7 ms·

I'm still not understanding the distinction here. Costco and Amazon both sell company-brand products, alongside non-company products. Costco and Amazon collect

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 6y 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 6y 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 6y 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
- mrandish 6y ago
  That's often not the case. Retailers like Costco, Walmart, Best Buy etc have a wide variety of different selling arrangements. I've sold products through all three and often did so on terms that gave them full right of return for any unsold product as well as significantly delayed payment. This combination basically nets out to be financially the same as pure consignment. They won't pay me for my product until well after it has sold-thru to an end user. Everything that's unsold comes back to me (and they bill me for shipping both ways!) In the meantime, all I have is basically an "IOU" promise to someday pay IF it eventually sells (and they always drag out the payment beyond the already-extended due date). Also, if I want to be featured in their circular I have to "buy" that just like an ad in a magazine except the retailer will (usually) DFI (deduct from invoice) the "ad" cost, which means they just owe me less (if and when the product sells and they actually pay). The same is true for getting my product displayed on an end cap or with in-store signage. The big retailers bring in new products to "test" all the time and do so at basically no financial risk to themselves (other than the opportunity cost of the shelf space) while capturing all the sales data.
  - soperj 6y ago
    >(and they always drag out the payment beyond the already-extended due date) That's pretty much their business model isn't it? Make money on investing for the days between product sold and payment.
    - vkou 6y ago
      You can only make a little money on that because interest rates are near zero, and investments with non-zero returns carry risk.
eropple 6y ago
Amazon sells products and facilitates others' sales. If Amazon carried the entirety of their inventory themselves like Costco or like Walmart used to be (before the expansion of their own online marketplace), it would be a distinctly different situation.
- 8note 6y ago
  That doesn't sound aligned with the California case yesterday?
FactolSarin 6y ago
All of Amazon's "we're not actually a monopoly" and "we're not responsible for defective products" arguments are based on this. They claim they are very much NOT a Costco or Walmart.
cgriswald 6y ago
You have the wrong mental model. Amazon isn’t Costco. Amazon is a shopping mall that has access to its tenants’ sales information and also owns an anchor store in the same mall. Costco can determine that Best Brand shoes sell in its stores and decide to source shoes themselves and stop carrying Best Brand. Amazon can determine that the Footlocker in their mall is making a killing selling Best Brand shoes and either sell Best Brand shoes in their anchor store or source their own shoes, all at a price that Footlocker can’t match. They can also advertise those shoes throughout their mall and change the layout so customers have to walk past their cheaper shoes to get to the Footlocker.
- awillen 6y ago
  This explanation doesn't explain the difference to me at all. Costco can see that vodka sells well, so they can make Kirkland brand vodka. They control the layout of the store, so they can change the layout so people see Kirkland brand first when they get to the liquor section. They know the pricing of other vodkas and which ones sell well, so they can source Kirkland vodka at an ideal price point. None of what you've described about Amazon differentiates it from Costco at all.
  - 411111111111111 6y ago
    I think the only difference is that Amazon is a digital marketplace, so they can and do let their users pioneer what gets sold. Space is at a premium with a physical location, so the likelihood of an actual store exploiting that is extremely unlikely
    - awillen 6y ago
      Unlikely? I literally just described an example of Costco doing this right now with vodka. That's not a hypothetical - Kirkland brand vodka is a real thing. Your logic is backwards - when space is at a premium, making the most profit off each item in that space is critical. It makes more sense for Costco to do this than it does for Amazon, not less.
Closi 6y ago
> Costco and Amazon collect and analyze sales data from the sale of both company and non-company products. It's similar, although personally I think the relationship between the companies is meaningfully different: Costco purchases product from manufacturers, and may choose to source product from other manufacturers (including under its own brand name). It uses it's own sales data to make this decision. Amazon acts as a marketplace for other businesses to list and sell their own products. These businesses are online retailers which use the Amazon platform, and pay Amazon fees for this service. Amazon is then using other retailers sales data in order to inform it's own business. The difference is with Costco it is their own sales data, while in Amazon it is the sales data of other retailers. It would be an issue if Walmart had access to Costco's sales data and not visa-versa (this would provide Walmart with an unfair competitive advantage). Similarly other smaller online retailers do not get access to Amazon's sales data, but Amazon get's access to the other retailers sales data who use their platform, and will then use this to compete with them.
- hirako2000 6y ago
  Amen.
- judge2020 6y ago
  Despite this I don't see how the case is that Amazon is being anti competitive while Costco isn't - just because they purchase and resell inventory doesn't mean Costco (or Walmart or Sams Club etc) doesn't hold the same power over their product suppliers that Amazon does to do data science on their sales to determine what new products to make in-house. Plus, walmart is now a marketplace as well. This overpriced GPU is 'Sold & shipped by Monoprice Inc'. It's only a matter of time before Walmart commits the same anticompetitive acts as Amazon using Marketplace data. https://www.walmart.com/ip/Zotac-NVIDIA-GeForce-RTX-3080-Graphic-Card-10-GB-GDDR6X/919301773 https://www.walmart.com/ip/Zotac-NVIDIA-GeForce-RTX-3080-Gra...
  - fredophile 6y ago
    Analyzing their own sales and analyzing other people's sales on their platform are two different things. Saying that Walmart may also try to do this in the future does not make it right or excusable.
foerbert 6y ago
I think the difference they are getting at is something akin to this. In one situation you run a stall and buy products from people to sell at that stall. At some point you use what you've learned doing this to sell your own product. In the other, you don't buy anything from anybody. Instead, you rent out a stall for other people to sell things from. You then watch the stall and use that information to open your own stall. The first case seems pretty normal to most people, I think. The person you were buying from originally doesn't inherently get some kind of assurance that you will always buy from them in the future. There's no difference to the seller if you buy from somebody else, don't sell any of that product, or make your own. We just don't expect that buying goods from somebody inherently adds any other kind of obligation. It's two equal parties making an exchange, and nothing more. The second case, however, I think is not so clear cut. All of the sudden you have a lasting relationship between two unequal parties. These are the sorts of situations where you tend to find more implicit or inherent obligations on the participants. It's no longer the guy you sold that thing to not buying from you again, it's your landlord competing with you. I'm not trying to pick a side here, so much as I am trying to explain why people might not see the two situations as identical. And of course there are plenty of real-world complications too.
- deleted 6y ago
  [deleted]
LanceH 6y ago
Costco buys products and resells them. Costco's research numbers are paid for entirely by Costco. Amazon rents space to merchants where those items are sold through the site for a fee. Amazon is never on the hook for a sale and is basically getting paid to do the market research to set up as a competitor. Yes, Costco does do some referral sales but I can't think of anything which has gone on to be a Kirkland product.
elzbardico 6y ago
Costco buys the products it sells. Then it decides how and for how much they will be sold. Their product, paid for. That’s the difference

NegativeLatency 6y 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 6y 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 6y 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
mrandish 6y ago
That's often not the case. Retailers like Costco, Walmart, Best Buy etc have a wide variety of different selling arrangements. I've sold products through all three and often did so on terms that gave them full right of return for any unsold product as well as significantly delayed payment. This combination basically nets out to be financially the same as pure consignment. They won't pay me for my product until well after it has sold-thru to an end user. Everything that's unsold comes back to me (and they bill me for shipping both ways!) In the meantime, all I have is basically an "IOU" promise to someday pay IF it eventually sells (and they always drag out the payment beyond the already-extended due date). Also, if I want to be featured in their circular I have to "buy" that just like an ad in a magazine except the retailer will (usually) DFI (deduct from invoice) the "ad" cost, which means they just owe me less (if and when the product sells and they actually pay). The same is true for getting my product displayed on an end cap or with in-store signage. The big retailers bring in new products to "test" all the time and do so at basically no financial risk to themselves (other than the opportunity cost of the shelf space) while capturing all the sales data.
- soperj 6y ago
  >(and they always drag out the payment beyond the already-extended due date) That's pretty much their business model isn't it? Make money on investing for the days between product sold and payment.
  - vkou 6y ago
    You can only make a little money on that because interest rates are near zero, and investments with non-zero returns carry risk.

eropple 6y ago

Amazon sells products and facilitates others' sales. If Amazon carried the entirety of their inventory themselves like Costco or like Walmart used to be (before the expansion of their own online marketplace), it would be a distinctly different situation.

8note 6y ago
That doesn't sound aligned with the California case yesterday?

FactolSarin 6y ago

All of Amazon's "we're not actually a monopoly" and "we're not responsible for defective products" arguments are based on this. They claim they are very much NOT a Costco or Walmart.

cgriswald 6y ago

You have the wrong mental model. Amazon isn’t Costco. Amazon is a shopping mall that has access to its tenants’ sales information and also owns an anchor store in the same mall. Costco can determine that Best Brand shoes sell in its stores and decide to source shoes themselves and stop carrying Best Brand. Amazon can determine that the Footlocker in their mall is making a killing selling Best Brand shoes and either sell Best Brand shoes in their anchor store or source their own shoes, all at a price that Footlocker can’t match. They can also advertise those shoes throughout their mall and change the layout so customers have to walk past their cheaper shoes to get to the Footlocker.

awillen 6y ago
This explanation doesn't explain the difference to me at all. Costco can see that vodka sells well, so they can make Kirkland brand vodka. They control the layout of the store, so they can change the layout so people see Kirkland brand first when they get to the liquor section. They know the pricing of other vodkas and which ones sell well, so they can source Kirkland vodka at an ideal price point. None of what you've described about Amazon differentiates it from Costco at all.
- 411111111111111 6y ago
  I think the only difference is that Amazon is a digital marketplace, so they can and do let their users pioneer what gets sold. Space is at a premium with a physical location, so the likelihood of an actual store exploiting that is extremely unlikely
  - awillen 6y ago
    Unlikely? I literally just described an example of Costco doing this right now with vodka. That's not a hypothetical - Kirkland brand vodka is a real thing. Your logic is backwards - when space is at a premium, making the most profit off each item in that space is critical. It makes more sense for Costco to do this than it does for Amazon, not less.

Closi 6y ago

> Costco and Amazon collect and analyze sales data from the sale of both company and non-company products. It's similar, although personally I think the relationship between the companies is meaningfully different: Costco purchases product from manufacturers, and may choose to source product from other manufacturers (including under its own brand name). It uses it's own sales data to make this decision. Amazon acts as a marketplace for other businesses to list and sell their own products. These businesses are online retailers which use the Amazon platform, and pay Amazon fees for this service. Amazon is then using other retailers sales data in order to inform it's own business. The difference is with Costco it is their own sales data, while in Amazon it is the sales data of other retailers. It would be an issue if Walmart had access to Costco's sales data and not visa-versa (this would provide Walmart with an unfair competitive advantage). Similarly other smaller online retailers do not get access to Amazon's sales data, but Amazon get's access to the other retailers sales data who use their platform, and will then use this to compete with them.

hirako2000 6y ago
Amen.
judge2020 6y ago
Despite this I don't see how the case is that Amazon is being anti competitive while Costco isn't - just because they purchase and resell inventory doesn't mean Costco (or Walmart or Sams Club etc) doesn't hold the same power over their product suppliers that Amazon does to do data science on their sales to determine what new products to make in-house. Plus, walmart is now a marketplace as well. This overpriced GPU is 'Sold & shipped by Monoprice Inc'. It's only a matter of time before Walmart commits the same anticompetitive acts as Amazon using Marketplace data. https://www.walmart.com/ip/Zotac-NVIDIA-GeForce-RTX-3080-Graphic-Card-10-GB-GDDR6X/919301773 https://www.walmart.com/ip/Zotac-NVIDIA-GeForce-RTX-3080-Gra...
- fredophile 6y ago
  Analyzing their own sales and analyzing other people's sales on their platform are two different things. Saying that Walmart may also try to do this in the future does not make it right or excusable.

foerbert 6y ago

I think the difference they are getting at is something akin to this. In one situation you run a stall and buy products from people to sell at that stall. At some point you use what you've learned doing this to sell your own product. In the other, you don't buy anything from anybody. Instead, you rent out a stall for other people to sell things from. You then watch the stall and use that information to open your own stall. The first case seems pretty normal to most people, I think. The person you were buying from originally doesn't inherently get some kind of assurance that you will always buy from them in the future. There's no difference to the seller if you buy from somebody else, don't sell any of that product, or make your own. We just don't expect that buying goods from somebody inherently adds any other kind of obligation. It's two equal parties making an exchange, and nothing more. The second case, however, I think is not so clear cut. All of the sudden you have a lasting relationship between two unequal parties. These are the sorts of situations where you tend to find more implicit or inherent obligations on the participants. It's no longer the guy you sold that thing to not buying from you again, it's your landlord competing with you. I'm not trying to pick a side here, so much as I am trying to explain why people might not see the two situations as identical. And of course there are plenty of real-world complications too.

deleted 6y ago
[deleted]

LanceH 6y ago

Costco buys products and resells them. Costco's research numbers are paid for entirely by Costco. Amazon rents space to merchants where those items are sold through the site for a fee. Amazon is never on the hook for a sale and is basically getting paid to do the market research to set up as a competitor. Yes, Costco does do some referral sales but I can't think of anything which has gone on to be a Kirkland product.

elzbardico 6y ago

Costco buys the products it sells. Then it decides how and for how much they will be sold. Their product, paid for. That’s the difference