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I hope California wins this. This is such a frustrating thing that Amazon does enforce. They will ban you if they find out you are selling the same item for che
by jjeaff 4y ago
I hope California wins this. This is such a frustrating thing that Amazon does enforce. They will ban you if they find out you are selling the same item for cheaper on your own website or on eBay.
To me, this is akin to the credit card companies disallowing a discount for paying with cash/check. Which was made illegal. Though I'm not sure if by law or legal case.
- deleted 4y ago[deleted]
- allocs 4y agoGenuinely asking, why is this bad (for either example)?
- tehlike 4y agoAmazon charges money, say 5% of transaction value. If an item is 100$, seller gets 95. Ok their own website, noone takes a cut, all money goes to seller. In this case they might want to sell for 98$, and then both customer and seller wins.
- hedora 4y agoAmazon gets paid to place targeted ads. They use the ad money to give five percent cash back on purchases. Manufacturer advertises "effectively pay 5% more on our web site or Amazon will club a baby seal (or worse)!" The advertising campaign falls flat. Consumers are killed/maimed by a counterfeit item they bought on Amazon. Manufacturer costs go up 10% (spent on lawyers and training customer support as emergency response workers). Amazon begins production of a higher-margin, but less expensive and non-deadly knock off, and promotes it above the original product. Repeat.
- lots2learn 4y agoAmazon's perspective is that they are a store / marketplace that a seller can optionally sell on. They are ensuring their customers get the best price. Like any store, if you don't like their terms then don't sell your product in their store. Pretty solid logic I think. But the reality is they are a store that dwarfs every other in customer reach making it difficult for small businesses to grow without utilizing Amazon as one of their sales channel. Hence, Amazon's 15% commission gets baked into everything even if it's not sold on Amazon. I think the law needs to evolve in a way to recognize scenarios like this where there is massive asymmetry - not necessarily a monopoly - between one dominant market player and others which is harming the consumer. Amazon's response of course would be "no fair; you're using us for product discovery but then giving the sale to the brand owner". Which has some validity. If you took away the commission, then they would be relegated to a search engine that relies on ad revenue only. But that would mean lower prices so consumers would win in the end.
- cool_dude85 4y ago>Amazon's response of course would be "no fair; you're using us for product discovery but then giving the sale to the brand owner". Almost as bad as someone walking into a brick and mortar store and then going to some big website to actually buy the TV. No fair indeed.
- Spivak 4y agoI mean it kinda is no fair, the ability for people to do this is a fairweather tolerance because big box still come out ahead even when price matching online retailers. The moment that stops being the case is when you will start to see stores charging covers.
- scarby2 4y agoI always wonder how many people actually do this. It has to be a pretty significant difference for me not to actually buy it at the store. If I'm at the store and i can put something in my cart and buy it then I'm not going to order it online and wait for delivery to save $5. Also delivery is extremely unreliable these days...
- Supermancho 4y ago> I always wonder how many people actually do this From watching other people at stores, it's maybe 15%? For goods that need to be installed or carefully handled, it's less common. Headphones? Pricecheck. Mechanical Keyboard? Pricecheck. Washer and Dryer? Most people pricecheck even though it seems like something they wouldn't. Turns out that most people shop around for those, so internet pricechecking is part of it. Food items that seem too expensive? Pricecheck. You can save a bunch on dry/bottled goods. Amazon Prime feels like a Costco membership. You have to make sure you use it, to justify it.
- onepointsixC 4y ago>They are ensuring their customers get the best price. No they are not. They are setting the price on their platform to be the minimum price. That's very different and bad for consumers.
- smallerfish 4y agoYou wish it's 5%. Play around with this (and don't enter 0 for shipping, because they have a divide by zero error): https://sellercentral.amazon.com/hz/fba/profitabilitycalculator/index?lang=en_US&ld=NSGoogle https://sellercentral.amazon.com/hz/fba/profitabilitycalcula...
- scarby2 4y agoDepends on the item value. It's usually closer to 10% The higher margin on the left is what amazon charges for fulfillment (which can be quite a lot).
- thayne 4y agoI can think of two reasons: 1. It hinders competition. You can't really provide a marketplace thay competes with Amazon by having lower prices (for example by taking a smaller cut from sellers), because sellers aren't allowed to list lower prices on your marketplace. Or alternatively, you can't compete by selling directly from you website, because you can't offer a lower price than on Amazon. 2. It means even if you buy directly from the seller, you have to pay a higher price because it is listed on Amazon. In effect people who bu directly are subsidizing a lower price for people who buy on Amazon. This applies to the credit card case as well.
- LatteLazy 4y agoSurely it encourages competition: Since the cost cannot just be passed onto consumers, the company making the decision over where to list has an incentive to actually consider other options? Also, the only reason we want competition is because it should get lower prices for consumers. Competition isn't a good in and of itself, it's just a means to an end. So if more competition means higher prices for the same goods, then who needs it? I don't quite get your second point: if the consumer is paying the same price, why do they care whether 100% goes to the supplier, or 99% or 0.01? If an item costs me 10USD, I don't care who get's that money, I just care that I don't get to keep it right
- toastercat 4y ago> Also, the only reason we want competition is because it should get lower prices for consumers. That is not the only reason free market capitalists want competition. Competition should also promote a variety of choice, innovation, and dynamism in other services to consumers, not just low product prices.
- stetrain 4y agoThis rule doesn’t just mean they can’t raise prices on Amazon, it means they can’t lower prices elsewhere. If another marketplace takes a lower cut, allowing the seller to set a lower price while keeping margins, they can’t do so under this arrangement without taking a hit on Amazon sales. The market should be encouraging finding the lowest-margin distribution path, not artificially propping up prices elsewhere to match Amazon’s margins.
- wyre 4y agoIf I own a store I should be able to set my own prices without risk of being kicked out of a marketplace.
- frogblast 4y agoBecause Amazon can arbitrarily raise the prices of goods sold at Amazon, and have no concern about being undercut. For example, you are selling a Widget for $20. Amazon says "we'll take $10 of that ourselves". You can sell your Widget elsewhere at lower overhead, but you can't pass those savings on to the buyer, which means the buyer has no incentive to shop elsewhere, which means there are no market forces encouraging Amazon to reduce their cut. There are also no market forces preventing Amazon from increasing their cut. Tomorrow, they'll want $15 of that $20.
- insane_dreamer 4y agoIts problematic because Amazon has such large control over online shopping, that setting anti-competitive rules further increases its control to where it becomes almost monopolistic.
- legitster 4y agoIs this unique to Amazon though? If you are Safeway, you wouldn't be happy if Nabisco started selling crackers half-price from their warehouse down the street. In most industries, MSRP agreement rules are pretty tightly enforced. California winning this case seems like it could make for a weird precedent.
- tarakat 4y agoNo business is happy with competition. That doesn't make contractual collusion any less anti-competitive. If it is, as you allege, the norm, that only makes dealing with it more urgent.
- legitster 4y agoThe FTC considers certain exclusivity contracts as pro-competitive: https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/single-firm-conduct/exclusive-supply-or-purchase-agreements https://www.ftc.gov/advice-guidance/competition-guidance/gui...
- insane_dreamer 4y agoBut exclusivity contracts is not what's in question here, which preclude you from selling elsewhere (as opposed to selling elsewhere but at a lower price). Also exclusivity contracts usually come with minimum volume commitments (since you're locked in). That's quite different than third-party sellers on Amazon. And it usually has to do with brand perception. Nordstrom doesn't want you selling that same product at Target because it devalues the brand.
- wbsss4412 4y agoTo add, both parties usually get additional value out of an exclusivity deal, which is why they voluntarily enter into an arrangement. In the case of Amazon though (and I caveat this with the fact that I’m not aware of the full details) this is about being able to sell on Amazon at all, there are no extra perks involved for the sellers.
- MisterBastahrd 4y agoI think any manufacturer will tell you that one of the worst ways to do business is to sell your product for less than you're listing it in the storefronts of companies willing to buy from you for retail. If you're going to undercut your business partners, they will find someone else to do business with. Most manufacturers with their own storefronts won't discount product unless they've allowed it in other storefronts and / or until the product has been discontinued. Don't bite the hand that feeds you. On the other hand, Amazon enforcing this as a rule is sort of ass-backwards. I remember a 2007ish USSC case that utterly changed the premium cigar market because it allowed manufacturers to enforce MSRP against gigantic volume discounters, which raised prices across the board overnight but also gave the manufacturers breathing room when it came to their own profit.
- gmadsen 4y agothe difference is that amazon is an online monopoly with insane fees on sellers. Forcing them to use the pricing on amazon elsewhere, ensures people buy it on amazon, and ensures amazon can continue to bleed sellers for however much they deem appropriate.
- wiremonger 4y ago> with insane fees on sellers We sell on Amazon. The fees are not insane. It varies by category, but typically they range from 10-15%. Amazon brings tons of value to the relationship, so we're happy to pay that fee.
- theturtletalks 4y ago10-15% could be 50-60% profit for most sellers. Sure they’re beneficial to you now, but what happens when Amazon starts private labeling the same things you sell? Or your supplier starts selling on Amazon and undercutting you? There’s a reason new DTC brands avoid Amazon and that’s cause you’re not building a customer base or your brand, just helping Amazon build there’s.
- 4y ago
- josefresco 4y agoIs this a new policy? I sold a physical product on Amazon for several years and always had it listed for cheaper on my own website. No issues - maybe I was too small to bother with?
- deleted 4y ago[deleted]
- atdrummond 4y agoI always thought if it was a DTC CPG your own site was allowed to offer it any price point. I only saw the restriction kick in on other marketplaces.
- themagician 4y agoAmazon typically only enforces this when you are using Amazon FBA to fulfill from your own website.
- wiremonger 4y agoBut Amazon isn't doing this so that they can make the other retailer's customers pay more. They're doing it to make sure their own customers pay the lowest price that prevails in the marketplace. It's just that this is the only mechanism they have for accomplishing that. Amazon can't control what a seller does elsewhere, but if a product is on sale elsewhere, they can basically tell the seller that they refuse to list it on Amazon unless the seller reduces the price to match the other retailer. So far most of the discussion is about pricing on Amazon vs. other retailers, but Amazon also does this between sellers of the same product on Amazon. If there are multiple sellers of the same product, Amazon will funnel their customers to the seller offer with the lowest price. The jargon term for this is "getting the buy box".
- CogitoCogito 4y ago> But Amazon isn't doing this so that they can make the other retailer's customers pay more. They're doing it to make sure their own customers pay the lowest price that prevails in the marketplace. Those two statements sound like the same thing from different perspectives.
- barelysapient 4y ago> But Amazon isn't doing this so that they can make the other retailer's customers pay more. They're doing it to make sure their own customers pay the lowest price that prevails in the marketplace. It's just that this is the only mechanism they have for accomplishing that. Amazon can't control what a seller does elsewhere, but if a product is on sale elsewhere, they can basically tell the seller that they refuse to list it on Amazon unless the seller reduces the price to match the other retailer. Nonsense. Selling on Amazon takes a 18-33% markup on the price of the product. Amazon forces this margin consumers by requiring sellers to not sell cheaper elsewhere; even though selling elsewhere may cost the seller less.
- wiremonger 4y ago> Selling on Amazon takes a 18-33% markup on the price of the product. Amazon forces this margin consumers by requiring sellers to not sell cheaper elsewhere Amazon charges a referral fee on all 3rd party transactions. It varies by category, but is typically 8-15%. All retailers take similar margins. For instance, the largest retailer in the US is Walmart. Here is a list of their 3rd party referral fees: https://marketplace.walmart.com/referral-fees/ https://marketplace.walmart.com/referral-fees/. Given that the retailers all take similar margins, I think it's crazy to somehow paint this as Amazon forcing a markup on customers. All Amazon is doing is refusing to show products if the price on Amazon is higher than at a competitor. It's the seller who chooses what to do about that. They can either raise the price at the competitor, or they can lower the price on Amazon. Again, the retailer's margins are similar, so it shouldn't matter.
- jandrewrogers 4y agoTerms like this are not uncommon in vendor contracts generally, it is not specific to Amazon. It is often a point of negotiation and the details are specific to product categories. There are also common strategies for working around or minimizing the practical impact of these kinds of terms if you are the vendor. I've dealt with these kinds of terms for decades and I've never sold anything on Amazon. A factor here is that many vendors on Amazon, even major household brands, are surprisingly unsophisticated about how they structure their business with Amazon. I know someone whose entire business is helping major brands structure their Amazon business correctly to get what they want out of that relationship. They are overwhelmed with new work from companies that you'd think would be competent to do this themselves.