5 ms·

Genuinely asking, why is this bad (for either example)?

by allocs 4y ago

tehlike 4y ago
Amazon 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 ago
  Amazon 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 ago
  Amazon'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 ago
      I 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 ago
        I 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 ago
  You 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 ago
    Depends 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 ago
I 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 ago
  Surely 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 ago
    This 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 ago
If I own a store I should be able to set my own prices without risk of being kicked out of a marketplace.
frogblast 4y ago
Because 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 ago
Its 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.

Genuinely asking, why is this bad (for either example)?

by allocs 4y ago

Genuinely asking, why is this bad (for either example)?

Amazon 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 ago
Amazon 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 ago
Amazon'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 ago
    I 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 ago
      I 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 ago
You 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 ago
  Depends 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 ago

I 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 ago
Surely 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 ago
  This 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 ago

If I own a store I should be able to set my own prices without risk of being kicked out of a marketplace.

frogblast 4y ago

Because 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 ago

Its 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.