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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 layo

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?
        judge2020 5y ago
        Costco also looks at sales data for competing products (within Costco) and chooses to make house brands of those products. It's not like Amazon sees sales data from someone's shopify site if people choose to sell on both brand.com and amazon.com.
    - gamblor956 5y ago
      That's the right way to look at it, missing just one crucial detail. Costco pays for the items that appear on its shelves (excepting the <1% of goods that are on a consignment basis, usually new trial products). The distributor of the store brand and the name brand have already been paid for the products (and are usually the same company). Amazon gets paid by the distributors (aka third party sellers) on Amazon.com for handling their sales (even in instances where it is not handling fulfillment), while also competing against them. That is where the anticompetitive concerns arise. If Amazon just sold stuff through the Amazon.com seller, and didn't have third-party sellers, (or if it operated a separate website for third party sellers) that would be fine.
      - Nasrudith 5y ago
        Don't most large brick and mortar retailers maintain refund for unsold goods agreements in addition to defects? Generally only exercised if they are complete failures. Effectively the difference in practice is a matter of financing and grain of operation - older retail would gain more and give no extra to upfront sales of say toliet paper after a demand spike raised prices while Amazon would give them a per sale percentage cut. At what point does own involvement in consignment sales models become not fine? If it works at 1% consignment. Is it 25%? 50%? 75%? 90%? Or more likely it doesn't exist because the whole concept is a fabrication that pays no attention to real law and operates in the court of public opinion to push their bullshit which wouldn't even need a defendant motion before winding up dismissed by a judge because they cannot point to any real laws?
        gamblor956 5y ago
        I don't know why HN is so focused on consignment sales. They are a tiny portion of the retail market, because no store (even Walmart) has the leverage to force consignment terms on their suppliers except for the tiny portion consisting of new products that distributors are trying to get stores to start selling. Also, Amazon does not give a per sale cut of the percentage, nor would they, since that's not how consignment works. Consignment goods are still sold at retail price; the only difference is that the supplier only gets paid for goods that sold. They don't get to share in the (additional) profits if the retailer (aka "Amazon.com")charges more due to spiking prices.
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.

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?
      - judge2020 5y ago
        Costco also looks at sales data for competing products (within Costco) and chooses to make house brands of those products. It's not like Amazon sees sales data from someone's shopify site if people choose to sell on both brand.com and amazon.com.
  - gamblor956 5y ago
    That's the right way to look at it, missing just one crucial detail. Costco pays for the items that appear on its shelves (excepting the <1% of goods that are on a consignment basis, usually new trial products). The distributor of the store brand and the name brand have already been paid for the products (and are usually the same company). Amazon gets paid by the distributors (aka third party sellers) on Amazon.com for handling their sales (even in instances where it is not handling fulfillment), while also competing against them. That is where the anticompetitive concerns arise. If Amazon just sold stuff through the Amazon.com seller, and didn't have third-party sellers, (or if it operated a separate website for third party sellers) that would be fine.
    - Nasrudith 5y ago
      Don't most large brick and mortar retailers maintain refund for unsold goods agreements in addition to defects? Generally only exercised if they are complete failures. Effectively the difference in practice is a matter of financing and grain of operation - older retail would gain more and give no extra to upfront sales of say toliet paper after a demand spike raised prices while Amazon would give them a per sale percentage cut. At what point does own involvement in consignment sales models become not fine? If it works at 1% consignment. Is it 25%? 50%? 75%? 90%? Or more likely it doesn't exist because the whole concept is a fabrication that pays no attention to real law and operates in the court of public opinion to push their bullshit which wouldn't even need a defendant motion before winding up dismissed by a judge because they cannot point to any real laws?
      - gamblor956 5y ago
        I don't know why HN is so focused on consignment sales. They are a tiny portion of the retail market, because no store (even Walmart) has the leverage to force consignment terms on their suppliers except for the tiny portion consisting of new products that distributors are trying to get stores to start selling. Also, Amazon does not give a per sale cut of the percentage, nor would they, since that's not how consignment works. Consignment goods are still sold at retail price; the only difference is that the supplier only gets paid for goods that sold. They don't get to share in the (additional) profits if the retailer (aka "Amazon.com")charges more due to spiking prices.

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.