.org/interest/short-term-interest-rates.htm
jasallen 5y ago
The difference is between retailer and marketplace. Both Amazon and Costco are retailers, and both could use that knowledge to decide what products to self-source for better retail margins. Either way, still a retailer, but maybe also a manufacturer / wholesaler. But Amazon is also a marketplace. In that role it acts as a "rentable retail space". Using the data of the retailers in your marketplace to decide what to make/wholesale and then retail is another layer. You could easily argue that it reduces to the same thing. But societally we've excepted that the retailer is a full layer in the system and gets full access to the data flowing through it. The marketplace itself is historically more of a fee-for-use type of thing, so its not an ingrained concept for us.
- Manuel_D 5y ago
  I'm still not understanding the distinction here. Costco and Amazon both sell company-brand products, alongside non-company products. Costco and Amazon collect and analyze sales data from the sale of both company and non-company products.
  - NegativeLatency 5y ago
    When Costco sells a product they’ve already bought it (a retailer) on the other hand when Amazon sells something they’re just acting as a middle party for the item in most cases.
    - Manuel_D 5y ago
      I'm not sure how Costco works specifically, but that's not the case in all retail. At GameStop, game publishers only got paid when their games sold not when they were put on the shelves. If there are 100 disk cases put on the shelves for Call of Battlefield and none of them sold, eventually GameStop would return them and the publisher got nothing.
    - hammock 5y ago
      >When Costco sells a product they’ve already bought it (a retailer) In practice that's not the case at all. Many if not most retailers require suppliers to buy back unsold inventory
baq 5y ago
Two helpful questions I don’t know answers to, but I’m quite confident that the difference between answers are the crux of the matter: Who are Costco customers? Who are Amazon customers?
- jquaint 5y ago
  I think that most Costco customers also use Amazon. I.e. I get my basic bulk items from Costco and my specific items from Amazon. Perhaps this is why amazon is trying to get these customer with "Subscribe and save" which offers discounts for subscriptions on basic items. Although, I have not seen any real data on this. Just my gut read.
rtsil 5y ago
I'm not familiar with Costco. Do their sellers operate their own stores inside Costco's premises?
- jquaint 5y ago
  I don't think they do. It's similar to a grocery store that sells other companies products. Costco is different in that they sell products wholesale/bulk.
michael1999 5y ago
Costco is a retailer. Amazon claims to be a neutral 3rd party when providing marketplace services to 3rd party sellers. Especially when trying to disclaim product liability. They tried to have it both ways, and now they'll get neither, and deserve it completely.
curryst 5y ago
Amazon is pushing people towards Fulfilled by Amazon. It makes sense as a marketplace, providing a more consistent experience. However when they compete in that marketplace, it means they're charging you to get data to outcompete you (via FBA fees). It also means that if they do enter that market, they're double dipping. They're taking away your revenue stream for their own profit, while simultaneously increasing what they charge you because it's harder to get your inventory out of Amazon's warehouses via selling it. They can also almost always outcompete you, because they don't have to pay the marketplace fees (they get the service at cost). They can also use the money they make from marketplace fees to undercut you, selling their competing product at a loss (but net zero after you pay your fees) until you get off the marketplace. Amazon also has a perverse incentive to not sell your goods because they don't have to pay for them, so they're totally okay if they can ensure that no one buys your product. Costco has to buy the goods they sell. If it's on a shelf, Costco wants it to sell. If they don't want something to sell, they stop buying it/carrying it. They can't make any money by buying a competitor's product and letting it sit in a warehouse. The incentive structure for Amazon is bad for everyone else. Their ideal profit scenario is to have warehouses full of other companies' stuff that never sells, and to sell an Amazon branded alternative to each consumer with demand. Costco's ideal profit scenario is to never buy third party products and only sell Kirkland goods (assuming demand stays the same). Amazon needs to pick one; they're either a marketplace, where their ideal profit scenario is to sell literally anything they have without preference, or they're a retailer and their ideal profit scenario is like Costco.
jitendrac 5y ago
Costco launching/selling products with own sales data is one thing. To make it clear, Here you should consider Amazon.com different entity than Amazon Seller Account. Now would you sell on amazon.com if amazon.com leaks your data to "amazon seller account" owner to boost his sales of a similar product, which you sell. Moral thing is, Amazon seller division who deals with product directly sold by Amazon, should never have access to the data of other sellers.Fullstop.
nnain 5y ago
You need to consider whether there's a difference between physical mail and Email (esp. Gmail)? And whether Google's business model is monopolistic because its 'software' over the internet.
deleted 5y ago
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jquaint 5y ago
I think its a matter of scale. Say Costco makes a Kirkland brand cereal, there are other stores that you can buy cereal at and there is competition. For a lot people, all online shopping comes from Amazon. Amazon uses this position to their advantage in many ways (high quality customer data, branding, etc.). This actually disincentives people from making compelling products because of the risk that Amazon will just steal the product.
deleted 5y ago
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munificent 5y ago
This is a good question. It rests on an implicit assumption that we think Amazon's behavior is anti-consumer ("bad") and Costco's is not ("good"). But perhaps one way to resolve this dissonance is to consider that Costco's behavior is anti-competitive too. They are a beloved brand, but that doesn't mean our emotional attachment to Kirkland products is an accurate reality-based moral stance.
Tiktaalik 5y ago
I recall hearing on a radio show a while ago about this topic a lawyer noting that a difference in these cases is that a retailer "takes a risk" in order to get the data, that is that they open up their storefront to this supplier, allocate space for them, and pay the supplier. The only way they learn that the supplier's product could be a success is by selling the suppliers product. In contrast Amazon takes on zero risk. It snoops on the data of transactions, and then launches competing products.
gamblor956 5y ago
The distinction comes down to the legal differences in how they operate their sales operations: Costco is legally a "reseller" that purchases items from manufacturers/distributors (at wholesale prices) and "resells" them to customers. (Note: only a tiny fraction (<1%) of Costco's inventory is sold on a consignment basis, meaning that the manufacturer/distributor only gets paid for units actually sold on. This arrangement generally only applies to some new products being sold on a trial basis.) Amazon is also a reseller of items sold through the Amazon.com seller...but not for items "sold" by third-party merchants. The distinction is that for Amazon.com seller sales, Amazon has legally purchased the inventory sold, even if the payment terms may more closely resemble consignment transactions than wholesale transactions.
xmly 5y ago
It is like Microsoft learns your business through your emails and starts the undercutting. Does it sound more serious? AmazonMarketplace is a software vendor and data should belong to sellers only.
agogdog 5y ago
Lots of good points here, but it's also worth mentioning that Amazon accounts for a much larger percentage of overall ecommerce sales (almost 50%). No other online marketplace comes remotely close. Individual physical retailers own much less of the market... even Walmart is only ~10% or so of retail in the US.
HWR_14 5y ago
> Is this fundamentally different than Costco using sales data to choose which Kirkland products to launch/sell? It's 100% different. Costco doesn't make any of the Kirkland brand products. Their suppliers do. And Costco usually only carries one brand of, say, batteries. They go to Duracell and say "We want to buy X Duracell batteries and Y Kirkland batteries from you over the next Z years". If Duracell doesn't want it, their next call is the same thing to Energizer. Basically, Costco says to their suppliers "We want to give you X high margin sales and Y much lower margin sales." And you know that going in. And are ecstatic because all those sales would otherwise go to your competitor. Amazon says "here's a flea market", then uses their security cameras to see what items are selling at everyone's stalls. The next day, the stalls of the people who run the flea market (right next to the front door) also have the best selling items. Oh, and their tables are infinite and maybe they also fuck with the listings on the map to make it harder to find that those items are also at your booth.
toss1 5y ago
The Amazon and Costco situations are different. When they start by doing independent market research, selecting a product, building/sourcing it and marketing it, then analyzing data generated by their own sales of these products in their own stores (brick & mortar or online), they are the same. The DIFFERENCE is that Amazon also hosts other sellers and uses THEIR data. So, an entrepreneur comes along having designed, arranged fabrication, and imports a product, then pays fees to sell it on Amazon. Amazon now uses THE MERCHANT's own data against them to notice the successful product, decide that it will be profitable, then search out the same manufacturer, offer a better deal, start selling on their own market as Amazon Basics, then kick the original seller off the market. [1], [2] It happens repeatedly enough to call it systematic. So, if you are only marginally successful, you can continue selling unmolested. But, if you find good success, Amazon will use your data to chop the top success zone right off of your business, after charging you for services while you spend decades building it. It is even better than Zuckerberg's plan - at least Farcebook doesn't charge you to hijack your data for their purposes - Amazon charges you AND hijacks your data. Just because it evades existing laws does not make it right. I will certainly not be selling anything on Amazon that either 1) I'm 100% certain cannot be reproduced elsewhere or 2) I only intend to be a small or temporary market. [1] https://www.wsj.com/articles/amazon-competition-shopify-wayfair-allbirds-antitrust-11608235127 https://www.wsj.com/articles/amazon-competition-shopify-wayf... [2] https://www.hitc.com/en-gb/2020/12/24/amazon-tripod-company-banned/ https://www.hitc.com/en-gb/2020/12/24/amazon-tripod-company-...

poidos 5y ago

I'm not sure if it's fundamentally different, but maybe you're just (like I am) more inclined to perceive Amazon as a "bad" company. Costco has a lot of goodwill with the public.

MengerSponge 5y ago

Imagine if a Costco sales rep offered to swap something in your cart with the Kirkland clone, or if they suggested the Kirkland product as you reached to grab something else off the shelf.

notyourwork 5y ago
Are businesses in the business of increasing efficiencies (more revenue, more profit, lower costs) or are they in the business of doing what is in the best interest of consumers or both? I don't think your example really holds weight. I goto Costco because they offer products I want at a price I like. If during shopping they were trying to give suggestions to better deals I'm not sure as a consumer I get to complain about it do I?
cptskippy 5y ago
I've never had amazon offer to swap anything from my cart.
tylerrobinson 5y ago
Aren't traditional grocery stores doing the same thing but using price, sales, positioning, name, and label imitation? When I reach for Quaker Oatmeal Squares, and Wholesome Oatmeal Squares Cereal is right next to it, for cheaper, also in a blue box?
- nerdponx 5y ago
  It's a lot easier to comparison shop. Also you can trust that the Quaker on the shelf is real name-brand Quaker. So you can look at the store brand prices, packaging, etc. and make a reasonably informed and quick decision. I wouldn't be surprised if Amazon lets the fraud and ratings scams go somewhat unchecked so as to make their own house brand look "safe" and desirable.
- dathinab 5y ago
  And they have gotten into lethal trouble because of it, I think there is a ongoing case against Oreo because they abused their market power to affect in shelf positioning in a way which likely counts as unfair/illegal abuse of marked power. Most important grocery stores and similar are resellers, Amazon is a proxy. Sure that pretend they sell you things but actually you just buy things through them, not from them. (Except their own products.)
krumpet 5y ago
Take a quick trip the Costco website and you'll see they use the same recommendation tactics. Looking at a bag of Peet's brand coffee, I see Kirkland Signature brand coffee sitting in the "Similar Product". Just saying...

notyourwork 5y ago

Disclaimer: I'm not a legal expert, just an engineer with my own opinions. I struggle with it as well because conceptually in my mind this is the same as a grocery store using customer buying data to inform itself. Grocery chains have been using private label brands to compete with name brands for years. Check your cereal aisle for the "fruit loops" in the back without a box that are ~50% cheaper than the name brand boxed real fruit loops. I never saw this as wrong growing up. I saw this as the store offering a cheaper comparable and consumers were able to chose which they want. In fact, the grocery store also controls what is on the end cap and what is on top and bottom of each shelf. I think the landscape is heavily skewed in favor of the dominant online retail merchant. This skew and dominance is what causes people to claim afoul behavior is going on.

dathinab 5y ago
Grocery stores select which products they want to sell and have limited capacity. Amazon provides a platform through which "everyone" can sell "anything" with no tightly constrained space/slots. As far as I know Amazon is legally closer to a market place where everyone is up their own stand (but they are required to look mostly the same) and which happens to also require you to use their payment system. I.e. Amazon is just a proxy while the grocery store legally buys and resells the products.
_up 5y ago
I am not from the US but I think Amazon has much more market dominance than Costco. If Amazon had 20% market share nobody would mind, but they don't have real competition that comes close.
- deleted 5y ago
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- ls612 5y ago
  Amazon has less than 20% market share in retail overall. Remember their competitors are not just the online sellers who are pushing this antitrust angle. It’s Walmart and Target and grocery chains and CVS and Walgreens and brick and mortar department stores and so on.

jagged-chisel 5y ago

Suppose Costco allowed other vendors to be present and selling in their stores. Costco requires these vendors to use Costco's checkout systems. Costco then takes the data gleaned from those sales to determine which products to compete with and then begins aggressively pushing their competing product. Is this fair to the vendors?

nerdponx 5y ago
This is an interesting thought experiment. Maybe the objection is that Amazon is erroneously considered a neutral marketplace, and not a "store". But practically is there a difference between these arrangements, other than the incidence of who technically is the retailer and who is the wholesaler? I think the real issue is how people shop online versus in stores. Online, they see a linear feed of individual products and buy whatever is near the top. In a store, they see a variety of displays, and it's almost hard not to comparison shop even a little bit. It's much, much easier to be "anti-competitive" on a web store than a physical store. Imagine if Costco did what Amazon does, deliberately making Kirkland products easier to find in the store and look more reputable/trusted compared to other brands. So I don't think the problem is that this particular move by Amazon is any more anti-competitive than anything a normal store with store brand would do. The problem is that Amazon already engages in other anti-competitive activity, so pretty much anything they do related to their own store brand is distasteful.
dathinab 5y ago
No in that case Costco would likely get into legal problems. Actually there had been legal cases with unfair market practices in grocery stores between different competing products sold there. I think there is currently a ongoing case with Oreo.

chii 5y ago

> To me this behavior by Amazon seems worse only seems worse because amazon is so big, and so monopolistic, that a lot of people hold them to different standards. It's the same idea that people expect a rich person to pay more taxes, or contribute more philothropically.

notyourwork 5y ago
I'd rephrase this: "only seems worse because amazon is so big, and so monopolistic" as: "only seems worse because amazon is so big, and so dominant" I don't think monopolistic is a fair adjective because it has an implied legal connotation. Is Amazon a monopoly or just the largest e-commerce retailer today?
- selectodude 5y ago
  Monopoly isn't the best term either, there's definitely other companies that are vertically integrated and are single-sources. What they don't do (or try to avoid?) is leveraging their position to unfairly complete with other companies. Amazon launching new product lines and boosting them to the top of the search results is almost textbook leveraging. Having information showing they used their internal data to find which products to market is basically icing on the cake. Google has already been dinged for this with their Google Apps boosterism on their search results. I can't imagine this goes any differently from that.
- BlueTemplar 5y ago
  Monopoly does NOT mean being the only seller. According to US law, having 50% of the market can be enough.
  - dragonwriter 5y ago
    > According do US law, having 50% of the market can be enough. Having much less than 50% of a descriptive market can be enough, if, e.g., you have pricing power, which demonstrates that irrespective of what other players may be described as being in the same market, they are not actually competing with you.

deleted 5y ago

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zachware 5y ago

This is a good point. I don’t think Amazon’s practices are structurally different than those historically of Walmart or Costco. Each captured sales data and built private label alternatives to key brands on a regular basis. Small differentiator in the case of Costco is that they have a practice (though not a policy) of offering the leading vendor the opportunity to produce the private label before doing it themselves. But that’s a small detail. Besides the fact that headlines about this get traction, there is a differentiator with Amazon in that they actively market themselves as a marketplace for small businesses in the way we’ve come to view Shopify. Costco and Walmart were always very clearly retailers...they buy stuff and sell stuff at a margin. So while I think a lot of the blowup about this is overdone, there is a legitimate argument about the difference between how Amazon markets itself and what it does. But, frankly, for anyone with any level of experience with retailers or, frankly, tech platforms, this kind of capture behavior should be expected.

Y-bar 5y ago

I used to stuff shelves at a grocery chain ~20 years ago and one difference seldom mentioned is that grocery chains bought from the manufacturers. That meant that we as a grocery chain were responsible for the sale to consumer, we were not merely a marketplace for a bunch of different brands. So, even if we had our own competing labels for some products, the manufacturers would never be left in the cold with unsold stock (if for example we chose to drop one brand or run a promotion for our own).

zachware 5y ago
This is generally not how grocery operates today. Most large grocers: - Sell shelf location slots to the highest bidder. - Include a consignment clause in their vendor agreements requiring vendors to take back spoiled, customer-damaged, and unsold inventory at X point or on-demand. - Require merchandisers to keep inventory in-stock for as many products as they can get vendors to manage (e.g. the coke delivery person is in-store several days a week.) All of this is especially true for shelf stable products and beverages. The modern grocery store is effectively managed like a flea market and is allowed to do so because the chains have so much leverage. So while we can take issue with Amazon’s practices, we have to remember that most of large-scale retail operates in ways that if written about to the level of Amazon, we’d also be griping about.
- Y-bar 5y ago
  Are you maybe describing US practices? Some of these practices has been prohibited for a decade in EU and it was recently broadened to include agricultural and perishable products: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019L0633&from=en https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELE...
  - zachware 5y ago
    Yes, US. Possibly related is that EU grocery margins are amongst the lowest in the world.
- gamblor956 5y ago

carlps 5y ago

I'm not intimately familiar with either side, but I see it as: - Costco buys x amount of product at y price from seller and then sells it in its store. - Amazon provides a platform for sellers to sell with a cut going back to Amazon. There is a fundamental difference between being a retailer and providing a retail platform. All Costco would really have access to is how much they've bought and how that has performed for them. Meanwhile Amazon is providing a platform for companies with a policy that they will only use their data to help them, which is what is allegedly not happening.

PoignardAzur 5y ago
> I'm not intimately familiar with either side, but I see it as: - Costco buys x amount of product at y price from seller and then sells it in its store. - Amazon provides a platform for sellers to sell with a cut going back to Amazon. This isn't really how it works. Retailers very often have arrangements to defer payments until after the product is sold. In fact, in France, retail margins are so thin that supermarket chains reportedly make most of their profit by selling the inventory, investing the money in short-term funds, then paying the suppliers one month later and keeping the interest.
- hnburnsy 5y ago
  With short term interest rates in the negative in France, I wonder what their business model is now... https://data.oecd.org/interest/short-term-interest-rates.htm https://data.oecd.org/interest/short-term-interest-rates.htm

jasallen 5y ago

The difference is between retailer and marketplace. Both Amazon and Costco are retailers, and both could use that knowledge to decide what products to self-source for better retail margins. Either way, still a retailer, but maybe also a manufacturer / wholesaler. But Amazon is also a marketplace. In that role it acts as a "rentable retail space". Using the data of the retailers in your marketplace to decide what to make/wholesale and then retail is another layer. You could easily argue that it reduces to the same thing. But societally we've excepted that the retailer is a full layer in the system and gets full access to the data flowing through it. The marketplace itself is historically more of a fee-for-use type of thing, so its not an ingrained concept for us.

Manuel_D 5y ago
I'm still not understanding the distinction here. Costco and Amazon both sell company-brand products, alongside non-company products. Costco and Amazon collect and analyze sales data from the sale of both company and non-company products.
- NegativeLatency 5y ago
  When Costco sells a product they’ve already bought it (a retailer) on the other hand when Amazon sells something they’re just acting as a middle party for the item in most cases.
  - Manuel_D 5y ago
    I'm not sure how Costco works specifically, but that's not the case in all retail. At GameStop, game publishers only got paid when their games sold not when they were put on the shelves. If there are 100 disk cases put on the shelves for Call of Battlefield and none of them sold, eventually GameStop would return them and the publisher got nothing.
  - hammock 5y ago
    >When Costco sells a product they’ve already bought it (a retailer) In practice that's not the case at all. Many if not most retailers require suppliers to buy back unsold inventory

baq 5y ago

Two helpful questions I don’t know answers to, but I’m quite confident that the difference between answers are the crux of the matter: Who are Costco customers? Who are Amazon customers?

jquaint 5y ago
I think that most Costco customers also use Amazon. I.e. I get my basic bulk items from Costco and my specific items from Amazon. Perhaps this is why amazon is trying to get these customer with "Subscribe and save" which offers discounts for subscriptions on basic items. Although, I have not seen any real data on this. Just my gut read.

rtsil 5y ago

I'm not familiar with Costco. Do their sellers operate their own stores inside Costco's premises?

jquaint 5y ago
I don't think they do. It's similar to a grocery store that sells other companies products. Costco is different in that they sell products wholesale/bulk.

michael1999 5y ago

Costco is a retailer. Amazon claims to be a neutral 3rd party when providing marketplace services to 3rd party sellers. Especially when trying to disclaim product liability. They tried to have it both ways, and now they'll get neither, and deserve it completely.

curryst 5y ago

Amazon is pushing people towards Fulfilled by Amazon. It makes sense as a marketplace, providing a more consistent experience. However when they compete in that marketplace, it means they're charging you to get data to outcompete you (via FBA fees). It also means that if they do enter that market, they're double dipping. They're taking away your revenue stream for their own profit, while simultaneously increasing what they charge you because it's harder to get your inventory out of Amazon's warehouses via selling it. They can also almost always outcompete you, because they don't have to pay the marketplace fees (they get the service at cost). They can also use the money they make from marketplace fees to undercut you, selling their competing product at a loss (but net zero after you pay your fees) until you get off the marketplace. Amazon also has a perverse incentive to not sell your goods because they don't have to pay for them, so they're totally okay if they can ensure that no one buys your product. Costco has to buy the goods they sell. If it's on a shelf, Costco wants it to sell. If they don't want something to sell, they stop buying it/carrying it. They can't make any money by buying a competitor's product and letting it sit in a warehouse. The incentive structure for Amazon is bad for everyone else. Their ideal profit scenario is to have warehouses full of other companies' stuff that never sells, and to sell an Amazon branded alternative to each consumer with demand. Costco's ideal profit scenario is to never buy third party products and only sell Kirkland goods (assuming demand stays the same). Amazon needs to pick one; they're either a marketplace, where their ideal profit scenario is to sell literally anything they have without preference, or they're a retailer and their ideal profit scenario is like Costco.

jitendrac 5y ago

Costco launching/selling products with own sales data is one thing. To make it clear, Here you should consider Amazon.com different entity than Amazon Seller Account. Now would you sell on amazon.com if amazon.com leaks your data to "amazon seller account" owner to boost his sales of a similar product, which you sell. Moral thing is, Amazon seller division who deals with product directly sold by Amazon, should never have access to the data of other sellers.Fullstop.

nnain 5y ago

You need to consider whether there's a difference between physical mail and Email (esp. Gmail)? And whether Google's business model is monopolistic because its 'software' over the internet.

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jquaint 5y ago

I think its a matter of scale. Say Costco makes a Kirkland brand cereal, there are other stores that you can buy cereal at and there is competition. For a lot people, all online shopping comes from Amazon. Amazon uses this position to their advantage in many ways (high quality customer data, branding, etc.). This actually disincentives people from making compelling products because of the risk that Amazon will just steal the product.

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munificent 5y ago

This is a good question. It rests on an implicit assumption that we think Amazon's behavior is anti-consumer ("bad") and Costco's is not ("good"). But perhaps one way to resolve this dissonance is to consider that Costco's behavior is anti-competitive too. They are a beloved brand, but that doesn't mean our emotional attachment to Kirkland products is an accurate reality-based moral stance.

Tiktaalik 5y ago

I recall hearing on a radio show a while ago about this topic a lawyer noting that a difference in these cases is that a retailer "takes a risk" in order to get the data, that is that they open up their storefront to this supplier, allocate space for them, and pay the supplier. The only way they learn that the supplier's product could be a success is by selling the suppliers product. In contrast Amazon takes on zero risk. It snoops on the data of transactions, and then launches competing products.

gamblor956 5y ago

The distinction comes down to the legal differences in how they operate their sales operations: Costco is legally a "reseller" that purchases items from manufacturers/distributors (at wholesale prices) and "resells" them to customers. (Note: only a tiny fraction (<1%) of Costco's inventory is sold on a consignment basis, meaning that the manufacturer/distributor only gets paid for units actually sold on. This arrangement generally only applies to some new products being sold on a trial basis.) Amazon is also a reseller of items sold through the Amazon.com seller...but not for items "sold" by third-party merchants. The distinction is that for Amazon.com seller sales, Amazon has legally purchased the inventory sold, even if the payment terms may more closely resemble consignment transactions than wholesale transactions.

xmly 5y ago

It is like Microsoft learns your business through your emails and starts the undercutting. Does it sound more serious? AmazonMarketplace is a software vendor and data should belong to sellers only.

agogdog 5y ago

Lots of good points here, but it's also worth mentioning that Amazon accounts for a much larger percentage of overall ecommerce sales (almost 50%). No other online marketplace comes remotely close. Individual physical retailers own much less of the market... even Walmart is only ~10% or so of retail in the US.

HWR_14 5y ago

> Is this fundamentally different than Costco using sales data to choose which Kirkland products to launch/sell? It's 100% different. Costco doesn't make any of the Kirkland brand products. Their suppliers do. And Costco usually only carries one brand of, say, batteries. They go to Duracell and say "We want to buy X Duracell batteries and Y Kirkland batteries from you over the next Z years". If Duracell doesn't want it, their next call is the same thing to Energizer. Basically, Costco says to their suppliers "We want to give you X high margin sales and Y much lower margin sales." And you know that going in. And are ecstatic because all those sales would otherwise go to your competitor. Amazon says "here's a flea market", then uses their security cameras to see what items are selling at everyone's stalls. The next day, the stalls of the people who run the flea market (right next to the front door) also have the best selling items. Oh, and their tables are infinite and maybe they also fuck with the listings on the map to make it harder to find that those items are also at your booth.

toss1 5y ago

The Amazon and Costco situations are different. When they start by doing independent market research, selecting a product, building/sourcing it and marketing it, then analyzing data generated by their own sales of these products in their own stores (brick & mortar or online), they are the same. The DIFFERENCE is that Amazon also hosts other sellers and uses THEIR data. So, an entrepreneur comes along having designed, arranged fabrication, and imports a product, then pays fees to sell it on Amazon. Amazon now uses THE MERCHANT's own data against them to notice the successful product, decide that it will be profitable, then search out the same manufacturer, offer a better deal, start selling on their own market as Amazon Basics, then kick the original seller off the market. [1], [2] It happens repeatedly enough to call it systematic. So, if you are only marginally successful, you can continue selling unmolested. But, if you find good success, Amazon will use your data to chop the top success zone right off of your business, after charging you for services while you spend decades building it. It is even better than Zuckerberg's plan - at least Farcebook doesn't charge you to hijack your data for their purposes - Amazon charges you AND hijacks your data. Just because it evades existing laws does not make it right. I will certainly not be selling anything on Amazon that either 1) I'm 100% certain cannot be reproduced elsewhere or 2) I only intend to be a small or temporary market. [1] https://www.wsj.com/articles/amazon-competition-shopify-wayfair-allbirds-antitrust-11608235127 https://www.wsj.com/articles/amazon-competition-shopify-wayf... [2] https://www.hitc.com/en-gb/2020/12/24/amazon-tripod-company-banned/ https://www.hitc.com/en-gb/2020/12/24/amazon-tripod-company-...