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Amazon collects a fee for every item sold, something like 10%. What sellers want to do is pass that fee on to the customer while keeping their prices lower at o

Amazon collects a fee for every item sold, something like 10%. What sellers want to do is pass that fee on to the customer while keeping their prices lower at other outlets where the fees aren't as high, so they make a constant margin on every sale. But Amazon doesn't want to develop a reputation as the "product search engine" that you never make an actual purchase through because it's always more expensive than just going to the seller's own website. So I believe where things have settled is sellers making less than they want to make from sales through Amazon and, bizarrely, more than they intended to make through sales on their own sites, because they can't set a lower price than their Amazon one.

zackees 3y ago
Not 10%, more like 35% when all is said and done. Add in FBA and it’s closer to 45%. add in advertising and the majority of the sale price is going into amazon.
Spivak 3y ago
This policy has a "unintended" side-effect of making Amazon always cheaper, since the face-value price has to be the same or higher, and Amazon's advantage is their logistics network it means that cost + shipping is a calculation that Amazon will always win. I get why Amazon is afraid of this, a bunch of retailers setting Amazon prices higher to drive sales to their own site, but this would really just push Amazon to quantify and charge directly for their value as a discovery platform. This doom situation really has to explain why it hasn't killed Target and why retailers wouldn't be willing to pay Amazon a premium for an additional sales avenue.
kypro 3y ago
> So I believe where things have settled is sellers making less than they want to make from sales through Amazon and, bizarrely, more than they intended to make through sales on their own sites, because they can't set a lower price than their Amazon one. So companies are making less on the products they sell through Amazon because as you say "sellers want to do is pass that fee on to the customer" but can't because Amazon's policies prevent this and this bad for the consumer because? You also didn't explain why businesses are forced to use Amazon. Is it not possible for companies to just not sell if they can't charge the consumer 10% more as they would like?
- aflag 3y ago
  > So companies are making less on the products they sell through Amazon because as you say "sellers want to do is pass that fee on to the customer" but can't because Amazon's policies prevent this and this bad for the consumer because? Amazon doesn't prevent them to pass that fee to the customer. They do that. However, that means that other places the fee is also included in listings outside of amazon (which means more profit for the seller). The problem is that now the customer have to essentially pay for amazon, regardless if they use it or not. For the seller this particular thing is not that much of an issue. > You also didn't explain why businesses are forced to use Amazon. Is it not possible for companies to just not sell if they can't charge the consumer 10% more as they would like? Amazon has a de facto monopoly on e-commerce. So, sellers are incentivised to have their products there. They don't have to, but they will probably make more money if they do. That just feeds the monopoly and make the customer worse off.
- rcoveson 3y ago
  > So companies are making less on the products they sell through Amazon because as you say "sellers want to do is pass that fee on to the customer" but can't because Amazon's policies prevent this and this bad for the consumer because? It's not clear whether it's bad for consumers who shop using Amazon, since they're getting some hand-wavy amount of "value" out of using Amazon's product search and free shipping. But it's certainly bad for consumers who shop directly from a seller's website. They're essentially subsidizing the seller's lost margin on Amazon sales without realizing it, and not benefiting from the free shipping or rewards points that the Amazon purchasers are. The net effect is it doesn't make sense for consumers to shop anywhere but Amazon if a seller has already decided to bite the bullet of selling on Amazon. You'd think the free shipping and rewards points and hosting costs and Amazon's profit margins would all contribute to the price being higher on Amazon, but they don't because of this policy. So as a consumer, you're crazy not to take advantage of those rewards (or you're just feeling charitable to the seller, who does make a lot more when you buy directly). > You also didn't explain why businesses are forced to use Amazon. I'm not arguing a position anywhere near that outlandish. In fact, I'm not even trying to argue for a position! I'm just trying to describe the effects of Amazon's policy on the market. For what it's worth, I don't think their policy is uniquely onerous. For all I know it's significantly less restrictive than some of the deals brick-and-mortar stores have struck with their suppliers. We probably agree that the "correct" way to deal with this is for suppliers to quit Amazon and lower their prices, if they truly think they're getting a bad deal. But the unfortunate reality is that our markets are extremely heavily regulated, so you'd be a fool not to at least try the courts now and again to see if you can make your deal better that way.

zackees 3y ago

Not 10%, more like 35% when all is said and done. Add in FBA and it’s closer to 45%. add in advertising and the majority of the sale price is going into amazon.

Spivak 3y ago

This policy has a "unintended" side-effect of making Amazon always cheaper, since the face-value price has to be the same or higher, and Amazon's advantage is their logistics network it means that cost + shipping is a calculation that Amazon will always win. I get why Amazon is afraid of this, a bunch of retailers setting Amazon prices higher to drive sales to their own site, but this would really just push Amazon to quantify and charge directly for their value as a discovery platform. This doom situation really has to explain why it hasn't killed Target and why retailers wouldn't be willing to pay Amazon a premium for an additional sales avenue.

kypro 3y ago

> So I believe where things have settled is sellers making less than they want to make from sales through Amazon and, bizarrely, more than they intended to make through sales on their own sites, because they can't set a lower price than their Amazon one. So companies are making less on the products they sell through Amazon because as you say "sellers want to do is pass that fee on to the customer" but can't because Amazon's policies prevent this and this bad for the consumer because? You also didn't explain why businesses are forced to use Amazon. Is it not possible for companies to just not sell if they can't charge the consumer 10% more as they would like?

aflag 3y ago
> So companies are making less on the products they sell through Amazon because as you say "sellers want to do is pass that fee on to the customer" but can't because Amazon's policies prevent this and this bad for the consumer because? Amazon doesn't prevent them to pass that fee to the customer. They do that. However, that means that other places the fee is also included in listings outside of amazon (which means more profit for the seller). The problem is that now the customer have to essentially pay for amazon, regardless if they use it or not. For the seller this particular thing is not that much of an issue. > You also didn't explain why businesses are forced to use Amazon. Is it not possible for companies to just not sell if they can't charge the consumer 10% more as they would like? Amazon has a de facto monopoly on e-commerce. So, sellers are incentivised to have their products there. They don't have to, but they will probably make more money if they do. That just feeds the monopoly and make the customer worse off.
rcoveson 3y ago
> So companies are making less on the products they sell through Amazon because as you say "sellers want to do is pass that fee on to the customer" but can't because Amazon's policies prevent this and this bad for the consumer because? It's not clear whether it's bad for consumers who shop using Amazon, since they're getting some hand-wavy amount of "value" out of using Amazon's product search and free shipping. But it's certainly bad for consumers who shop directly from a seller's website. They're essentially subsidizing the seller's lost margin on Amazon sales without realizing it, and not benefiting from the free shipping or rewards points that the Amazon purchasers are. The net effect is it doesn't make sense for consumers to shop anywhere but Amazon if a seller has already decided to bite the bullet of selling on Amazon. You'd think the free shipping and rewards points and hosting costs and Amazon's profit margins would all contribute to the price being higher on Amazon, but they don't because of this policy. So as a consumer, you're crazy not to take advantage of those rewards (or you're just feeling charitable to the seller, who does make a lot more when you buy directly). > You also didn't explain why businesses are forced to use Amazon. I'm not arguing a position anywhere near that outlandish. In fact, I'm not even trying to argue for a position! I'm just trying to describe the effects of Amazon's policy on the market. For what it's worth, I don't think their policy is uniquely onerous. For all I know it's significantly less restrictive than some of the deals brick-and-mortar stores have struck with their suppliers. We probably agree that the "correct" way to deal with this is for suppliers to quit Amazon and lower their prices, if they truly think they're getting a bad deal. But the unfortunate reality is that our markets are extremely heavily regulated, so you'd be a fool not to at least try the courts now and again to see if you can make your deal better that way.