Hacker News Reader

Comment by paulgb | Hacker News Reader

Grocery chains have had store brands since before the internet, so this conflict of interest is not novel.

Lots of those are manufactured by the same companies that make the branded ones. So they can still get their cut.

What's to stop the "same companies" from working with Amazon to do the same? Amazon Hair Conditioner (made by Pantene"

Perhaps that is already happening, with a select few manufacturers. But consider that many marketplace sellers are third parties (e.g. an electronics shop). Or other manufacturers with different costs (many factors affect this... location, workforce..). What happens with these?

I do wonder if Amazon are making any kind of profit on these items. With their long term strategy they can very well afford to make a loss just to undercut the competition and put their products out there, make a name.

They can do cost/benefit analysis. They don't have to pay themselves 15% of the price including shipping in fees, they have good relationships with cheap overseas manufacturers (in China you pay literally pennies for plastic stuff in large quantities) utilizing economy of scales, they know the exact demand/sales of their competitor/"partner", probability they can convert competitor's sales into their own sales, control the visibility on their platform etc. I am sure they make larger profit than what they would get by taking a cut from a 3rd party seller. Or they are irrational, which I don't believe.

So... why don't these companies get on the phone with Amazon and make the same deal?

Because they will be destroyed in either case? (See how Wal-Mart treats its suppliers and grinds them into the dust.)

Amazon isn't manufacturing these products either. They're just cutting out the middleman and going straight to the source in exactly the same manner as grocery stores do with their private labels.

Right - if you are already having a product made in China, you are the middle man. If you are actually making the product yourself, then Amazon might come to you and create an off-brand version with some trivial differences. But, in any case the designs of simple products are not nearly as sacred as the actual manufacture of them.

Unfortunately, it does have a depressing effect on new design and innovation. And it certainly seems that the low-cost Chinese manufacturers haven't got the knack for originality yet.

Reply on news.ycombinator.com