Amazon’s New Competitive Advantage: Putting Its Own Products First
propublica.org
propublica.org
Many retailers reserve some of their best shelves paces for their private label products, both as a form of differentiation and to extract higher margins.
You could argue that Amazon is unique in that it is large and potentially has a monopoly over eCommerce, but it is hard to say that in the end, consumers are on the loosing end.
Most amazon basic products are commodities, and prices gets lower because of economies of scale. Should amazon jack up the price, consumers will just switch to another whitelabel/run of the mill variant from another seller.
It will be problematic if amazon dumps on the market and drives theirs party sellers out of existence, but I don’t think that is the case here.
In some cases the private label even uses the same manufacturers, the people producing the product still get paid in the end.
The value add is that you can have decent confidence the product isn't so crappy that the brand is unwilling to put their name on it. Presumably Walmart, Harbor Freight, Amazon, whoever at least got a test batch of the product and made sure it actually worked before ordering millions of them. The consumer can just buy the widget at a slight markup for $1.99 and know it will work instead of going on Ebay or Alibaba and buying direct from exporters and wondering whether they should get varieties A, B or C for $1.59, $1.69 or $1.79.
There are considerations people have that are above and beyond the purely utilitarian.
If it's an electronics part, I would also like the FCC submission numbers, UL submission numbers, etc. For every regulatory agency in which a filing was made, I would like to be able to see those filings.
Those filings should also count as the advertised product specification. If they change chips or designs outside of the specified list I should be able to return the product for it being different than the listed item.
In some of these categories it is basically heaps of 3rd parties slapping logos on the same stuff and the winner is whoever best games the reviews for search rankings. They are now annoyed that in some cases Amazon decides that there is no winner.
It's quite easy. Amazon is abusing its position to drive others out of business. They collect a lot of data and when someone finds a great selling product they move in and take over a big chunk of the market. That can and will hurt the customer. It should be illegal, as it actually is in some markets.
Until they're a legal monopoly in some suitable category, they are welcome to do this. One effect may drive amazon competitors to cater to all the sellers. And at any rate, to be the top spot Amazon has to be offering good enough prices to get consumer dollars.
For now it benefits the consumer, because they are getting good prices and possibly avoiding lots of junk sellers selling bad goods. Amazon brand good are trustworthy compared to a lot of sellers.
being a platform business that competes directly with its business customers can be a significant (but not necessarily sufficient) indicator as well.
It is according to US law. Without a larger percentage, no court will consider anti-trust charges, due to Circuit and Supreme Court cases on what percentage of market control is required. Here's relevant portions from DoJ:
"In determining whether a competitor possesses monopoly power in a relevant market, courts typically begin by looking at the firm's market share.(18) "
So the typical case starts with percent control....
"Although the courts "have not yet identified a precise level at which monopoly power will be inferred,"(19) they have demanded a dominant market share"
So the courts require a threshold.....
"the Tenth Circuit noted that to establish "monopoly power, lower courts generally require a minimum market share of between 70% and 80%.""
There's ample more court citations on the DoJ page.
Amazon doesn't reach these levels in probably any relevant category they are in. Certainly not for retail sales (Amazon is a tiny portion there), or online sales (less than half), or web services (Amazon ~ 40B out of 350B market).
For any company, if you shrink the categories far enough, you can always find a monopoly - Apply has a (near) monopoly on Apple watches, for example. But this is not a monopoly.
https://www.justice.gov/atr/competition-and-monopoly-single-...
I don't think even the ProPublica article is accusing them of this.
What evidence is there that Amazon has purposefully driven sellers out of business, as opposed to just unfairly privileging its own brands? Why would they do this, when they created the marketplace and make a lot of money from it?
Then Amazon sees it, makes their own laptop tray, subsidized by economies-of-scale and their shipping network. They feature it higher than yours, bury yours down further, and sell it at much cheaper. It's not like you can compete on Amazon. And let's face it, you're not going to compete making your own store or selling it on brick-and-mortar.
Eventually you starve out, you get out of the market, and then they cheapen the product even more to the point of lower product quality. Then at that point, the consumer loses.
Seen so many products that used to be high quality, then the product quality got worse over time with cheaper materials, while keeping the same 5-star old reviews
They will always push their private brand products to their customers.
>unfairly privileging its own brands
will lead to
> drive others out of business
This would make more sense if the consumers benefiting were not human.
Contrast with you personally making a detour in your car to a physical store to buy a single small item -- that actually DOES have a fuel cost.
Unless your purchases are always along a route your travel anyways (like your commute), delivery is vastly more fuel-efficient as a general rule.
Amazon does this a lot, no matter what your order looks like. The most pathological I've ever seen was at an old workplace, they shipped 20 boxes of pens (12 packs or whatever size of disposable pens) each in a separate large box. The delivery person took several trips up the elevator to deliver them.
But, of course you have an answer to this problem, right?
Obviously, Prime also pushes people toward single-item orders, which helps justify this strategy, and also increases people's dependence on a service level that is hard for competitors to match who aren't at a scale where these kinds of approaches work out.
Kind of a fail that the system wouldn't flag a 20-parcel order as something that needed a human to ok it, but who knows, perhaps it was reviewed after the fact and something got tweaked.
In order to discover how much waste there is in ordering 1 thing one day and one the next you have to determine exactly how the route would have differed in each case. Given the delivery truck would probably still have been in your town anyway lets imagine for the sake of argument that it drives an additional half mile each way. If we try to imagine the net effect of lots of extra packages lets say all the extra packages in the truck caused a net of 100 miles of travel divided 100 ways. So lets imagine a net cost of 2 miles of travel. So the person probably wasted the equivalent of 1/5 of a gallon of gas.
More efficient delivery trucks which fedex and ups are rolling out will make a difference. This relies on a few parties that will directly benefit from doing so. Totally going to happen.
Less packaging by actually putting more than one thing in the same exterior packing would make a difference. This relies on a few parties who would benefit slightly. This might in theory happen.
Batching orders instead of ordering item A when you actually need it and item B when you need it doesn't matter much and would be difficult to do. It requires millions of people to think ahead and always order things before they need them. This will NEVER happen.
The people complaining about shipping waste are addressing a legitimate problem that actually could be solved. Your statement is akin to the people that say why do we need to work on problem foo while their are still children starving in Africa. It's true their are and we ought to do something but in the meanwhile we can still do other things to.
There was multiple items amazon decided not to bundle.
>You could argue that Amazon is unique in that it is large and potentially has a monopoly over eCommerce, but it is hard to say that in the end, consumers are on the loosing end.
It is not about a "monopoly", under Anti-trust you can't unfairly leverage your market position to force others out of competition. That is clearly being done, and the entire body of Anti-trust law would disagree with you and say Amazon unfairly using its market position to kill competition (even if Amazon has a lower cost) is a detriment to consumers. In the eyes of Anti-trust law unfairly forcing competitors out of the market limits consumer choice which is always a detriment to consumers.
Can you truly argue just because a firm is large they are no longer allowed to offer the same product for cheaper simply because they have a strong foothold in distribution?
This isn't an economy of scale.
The component that has scale is distribution. A third-party seller selling through Amazon gets those advantages the same as Amazon. What's different is the sourcing and manufacturing of the product.
Amazon has an edge. But it's not one of economies of scale.
In each of these components Amazon Basics has an advantage over third parties whom are often mom and pop and are undercapitailized.
The points of contention are
1) If amazon competes fairly in Ad bidding so Basics products shows up first on the paid search results, is this anti-competitive?
I don't think so. They just have more capital. Any other well capitalized firm can do the same.
2) Is it fair for amazon to display their products more prominently?
I don't think so. How is this any different than Walmart refusing to carry a product? Or putting their private labels more prominently?
Totally agree. But this isn’t an economy of scale advantage.
SoftBank-backed companies had a capital advantage over their competitors. That isn’t per se an economy of scale. Amazon’s products have a distribution advantage over smaller competitors. Again, not an economy of scale.
Amazon has much better visibility on sales, margins, user behaviour than their market sellers. Where risk is high they allow sellers to take the risk, where it is low they enter directly and take more margin.
It's a great business model, like a hedge fund running an exchange with no separation of information. It would be illegal the financial sector.
Maybe I'm misunderstanding, but wasn't Glass–Steagall repealed?
A lot of people don't realize, but hedge funds are the small fry. I mean sure a few hundred million or even a billion or two dollars sounds like a lot of money, but once you realize how much the Fed is pumping through the primary dealers it's literally pocket change. It's outfits like Goldman or BlackRock that are playing heads I win tails you lose.
Glass-Steagall banned federally-insured banks from competing with investment banks. Information walls, which have to do with insider trading, are a separate beast.
The anti-trust concerns would also apply to Walmart's own ecommerce. They're effectively leveraging their brick and mortar presence to establish their ecommerce business (which is presently the 2nd largest in the US). The 3rd largest is eBay, which leaves one to wonder how much of the hole left by Amazon would be absorbed by Walmart.
The other complaint seems to be "fairness." If you operate a platform, people expect it to be fair. But what is "fair" probably has more to do with historical cultural norms than actual abstract fairness, again it is the change the causes the issue. If Walmart started putting "see our generic option for cheaper over here" on end-caps that manufacture were paying top billing to place, they'd complain. But Walgreens has already been doing this in their OTC sections for years, just not with paid-to-place products.
As a consumer, I personally like the Amazon brands, because I can at least trust them to be real products with a reasonable quality expectation, not a switchout from some crappy seller or comingled inventory with fakes.
What irony. Amazon's co-mingling is actually benefitting them in ways other than lowering costs — It's actively driving people to their house brand(s).
Amazon is pure (evil?) genius.
I suspect Amazon just overreached. And not because of an intentional decision going sideways, but because of having many independent teams, with smart people, each optimizing for their own area. Frankly, it is actually amazing how much cohesiveness in action and strategy actually exists, as opposed to the mistakes we see (I'm looking at you AWS console).
Do note that this is all speculative anyway... There's been no ruling. Just some people pointing out problematic behaviour.
1. I am not arguing anything, I did not develop Anti-trust law nor did I argue for or against it.
2. I never mentioned the the size of the Firm, because that isn't the legal standard. As I said what matters is unfairly forcing competition out of the market.
What Amazon does is has other businesses develop products and markets for those products on the Amazon marketplace. Then Amazon uses its data to determine which products are selling and what Amazon shoppers are looking for, then Amazon copies the product and uses all kinds unfair practices to force out the market incumbents...and in many case once the Amazon has forced out the market incumbent (again to the detriment of consumers), then Amazon has a history of raising their product price (again to detriment of consumers).
But we get it, to you Amazon hasn't done anything wrong and the consumers are better off and should be thanking Amazon. I'm not argue otherwise, just simply saying that is inconsistent under Anti-Trust laws.
In other words, if other well capitalized players had the same data, same ability to manufacture at the same scale, advertise etc... and Amazon's sole advantage is product placement, is it still problematic?
Potentially, but stop focusing on the act and focus on the result.
You brought up retailers and their shelf space. First no grocery store puts "Grocery Store O's" in a better placement than Cherrios...but fine lets assume they did. Does putting "Grocery Store O's" force Cherrios out of the market? No. However, seems to be no shortage of examples of a successful vendor on Amazon being forced out of the market altogether after Amazon copies their successful product.
One is much better capitalized than the other and enjoy many cost advantages. On product and price alone, many consumers would choose Amazon, all else being equal, including product placement. In short, since we haven't seen Amazon crushing equally well capitalized and competent white-label players like Anker, Amazon is only out competing inefficient firms.
Similarly, Walmart's "Grocery Store O's" are competing against P&G, which is a equally well capitalized firm. That is, the Cereal market is efficient and competitive, and winners win through distribution and market positioning. This is why P&G O's aren't getting destroyed.
The results you are witnessing - smaller firms getting taken out, is just a phenomenon of competition. I suspect as consolidation takes place, many large firms like Anker will be able to offer competitive product at competitive prices vs. Amazon Basics.
As an aside it does not surprise me at all when I learn that a law is not worded in a way that's congruent with the popular conception of the law.
It would be argued that Amazon's specific point of abuse and power is related to its ecommerce market share. If a monopoly argument is going to be made against Amazon in retail, it will be about their online store (as opposed to eg in-store Wholefoods).
I think it's a fair point of separation. Amazon can simultaneously have an abusive monopoly online and a weak position in physical stores. Walmart could cultivate a monopoly in physical store retailing (hypothetically), and have a weak position online.
Other grocery stores don't attract anti-trust attention, typically, because they have no overwhelmingly dominant position.
If Kroger had 40% or 60% of the US grocery store business, they'd be a target of anti-trust focus persistently (as it is, Kroger is the #2 grocer and only has 10% of the grocery business; it's a very fragmented market, Costco is #3 with a mere 5% share). If Amazon.com only had 10% of the US online retail business, there wouldn't be so much concern about their potential monopoly positioning.
Anti-trust law only applies to businesses which have market dominance. Grocery stores generally aren't in this position except for Wal-Mart which has similar concerns.
Because a grocery store selling white-label products isn't an unfair use of market position to force competitors out of the market.
How many times has a grocery white-label cereal bankrupted a Cherrios or forced them out of the market? Alternatively, how many stores do you hear about vendors that launched a successful product (even a #1 selling product) only to have to close after Amazon launched a copycat product.
>Don't all businesses want to force their competitors out of the market?
No, complimentary and substitute products are healthy for the market place. Again go back to the grocery store, they don't want General Mills/Post going out of business, they want to fill their shelves with those products.
>As an aside it does not surprise me at all when I learn that a law is not worded in a way that's congruent with the popular conception of the law.
This is true especially with 1st amendment and 2nd amendment law...I am not sure what the popular conception of Anti-trust law may be, but when it comes to Amazon I always see the white-label grocery store product analogy. What is great about the law is legal opinions often include factual analogies and distinctions like this, what would shock most people is how logically sound and exhaustive the courts are.
I don't think the grocery store and the cereal company are competitors in that case.
A key difference is that in those situations (a grocery store, for example), the marketplace owners have already purchased all the products on the shelves. It's the grocery store's decision to choose what and how the products that they have paid for are presented to customers.
This is not a hundred-percent comparison, of course, but it came to mind in the last number of weeks as this Amazon topic has come up.
Is this actually true these days? I was under the impression that this varied by product.
Other agreements might be to for Target to purchase a certain amount of Playstations but only as long as Target places them on the top shelf. These are just two of the many different ways that the shelves get filled. In these examples, it's much much harder to draw a comparison to Amazon without knowing how Amazon makes similar agreements with its sellers.
(Target and Sony are just examples, I don't know if Target actually does contract specifically with Sony in this way)
So, while that is not an absolutely example (as lots of stuff in the store is still owned by the separate vending companies), it is a good caveat to our first "grocery stores do it" thought that comes to mind when thinking about this Amazon topic.
Amazon's brand (as a store / marketplace) is that it helps you sort through many options to select the product they believe you will like the best. This is different from the service offered by traditional grocery stores which offer many different products, but are not arranging those products in relation to a particular request.
This means that, when Amazon is operating as a store, any re-ordering of the display results disrupts the value they provide to consumers. It also, of course, disrupts the value they provide to the products they sell. Any other product that receives poor reviews would be punished by being displayed later, but Amazon branded products will never suffer that fate. The same is true of any other algorithmic sorting.
Amazon is, with one side of its mouth, suggesting a business model that it claims will benefit both sellers and buyers (that the best products will win and consumers will be shown the product best matched to them) and also explicitly excluding itself from that system.
To return to the supermarket situation, you might imagine a supermarket which stocks all brands, but the first item in every row is the store-brand equivalent of that product which you must remove to get to the branded one.
Grocery stores (and all other brick-and-mortars) spend tons and tons of money and effort specifically arranging their stores to influence which products you will buy. It's done on the scale of which aisle certain products are on, all the way down to the scale of specifically which shelf (and even exact inches away from eye level) certain products are on.
Every single time you walk into a store, the first product you see (maybe in front of the entryway, maybe it's a big banner hanging from the ceiling, or maybe it's the design of the shelf near the cash register) is all meticulously planned.
But they are, which is what you're missing. Again, these stores spend millions and millions of dollars collecting these requests and arranging their store in response. They collect feedback and rearrange the shelves nearly every day based on requests (which can be actual verbal/written requests on their website or to store workers, or derived from things like sales numbers).
You can think of it in this way: each time someone goes to the "Chips" aisle, that is a implicit "request" from the customer that they want to buy chips, and the store has arranged their aisle in such a way that influences which chips you buy, just as Amazon arranges their search results page.
Stores maximizing the revenue they receive from their average customer, which they do quite aggressively as you note, feels very different from what Amazon is doing.
>the store has arranged their aisle in such a way that influences which chips you buy, just as Amazon arranges their search results page.
To make a somewhat silly comparison that illustrates how this is is not "just" like Amazon - I have never been in a grocery store that places their brand of chips on both ends of the chips aisle. I might find my chips before I see their brand. Amazon, on the other hand, can rearrange their shelves for every customer, and so their ability to manipulate the consumer experience is much greater.
Ultimately the arranging of physical displays, no matter the amount of zeal or data involved, seems categorically different to me than stores which can arranged differently not only for every customer, but every customer request. I think you're saying they're basically the same thing - in which case we'll just have to agree to disagree.
[1] https://www.amazon.com/s/ref=lp_16310101_nr_n_6?fst=as%3Aoff...
To extend it again to the grocery store example, if I walk into a Target and ask the customer service person for their recommendation for some crackers, and they walk over to the Cracker aisle and point directly at the Target brand crackers instead of the Nabisco ones, are you saying that's problematic?
I don't think there's anything wrong with stores recommending something in general. For instance, I don't think there's anything wrong with the "amazon's choice" label that Amazon uses.
This feels different to me, because as I said originally, this isn't Amazon recommending their brand. Amazon still ranks search results based on some combination of popularity and (probably) profitability.
To return to the in-store scenario: let's say you asked someone in Target to recommend crackers. The employee has a recommendation, but to hear it you first need to be shown the Target brand crackers, and then the employee will give you their recommendation.
1. There's limited space at the front of a brick and mortar store. It's not practical to put most of the items at the front, so anyone who's not just there for a bag of chips ends up looking through the aisles anyways.
2. Brick-and-mortar stores usually only sell a few forms of same product. If I want olive oil, there's some store brand, some italian-looking brand, and maybe a brand that advertises some sort of magical health benefits. There might be a few variations for the level of refinement/virginity. It's easy for me to look at all the options and compare them. When I look at a search page on Amazon, there's often 100's of hits, and it's often pretty unclear if there's any difference between them that I'd care about (see https://www.amazon.com/s?k=olive+oil).
So in reality, if your product is on page 5, it is perhaps as good as not being on Amazon anyway for that particular query.
If you look at it this way, the space constraint isn't much different than brick and mortar.
Then you throw in Amazon Shopping ads (aka Sponsored Products) and the shelf space metaphor gets muddled further, because it's like as if every store visitor saw unique and different endcap displays and shelving ordering. There is less individual tailoring to search results than you might expect on Amazon (especially compared to information search engines like GoogleBingBingGo) but it is still a factor.
Then there is the factor of endemic counterfeiting in some categories, so the sketchier the listings are the more likely you are to just buy a counterfeit product, which would never happen in a typical brick and mortar retail shop.
IMO Amazon's private labels are so minor and make up such a small portion of store sales that it ranks very low on the scale of things that Amazon does that are morally/legally questionable.
There's limited space on the frontpage of Amazon.com, too. If I go to Amazon looking for chips, I won't see it on the front page so I'm going to end up going to the Chips section of the site. If you're just at the store for a bag of chips, you go the chips aisle, which is also meticulously planned to specifically influence which brand of chips you will buy. I fail to see how this is any different than going to the Chips section of Amazon and seeing a specially arranged selection of chips.
>2. Brick-and-mortar stores usually only sell a few forms of same product. If I want olive oil, there's some store brand, some italian-looking brand, and maybe a brand that advertises some sort of magical health benefits. There might be a few variations for the level of refinement/virginity. It's easy for me to look at all the options and compare them. When I look at a search page on Amazon, there's often 100's of hits, and it's often pretty unclear if there's any difference between them that I'd care about (see https://www.amazon.com/s?k=olive+oil).
I don't really see what this has to do with the topic at hand. Can you clarify your point?
And if I don't like Tesco I can go to Asda. If Tesco won't sell my product I can try and sell it to Sainsbury's or Waitrose.
The equivalent with Amazon is "If I don't like Walmart, there is some guy with a market stall selling fish, another with apples, a store 5 miles away that has carrots...". Or even, "Tescos won't buy my carrots so I will just drive them to every person myself".
I have said it a few times, you can't be the marketplace and sell through that marketplace. Imagine finding the NYSE were trading shares, and were giving themselves 30ms advantage over everyone else (if you can't imagine, have a browse of the Cryptocurrency markets). Imagine a commodities market who own 90% of the oil themselves, and price themselves into every order (maybe onions...).
https://www.cbsnews.com/news/nyse-jeffrey-c-sprecher-kelly-l...
To be competitive, you can and you should.
Amazon is a platform company. Platforms commoditize the complements. They didn’t have toys, so partner Toys’R’Us, didn’t have shoes, so partner Zappos, etc.
As the platform, platforms observe transactions, such that through time, they can value complements and decide to co-exist, acquire, or compete.
This is by now a well-known strategy.
Rabbit hole: https://www.gwern.net/Complement
This is an extremely important part of the service that every store provides. The only difference with Amazon is that they offer a wider selection of everything. In brick and mortar stores, only one or a few products of each type are stocked and the rest are simply not offered. You don't think about the store providing the service of sorting the products that they decided not to offer, but they do.
A Safeway house brand is usually offered at a small discount to the name brand, because the consumer trusts the name brand more.
I think this is going a bit too far. "removing to get to the branded one" would be appropriate if you had to go to 2nd page of search results to see branded products, but most results on Amazon show competing products above the fold.
A better comparison would be reserving the best shelf space for Amazon Basics.
I rarely use amazon for anything today because the volume of garbage easily outweighs the good products, mad it's like rolling craps dice if you get a good seller. I opt to purchase directly from the manufacturer or a known retailer that know owns the product they are selling now, if I use amazon, it is exclusively for amazon brand products only.
if this type of behavior pushes 3rd party sellers off the platform and returns amazon to their glory days of being the actual retailer, I think it's a good move
Is that their brand though? I've never been convinced of that due to all the sponsored results (which are very similar to how brick-and-mortar stores arrange their products) and most egregiously, not providing consistent per unit pricing. I've never felt like Amazon is helping me make the right choice at all, but rather duping me into a choice that benefits them.
The key advantage that Amazon has over other retailers (for consumers at least) is that its logistics are so damn good. I’ll usually go to Amazon first to look for what I want, because I know they’ll probably ship it faster. But more often than not I usually end up buying from a more specialized retailer for one reason or another.
That is incorrect. You may be surprised to learn that grocery stores sell prime shelf space to distributors/brands.[0]. In this case, it's the distributer's request - not yours.
[0]https://cspinet.org/news/supermarkets-%E2%80%9Crigged%E2%80%...
Amazon can be the e-commerce site and sell commodity things. It would be different if it lacked transparency or was trying to hide it's involvement in the private labels.
I mostly realise that they are Amazon brands when I notice they are strongly pushed by Amazon’s algorithm.
This is the same problem that Google creates.
Imagine if the Yellow Pages advertisements, listed categorically and alphabetically, were re-sorted according to an algorithm according to whomever was accessing them.
To use a popular term, sorting has been "weaponised".
It is a form of filtering, curation, gatekeeping. Businesses compete to pass through the filters, past the gate.
For example, when a user selects an app for her phone, she selects from a "top 10" or some such. As with being on "page one" of Google search results, manipulating the algorithm becomes a goal. Another popular term online, "winner take all" or "network effect", is in part enabled through sorting. All those hundreds of thousands of other apps are sorted out to create a "top 10" for which all must compete.
Instead of letting users sort results on their own initiative, e.g., according to popularity or rating, listings are sorted by default.
Alphabetical listings do not create the competition that drives up the value of the "top 10" or "page one". Alphabeticisation is a transparent algorithm everyone can understand, not a trade secret.
Even on HN, we see comments re-arranged in their order in a thread, in order to manipulate reader response.
There is certainly an element of utility and convenience but, in effect and perhaps by intent, there is more to the sorting than simply what may benefit the user.
Is that really true? Maybe once upon a time, but Amazon is the last place I turn to when trying to find a product that's suitable for purpose. As their marketplace has become a wasteland of cheap knock-offs and fake reviews, I find the only way to successfully use the site is to first find a product on an external review site (i.e. NYT's "Wirecutter") or search specifically only for brands I already know and limit the results to those sold directly from Amazon.
Amazon getting the sales reduces income to anyone else selling, and when Amazon is almost the only place to sell, smaller companies will go under and new ones will have a harder time starting.
I'm with you from an ideological perspective, but from a practical perspective living in the current world the way it is, they will get in trouble from either the American or European[1] regulatory bodies. And I'm surprised they don't get it. It's only a matter of time. It will take only one of their platform users or competitors to get fed-up and make a big stink (and there's already griping), that will start a chain reaction where they will have to do something to firewall their divisions, or they will be broken-up while paying multi-billion dollar fines and taking a huge PR hit.
I'm not a genius, but it doesn't take a genius to see that this WILL happen. And they are so stupid for doing what they are doing just to sell some Amazon-branded toilet-paper. They should have just stayed an open platform and not competed with their users. They screwed this up and it's too late to do anything about it now.
>Many retailers reserve some of their best shelves paces for their private label products,
Sure. And Apple can get away with heavily restricting the type of apps that can be distributed on iOS (so much so that you can't even ship your own HTML rendering engine!!!), but if Microsoft tries something like that with Windows, they would get in tons of trouble. Do you think Amazon in this example is more like Apple or more like Microsoft?
[1] Nothing makes European regulators as happy as going after American tech companies.
If you were cynical, you could say they’re pushing the bounds because they know they’ll get whacked for something eventually, even if just for owning a huge chunk of e-commerce (already the case). And if they are going to, why don’t they choose what that’ll be, and the thing that makes them hardly any money? I’m sure they’d be happy to pay basically nothing (what, use their lawyers already on retainer and wind-down contracting of white-label crap? — and maybe pay damages, which seems unlikely they’d let it go that far).
And yet, I cannot see how regulators will just let them take over consumer goods given their size and clout, and the fact that they are using data from their users to drive their business decisions on which products to launch and compete with those same users. I just cannot see them not getting into major regulatory trouble for that.
Amazon does not pay wholesale for items in its marketplace. In fact the marketplace was explicitly set up to be a logistics-only service and level playing field for anyone who joined. Now it's not, of course. Basically they pulled a bait-and-switch on their marketplace customers.
(Ironically, they also pulled a bait-and-switch on their first retail partners by signing exclusivity agreements, and then breaking them when they launched marketplace.)
This is also why Amazon struggles to fight counterfeit products. For most of the products you can buy on amazon.com, Amazon the company does not have buyers who can verify product quality and supply chain before placing a wholesale order. It's a logistical struggle made worse by a cultural struggle, i.e. they don't want to sell counterfeits but they also don't want to do any of the normal work that retailers do to prevent counterfeits.
Whereas Amazon is not a storefront, it's a digital marketplace. They don't have to buy the stock of the product that is being sold, they just put up the listing and take their percentage if the listing sells, and then it's fulfilled by whatever company created the listing. This means that Amazon doesn't lose any money if a competing product doesn't sell.
Obviously amazon _does_ buy and fulfill orders themselves for many items, but not all.
I think there's a planet money on this specific topic
Among others. Including aggressive tax avoidance in most jurisdictions in which it operates.
Amazon is nothing like a grocery store. Nor is it like a department store. Nor is it an online store.
It's more like a B-movie monster which is trying to devour retail, manufacturing, supply chain management, logistics, consumer analytics, advertising, content creation, web services, publishing, consumer AI - and a significant proportion of the cardboard box industry.
Consumers are actual humans with complex lives that often also include producing things. Every seller that Amazon drives out of business is a consumer (or consumers) that no longer has an income. That's how this harms consumers.
Now that is not to say there isn't a brand being sold on Amazon that isn't labeled as such. While I have bought many Amazon branded items there have been a few I skipped because of reviews.
If you see it as a platform, like the windows 95 desktop with the IE icon, it might be different.
Personally as a customer, it's annoying the liberties amazon takes with my shopping experience and sponsored results and toolbar like extras and prime interstitial ads and so on...
It is more than best shelves.
Tyranny and data moat when marketplace also becomes your competitor.
That’s not to say that it’s new or illegal, it just feels scummy.
But it's no longer a flat canvas where you can see everything all at once. The shelf is not flat, it's deep. You have to move through products one by one. In the article they say that the first spot is 'valuable.' More like 'life or death.'
But I would believe it if because of the lack of incentive, they din't make active efforts to improve it.
In short, competition needs to be increased (i.e. more platforms). For example, Amazon wouldn't be able to pull so many shenanigans if users could export all shopping data to jet.com and easily shop on multiple platforms.
The other solution is updated regulations that follow in the footsteps of historical frameworks of antitrust in industries like utilities where it's accepted that monopolies are efficient, but strict measures are put in place to limit abusing market power.
The problem (IMO) is that there is no political pressure for the Justice Department to seek corrective action against these near-monopolies.
The lack of action (IMO) comes from two motivations...
1. The desire for US politicians to see US companies attain global near-monopoly status as a mechanism to help propagate US policy & surveillance.
2. The campaign finance influence these corporations buy through lobbying in Congress and their local/state officials.
1 & 2 aren't even all that independent. Amazon didn't setup HQ2 in DC for nothing. Bezos even literally bought the largest mansion in DC explicitly to host congressional networking events.
The solution is simple, in principle. Nurture, fund, and support alternatives to these companies. Realistically, globalization means there is little hope for regulatory breakups in America's future.
If Amazon starts giving their own brand preferential treatment over this crap it will be an improvement to the service. The few Amazon brand products Ive purchased, like USB and Lightning cables, are among the best available, for good prices.
As is, I try to shop elsewhere these days, even if the shipping takes longer.
Entire first row was an ad for bulletproof coffee and sugarbearhair vitamins. Second row had the amazon brand on the left with prominent amazon logos on the coffee bag and the pill bottle and a tag that says “featured from our brands” and the first word in he title for both items was Amazon. The next three items were sponsored ads.
I don’t see amazon being deceptive here. They are making it very clear you are buying the “Amazon Brand.”
It seems inevitable that once a platform, whether it's an ISP, a media platform, or an ecommerce platform, starts making its own products for that platform, then they will also start abusing their power against their own platform partners.
It's just irresistible for them not to, because there's so much to gain from it. So only (pro-active) laws could stop this. You can't leave it "to the market" to solve this, because by the time that happens (if ever), the platform company would have already extracted tens and hundreds of billions of dollars from the strategy and killed an untold number of smaller companies.
... and by the time most users would jump to another platform, that other platform would start pulling the same thing, because why not? Ad infinitum.
Try it yourself. The hard part is finding out what Amazon's brands are since they (surprise!) don't publish a list. This is the best list I could find in my short time searching
https://www.businessinsider.com/amazon-owns-these-brands-lis...
> The new approach violates Amazon’s mantra that every decision must put the customer first, said Tim Hughes, a consultant who used to work in product management at Amazon. “Why would their brand be a better option for consumers?” said Hughes, chief operating officer of a firm that helps brands manage Amazon accounts. “It doesn’t necessarily have to be cheaper, or better, or anything. So then what’s their justification to say, ‘We’re just going to put this up in front of everybody else’? This is just another example of Amazon being able to manipulate the platform for its own good use.”
I don't disagree with this, but at the same time, if you're arguing for advertising determining what gets the top slots, why would a manufacturer that can pay more be a better option for consumers?
Tim Hughes should probably figure out that the previous system had exactly the same properties
Every retailer has a store brand. Why is it a public good that I have to pay a premium price for a cable from a pre-approved seller? Why should anyone selling on Amazon think that they have an exclusive relationship with their customers? Sellers can, and always have, cannibalized one another's products. Yes, in school it's cheating, but in retail it's called competition.
Every retailer can compete with Amazon on any axis they want to, whether it's selection, price or service. Walmart does, IKEA does, and Ebay and Etsy and FreshDirect and Target and Powells. I buy online from all of these companies.
Amazon never seems to get credit for things that it does that are good for society. There are the obvious things, like trustworthy ecommerce, huge selection, fast shipping and low prices. But then there are things like raising the minimum hourly wage to $15/hr, supplying PPE and food during a pandemic and providing tax revenue through salaries. Add to that creating new economic sectors and leading the world in distributed s/w development. None of these things is inevitable, none of these things are easy to do.
> Every retailer can compete with Amazon on any axis they want to, whether it's selection, price or service. Walmart does, IKEA does, and Ebay and Etsy and FreshDirect and Target and Powells. I buy online from all of these companies.
That's the crux of the debate IMO - whether or not Amazon is a monopoly. You say that other retailers can compete effectively as a product discovery service. I am not sure. I think the vast majority just searches on Amazon at this point, so it is sort of a monopoly.
There are so so so many options out there. I use plenty of online retailers all the time. Complaining about them being a monopoly in this way is like going to the same brick and mortar retailer and complaining they are a monopoly because you're too lazy to see what other retailers are available. If anything it's even more absurd because the closest brick and mortar competition might be miles away while online the competition is mere keystrokes away.
Every single search engine is also a product discovery service too: Google, Bing, DuckDuckGo.
That said, I am not particularly worried about Amazon basics as these are commodity products, as long as they are being transparent about it. Monopoly is a problem only if they use tactics that prevent competitors from emerging - example could be incentivizing vendors to sell only on Amazon.
[1] https://www.statista.com/statistics/788109/amazon-retail-mar... [2] https://www.netmarketshare.com/search-engine-market-share.as...
Imagine you have 1000 stores all on the same street and one is so much better than the other stores that 50% of sales happen in that one store and there are no shenanigans where that one store is disadvantaging the other 999 stores. How can you argue that that is a monopoly?
And it's not like you can't make your own online shop or at least a nice web page explaining your product better than at Amazon. I wish more sellers would go to the trouble of doing that.
Amazon are using their platform to cover off those customers who are neutral in their brand preference.
A lot of small businesses got their start by leveraging the ubiquity of Amazon. Far cheaper than trying to roll your own services and also got a large set of eyes on their product.
Which is great until Amazon collects enough data to decide that it would be 'useful' to them to enter that same market.
So basically, you leverage Amazon to bootstrap your business, and Amazon uses your marketing experience and success to decide which markets to develop and enter.
Now if only they were able to charge money for their services then maybe they would need to do this, or maybe they could even come up with a monthly subscription program for anybody visiting their website...
Is their a legal distinction that establishes Amazon as a platform first, and a seller second?
The issue in this case would be that Amazon is manipulating the markets involved by effectively being the market. If FooCorp was a minor player in the market, didn't buy up competing marketplaces, and was clear about it's brand as a seller of Foo products that would be fine (think Costco and Kirkland Signature branded products). The issue with Amazon is that it is half of all eCommerce, buys up competing marketplaces to shutter them, it is hellishly difficult to determine what is an Amazon sold product and a marketplace sold product on their site, and their brand is as a marketplace.
Yes you can
https://www.amazon.com/s?k=google+home&rh=p_89%3AGoogle&dc&q...
https://smile.amazon.com/stores/Google+Inc./page/080B7645-82...
The lack of competition in US (Walmart and Target took e-commerce seriously only recently) let Amazon take almost 50% of e-commerce. But hopefully Ebay, Walmart, Target and Costco would add more competition.
Painting Amazon like this only online market that we cannot escape is a bit misleading. Amazon has a long way to go to beat the asian e-commerce, and now has domestically more competition with Walmart, Target and Costco.
Amazon is barely holding on ~44% of the US eCommerce market.
And where they're blocked by an adblocker, as they should be.
It seems like something the world desperately needs.
But in reality they simply own the whole thing and it is perfectly reasonable to do however they want.
I guess rephrasing, what's the definition of monopoly here?
https://www.theverge.com/2019/3/9/18257965/elizabeth-warren-...
monopoly: the exclusive possession or control of the supply of or trade in a commodity or service.
Aren't suppliers free to start their own store, drive traffic to it and make money? Aren't suppliers free to list their products on Amazon, Ebay, Craigslist, Etsy, Shopify etc.?
How is this considered a monopoly? I'm actually interested in an answer. I might be missing something.
[1] https://www.cnbc.com/2019/07/17/eu-to-investigate-amazon-ove...
[2] https://www.theguardian.com/technology/2020/may/01/amazon-je...
The issue wasn't that Microsoft gave away IE for free. Netscape gave away Navigator for free, too. The issue was that Microsoft tried to "leverage" Windows to increase IE's market share.
Microsoft tried to use their monopoly as the supplier of one piece of software (the OS) to distort the market for another piece of software (the browser).
Netscape did not give Navigator away to PC builders for free originally; selling volume licenses was their business model, and Microsoft illegally destroyed it. Hence the prosecution.
Netscape in those days was a borderline unusable product, and trying to blame Microsoft is misplaced.
Have you ever tried to install another browser on your kindle?
Also, much of the drama in the trial was about Microsoft removing Explorer from the distribution, not about barriers to the installation of Netscape.
If Microsoft had competed and won on technical merit and/or marketing, that would have been fine. But they didn't.
Today I still have IE on my machine, but I never use it, because Chrome causes fewer problems. Having it sit on the machine does no harm, and doesn't bother me.
That anti-trust battle was the first in history where it was a dispute between one free product and another free product. Nobody ever demonstrated any harm to consumers at all. That was never even an issue at trial. Nobody ever demonstrated that Netscape couldn't be installed.
There’s less and less incentive for you to put up your commodities on Amazon for a vendor
>> Amazon's New Competitive Advantage: Abusing its Monopoly Position
Amazon ALWAYS acts illegally.
Need some light bulbs. AmazonBasics ones look good. Oh, doesn’t ship to California.
Some models of cars are unable to be sold here for the same reason, although most are designed to conform to California regulations due to the manufacturers not wanting to miss out on the California market.
Amazon chose not to earn the normal profits that most businesses need to survive and grow in order to offer unrealistically low prices on all sorts of products specifically in order to gain this advantage. They didn't just happen to gain the market dominance that allows for this sort of anti-competitive abuse, they bought it by convincing shareholders not to punish them for choosing not to earn a profit.