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>these bigger companies are setting prices to always match or undercut pricing elsewhere. This squeezes the advantage smaller players may have on pricing, and b

>these bigger companies are setting prices to always match or undercut pricing elsewhere. This squeezes the advantage smaller players may have on pricing, and big players can afford to do so even at a loss. That sounds like a win for the consumer >This squeezes the advantage smaller players may have on pricing Small players competing on price alone with Walmart or Amazon is suicidal. Offering something other than low price is a way to compete.

thestepafter 3y ago
Until the small players all close down and then the big players raise prices.
- mattmaroon 3y ago
  Amazon has been around nearly 30 years and the prices have gotten steadily lower. Longer for Walmart and Target. That’s just a thing people imagine will happen. What actually happens is the big players just competing on price against each other forever.
mattmaroon 3y ago
In retail the small companies have never successfully competed on price.
avidiax 3y ago
> That sounds like a win for the consumer Let's say that you have a comparative advantage against Amazon. A company went bankrupt and you bought the remaining inventory of lawn darts at a fire sale price. Now you try to sell your lawn darts at 90% of the Amazon price. And they lower their price to match or be below yours. And this continues. And pretty soon you have to sell your lawn darts at the price you bought them for, and even that isn't really moving them. Sure, Amazon is taking a loss on lawn darts. But they've also squashed you, preventing you from specializing in outdoor equipment and building comparative advantage against Amazon. You go out of business, and Amazon's scraper see's no price data so they go back to a default price of cost+100%. And all of this without a human in the loop at Amazon. They just matched your price, and let the network effect they have do the rest to completely drain your customer flow.
- Ekaros 3y ago
  Shouldn't the market be big enough for this to eventually drive Amazon to bankruptcy? They might do this with few items, but not with all items. And then at certain point someone would buy those items they overly discounted... And later sell for profit.
  - avidiax 3y ago
    That's the classic economic theory. A company that tries to dump will go bankrupt, which is irrational, so no company will do this. But in this case, Amazon is 40% of the market. There is no upstart competitor that can outlast them in a price war. There is also likely little to no comparative advantage you can have against them, except a legal monopoly like a patented or trademarked product. Even then, if they clone your product, when you sue them it will be a rounding error in their legal budget while you have no cash flow to sue them. The classical school seems to think that there's a limitless amount of irrational entrepreneurship that will drain Amazon if they price too low. In reality, entrepreneurs are generally not that dumb. Amazon, of course, doesn't dominate everything. They aren't going to sell every product. There are marginal, low-volume, low return products that they will happily let other companies sell on their platform or elsewhere. But if your product becomes high margin and high volume on their platform, they will know, and they'll be coming for your profits.
    - mattmaroon 3y ago
      They more or less did this against diapers.com. They simply forced them to be acquired by selling diapers at a loss. The thing is, it's easier than ever to start an e-tailer. I've been using Deliverr (which is now owned by Flexport) which does 3rd party logistics along with Shopify. If Amazon pumped their prices on diapers, it would be really easy to start an online diaper store. The threat keeps them honest to some extent. Obviously, you can't fight Amazon directly on selling everything. But 3rd party retailers to sell targeted things can be spun up quickly if Amazon lets their prices in any one category creep up too high. And Amazon competes in individual categories with a lot of people. I can buy a lot of home repair type things on Amazon, or at Wal-Mart, Home Depot, Lowe's, Menards, etc. I can buy a lot of electronics on Amazon, Wal-Mart, Best Buy, etc. There's a lot of competition in retail in general and likely always will be, there just isn't a lot of competition in everything stores and it's hard to see how that would change.

thestepafter 3y ago

Until the small players all close down and then the big players raise prices.

mattmaroon 3y ago
Amazon has been around nearly 30 years and the prices have gotten steadily lower. Longer for Walmart and Target. That’s just a thing people imagine will happen. What actually happens is the big players just competing on price against each other forever.

mattmaroon 3y ago

In retail the small companies have never successfully competed on price.

avidiax 3y ago

> That sounds like a win for the consumer Let's say that you have a comparative advantage against Amazon. A company went bankrupt and you bought the remaining inventory of lawn darts at a fire sale price. Now you try to sell your lawn darts at 90% of the Amazon price. And they lower their price to match or be below yours. And this continues. And pretty soon you have to sell your lawn darts at the price you bought them for, and even that isn't really moving them. Sure, Amazon is taking a loss on lawn darts. But they've also squashed you, preventing you from specializing in outdoor equipment and building comparative advantage against Amazon. You go out of business, and Amazon's scraper see's no price data so they go back to a default price of cost+100%. And all of this without a human in the loop at Amazon. They just matched your price, and let the network effect they have do the rest to completely drain your customer flow.

Ekaros 3y ago
Shouldn't the market be big enough for this to eventually drive Amazon to bankruptcy? They might do this with few items, but not with all items. And then at certain point someone would buy those items they overly discounted... And later sell for profit.
- avidiax 3y ago
  That's the classic economic theory. A company that tries to dump will go bankrupt, which is irrational, so no company will do this. But in this case, Amazon is 40% of the market. There is no upstart competitor that can outlast them in a price war. There is also likely little to no comparative advantage you can have against them, except a legal monopoly like a patented or trademarked product. Even then, if they clone your product, when you sue them it will be a rounding error in their legal budget while you have no cash flow to sue them. The classical school seems to think that there's a limitless amount of irrational entrepreneurship that will drain Amazon if they price too low. In reality, entrepreneurs are generally not that dumb. Amazon, of course, doesn't dominate everything. They aren't going to sell every product. There are marginal, low-volume, low return products that they will happily let other companies sell on their platform or elsewhere. But if your product becomes high margin and high volume on their platform, they will know, and they'll be coming for your profits.
  - mattmaroon 3y ago
    They more or less did this against diapers.com. They simply forced them to be acquired by selling diapers at a loss. The thing is, it's easier than ever to start an e-tailer. I've been using Deliverr (which is now owned by Flexport) which does 3rd party logistics along with Shopify. If Amazon pumped their prices on diapers, it would be really easy to start an online diaper store. The threat keeps them honest to some extent. Obviously, you can't fight Amazon directly on selling everything. But 3rd party retailers to sell targeted things can be spun up quickly if Amazon lets their prices in any one category creep up too high. And Amazon competes in individual categories with a lot of people. I can buy a lot of home repair type things on Amazon, or at Wal-Mart, Home Depot, Lowe's, Menards, etc. I can buy a lot of electronics on Amazon, Wal-Mart, Best Buy, etc. There's a lot of competition in retail in general and likely always will be, there just isn't a lot of competition in everything stores and it's hard to see how that would change.