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This is not a defense of Amazon. A neighbor of mine who makes high end silver jewelry was doing fine with the gallery he used (in Santa Fe). The gallery collec

This is not a defense of Amazon. A neighbor of mine who makes high end silver jewelry was doing fine with the gallery he used (in Santa Fe). The gallery collected about 30% of his sales price in fees. Another gallery approached him, asked to represent him instead. They took 50% in fees. He switched anyway. His income went up (and stayed up). Presumably the new gallery provides some combination of better environs, more and/or different customers, better salespeople. It still seems wrong that fees could be this high, for a jewelry gallery or for amzn. But it shouldn't be assumed that the high fees necessarily mean reduced income for the original seller.

pcurve 3y ago
"But it shouldn't be assumed that the high fees necessarily mean reduced income for the original seller." I agree. It just gets passed down to the customers. Most of my shock was directed at the 50% increase in fee in just a few short years. You can't do that without having a lot of leverage.
- wolverine876 3y ago
  > It just gets passed down to the customers. That's a common but not an accurate belief: As a business owner pricing a product or service, if your costs increase you can either take the marginal cost out of your net income or increase the price. Taking it out of your net income is simple: You keep prices the same, revenue remains the same, and profit drops a bit. Increasing the price is more complex; you are changing one component in a system of dynamic feedback: When you raise the price, fewer people buy your product, so the outcome may be less revenue and less profit. The impact of price changes on purchasing is called elasticity: Some products - e.g., fancy restaurant meals - are easily forgone and are thus price sensitive. Others, like necessary healthcare, can be priced extortionately and people will still buy it. Arguably, if you are the mythical optimal manager, you've already priced your product to maximize revenue and therefore any change will decrease it. In that case, price increases will only worsen your profit. The reason for your price increase is orthogonal to the customer's purchase decision - you raise the price, they buy less. They usually don't know and don't care why - do it for greed, to cover additional cost (and maintain your beloved profit margin), because your finger slipped on the price-your-goods app, whatever.
  - robertlagrant 3y ago
    It's not just elasticity. The main weight on your prices is your competitors' prices.
    - deleted 3y ago
      [deleted]
    - agentgumshoe 3y ago
      And the quality of your product and what customers are willing to pay, though that seems a fading requirement when customers are 'everywhere.'

pcurve 3y ago

"But it shouldn't be assumed that the high fees necessarily mean reduced income for the original seller." I agree. It just gets passed down to the customers. Most of my shock was directed at the 50% increase in fee in just a few short years. You can't do that without having a lot of leverage.

wolverine876 3y ago
> It just gets passed down to the customers. That's a common but not an accurate belief: As a business owner pricing a product or service, if your costs increase you can either take the marginal cost out of your net income or increase the price. Taking it out of your net income is simple: You keep prices the same, revenue remains the same, and profit drops a bit. Increasing the price is more complex; you are changing one component in a system of dynamic feedback: When you raise the price, fewer people buy your product, so the outcome may be less revenue and less profit. The impact of price changes on purchasing is called elasticity: Some products - e.g., fancy restaurant meals - are easily forgone and are thus price sensitive. Others, like necessary healthcare, can be priced extortionately and people will still buy it. Arguably, if you are the mythical optimal manager, you've already priced your product to maximize revenue and therefore any change will decrease it. In that case, price increases will only worsen your profit. The reason for your price increase is orthogonal to the customer's purchase decision - you raise the price, they buy less. They usually don't know and don't care why - do it for greed, to cover additional cost (and maintain your beloved profit margin), because your finger slipped on the price-your-goods app, whatever.
- robertlagrant 3y ago
  It's not just elasticity. The main weight on your prices is your competitors' prices.
  - deleted 3y ago
    [deleted]
  - agentgumshoe 3y ago
    And the quality of your product and what customers are willing to pay, though that seems a fading requirement when customers are 'everywhere.'