6 ms·

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

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 5y 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 5y 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 5y 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.
    - fredophile 5y ago
      Store brand products are not new and not the issue. Let's pretend that Costco didn't currently sell vodka at all. If Costco wants to know if they should start selling vodka or bottling their own vodka and selling that they don't have access to the sales data from the liquor store next door to Costco. Amazon is letting other businesses take the risks and using sales data from those businesses to outcompete them.
      - judge2020 5y ago
        But Costco does sell Vodka and wouldn't have made that product if Vodka sold 10% of what it actually sells. Because Amazon sells literally everything, is it a crime to do what Costco does, just on a bigger scale? The only end-goal that would actually solve the problem fairly is if companies couldn't sell first-party products (or products from a partner where they have a vested interest in) in their store. If you just take care of the one company, you end up with other companies doing the same thing in 20 years like how iOS still has a default music player when MS got burnt for that with having a default browser.
        fredophile 5y ago
        I feel like people in this thread are being deliberately obtuse. The issue isn't about selling vodka. It isn't about selling store brand alternatives to brand name products. The issue is where Amazon is getting their data from when decided what products to sell and what store brand products to make. When Costco decides to make a store brand alternative they are using sales data for things they have sold in their store. Amazon is using data for things other people have sold. Amazon is not doing what Costco does.
        cycomanic 5y ago
        This is not about making a home brand. Amazon can literally look at the sells data of e.g. some seller which sells Nike Air Jordans (as a stupid example) and go and source those themselves and offer them (the exact same brand) cheaper than the seller, because they have all the sales data. Now how would Cosco do this?
- codemac 5y ago
  It's simple, Costco actually buys the inventory, and resells it. There are more advanced kinds of agreements (like buy back X number of coats of you sell less than Y) but that's largely how they operate. Amazon is much more like a digital mall in that they rent out their store features for sellers. However, Amazon would like to be seen by the customer as Costco and this causes dissonance between how they treat sellers, and how they treat customers.
  - awillen 5y ago
    Okay, you've described the business models, but so what? In both cases, they still use the sales data available to them to create and sell their own products at the expense of third party sellers. In Amazon's case, that means diverting customers away from third party listings to their own. In Costco's case, that means making fewer purchases from third party sellers because the amount of shelf space available decreases as Costco puts more of its own products out. The type of sales relationship that they have with third party sellers doesn't change the fact that both are using sales data to create and sell their own products at the expense of those third parties.
    - dec0dedab0de 5y ago
      In both cases, they still use the sales data available to them to create and sell their own products at the expense of third party sellers. Costco doesn't have any third party sellers. Costco is the only seller.
    - arrosenberg 5y ago
      Yes, but the terms of the relationship make Amazon's behavior anti-competitive. Costco isn't going to various brands and asking them to sell at Costco, they buy inventory and resell it at a profit. Amazon has convinced a large portion of the retail market to feudalize themselves on Amazon's platform, then they are using the data accrued to take over the markets of their current and former tenants.
    - ClumsyPilot 5y ago
      >"Okay, you've described the business models, but so what?" That the defining feature mate! Getting paid an extra to provide premium service to a customer is normal in some areas, but it's a crime of you hold public office.
- raisedbyninjas 5y ago
  When Costco sells Kirkland brand vodka and Grey Goose, all bottles of Grey Goose are sold the same way. Costco purchases directly or from a distributor. Grey Goose may or may not pay for shelf space, IDK. Purchasing premium shelf space is a common practice for other retailers and grocers. When Grey Goose is sold on Amazon, either Amazon buys it and re-sells it or Grey Goose sells it through a marketplace account incurring Amazon's marketplace fees. So Amazon can always have two listings for one product, a marketplace listing and an Amazon listing. Their Amazon listing can always be cheaper.
  - mattmcknight 5y ago
    They don't have two listings though. They list the prices of all sellers in one item, with the lowest price as the default.
- HWR_14 5y ago
  Costco sources Kirkland products from people they already do business with. So if they see your Vodka is doing great, they call you and ask (well, as a giant customer of yours "ask") you to make a Kirkland version as well. On those bottles you'll make less, but you're still going to make a lot of money there. And getting cheaper people to buy your product without diluting your brand. And a lot of money off your branded product. Most things I've seen from manufacturers online is that being asked to supply Costco with their product and the Kirkland version is a win from both asks.
criddell 5y ago
Maybe Costco is different, but at a lot of stores the line is blurrier. You might be able to get your product on store shelves, but if you want good placement, you basically have to rent that shelf space.

awillen 5y 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 5y 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 5y 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.
  - fredophile 5y ago
    Store brand products are not new and not the issue. Let's pretend that Costco didn't currently sell vodka at all. If Costco wants to know if they should start selling vodka or bottling their own vodka and selling that they don't have access to the sales data from the liquor store next door to Costco. Amazon is letting other businesses take the risks and using sales data from those businesses to outcompete them.
    - judge2020 5y ago
      But Costco does sell Vodka and wouldn't have made that product if Vodka sold 10% of what it actually sells. Because Amazon sells literally everything, is it a crime to do what Costco does, just on a bigger scale? The only end-goal that would actually solve the problem fairly is if companies couldn't sell first-party products (or products from a partner where they have a vested interest in) in their store. If you just take care of the one company, you end up with other companies doing the same thing in 20 years like how iOS still has a default music player when MS got burnt for that with having a default browser.
      - fredophile 5y ago
        I feel like people in this thread are being deliberately obtuse. The issue isn't about selling vodka. It isn't about selling store brand alternatives to brand name products. The issue is where Amazon is getting their data from when decided what products to sell and what store brand products to make. When Costco decides to make a store brand alternative they are using sales data for things they have sold in their store. Amazon is using data for things other people have sold. Amazon is not doing what Costco does.
      - cycomanic 5y ago
        This is not about making a home brand. Amazon can literally look at the sells data of e.g. some seller which sells Nike Air Jordans (as a stupid example) and go and source those themselves and offer them (the exact same brand) cheaper than the seller, because they have all the sales data. Now how would Cosco do this?
codemac 5y ago
It's simple, Costco actually buys the inventory, and resells it. There are more advanced kinds of agreements (like buy back X number of coats of you sell less than Y) but that's largely how they operate. Amazon is much more like a digital mall in that they rent out their store features for sellers. However, Amazon would like to be seen by the customer as Costco and this causes dissonance between how they treat sellers, and how they treat customers.
- awillen 5y ago
  Okay, you've described the business models, but so what? In both cases, they still use the sales data available to them to create and sell their own products at the expense of third party sellers. In Amazon's case, that means diverting customers away from third party listings to their own. In Costco's case, that means making fewer purchases from third party sellers because the amount of shelf space available decreases as Costco puts more of its own products out. The type of sales relationship that they have with third party sellers doesn't change the fact that both are using sales data to create and sell their own products at the expense of those third parties.
  - dec0dedab0de 5y ago
    In both cases, they still use the sales data available to them to create and sell their own products at the expense of third party sellers. Costco doesn't have any third party sellers. Costco is the only seller.
  - arrosenberg 5y ago
    Yes, but the terms of the relationship make Amazon's behavior anti-competitive. Costco isn't going to various brands and asking them to sell at Costco, they buy inventory and resell it at a profit. Amazon has convinced a large portion of the retail market to feudalize themselves on Amazon's platform, then they are using the data accrued to take over the markets of their current and former tenants.
  - ClumsyPilot 5y ago
    >"Okay, you've described the business models, but so what?" That the defining feature mate! Getting paid an extra to provide premium service to a customer is normal in some areas, but it's a crime of you hold public office.
raisedbyninjas 5y ago
When Costco sells Kirkland brand vodka and Grey Goose, all bottles of Grey Goose are sold the same way. Costco purchases directly or from a distributor. Grey Goose may or may not pay for shelf space, IDK. Purchasing premium shelf space is a common practice for other retailers and grocers. When Grey Goose is sold on Amazon, either Amazon buys it and re-sells it or Grey Goose sells it through a marketplace account incurring Amazon's marketplace fees. So Amazon can always have two listings for one product, a marketplace listing and an Amazon listing. Their Amazon listing can always be cheaper.
- mattmcknight 5y ago
  They don't have two listings though. They list the prices of all sellers in one item, with the lowest price as the default.
HWR_14 5y ago
Costco sources Kirkland products from people they already do business with. So if they see your Vodka is doing great, they call you and ask (well, as a giant customer of yours "ask") you to make a Kirkland version as well. On those bottles you'll make less, but you're still going to make a lot of money there. And getting cheaper people to buy your product without diluting your brand. And a lot of money off your branded product. Most things I've seen from manufacturers online is that being asked to supply Costco with their product and the Kirkland version is a win from both asks.

criddell 5y ago

Maybe Costco is different, but at a lot of stores the line is blurrier. You might be able to get your product on store shelves, but if you want good placement, you basically have to rent that shelf space.