Comment by saltking112 | Hacker News Reader

Comment by saltking112 | Hacker News Reader

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With commoditized products the brand/manufacturer has no pricing power, so in order to go down the cost curve the firm would need to deploy more capital. This means making things in bigger batches, more efficient shipping, more advertisement investment taking ads out on Amazon to get initial reviews etc...

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?

> Amazon Basics has an advantage over third parties

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.

On the sourcing side, they have a scale advantage of placing larger orders which can get them better OEM pricing. Depending upon the product category their probably are manufacturing efficiencies of scale that enable better pricing. And in particular, their purchasing departments have more efficient analytics numbers to make product entry decisions that benefit from the scale Amazon has reached. So the efficiency in which they are likely to operate in making JIT purchases, or predictive purchases, and avoiding costly inventory mistakes and markdowns is only possible with the large market reach and ability to hire a technical depth of analysts (or tools makers for analysts) enabled by their size.

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