Comment by fragmede | Hacker News Reader

Comment by fragmede | Hacker News Reader

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It's more nefarious than simple loss-leadering and undercutting your competitor's margins. That's business 101. Amazon is playing business 201. Amazon took over pricing for the widget, and then undercut that price with their own. Stay with me for a second because 201 is kinda complicated.

Widget usually sells for $25. Amazon agrees to buy 1 from you at $20 (you give them a volume discount because it's Amazon buying so you figure it'll sell like hotcakes. You still make a profit at $20.). Amazon then prices your widget on their marketplace for $30. Seems fine so far. The trick is that Amazon turns around and sells their widget, made by an alternate supplier, for $23.

Your deal with Amazon means you no longer have control over how much your widget sells for, just that you're selling them to Amazon at $20 and Amazon gets to charge however much they want.

To no one's surprise, your widget, priced at $30, doesn't sell because Amazon's is $23. You're not allowed to turn around and sell them on Amazon's marketplace at all, so they just sit there at $30 and don't sell.

Is there any evidence this happened? It seems like companies would simply leave the "sold by Amazon" program, and quickly.

Its actually right in the posted link:

The “Sold by Amazon” program resulted in prices for some products increasing when Amazon programmed its pricing algorithm to match the prices that certain external retailers offer to online consumers.

As a result, when prices increased, some sellers experienced a marked decline in the sales and resulting profits from products enrolled in the program. Faced with price increases, online customers sometimes opted to buy Amazon’s own branded products — particularly its private label products. This resulted in Amazon maximizing its own profits regardless of whether consumers paid a higher price for sales of products enrolled in the “Sold by Amazon” program or settled for buying the same or similar product offered through Amazon.

Yes, I read that. It doesn't address my point, which is that merchants would just leave the program if they faced declining sales.

Are you asking if a seller would leave, or could leave? To the former the answer is obviously “yes they would”, to the latter idk.

But regardless, even if they are allowed to leave the program, that doesn’t make it any less illegal.

Where would they go? Amazon is where the customers are. This is the problem.

They’d go back to selling outside of this program. They don’t need to leave Amazon to do that.

Amazon is actually fixing the price that you are selling on Amazon matched to what other sites are selling. There's no point in leaving if you're selling your widget on other platforms for the same price.

The article says so.

That sounds like pretty normal branding. I can get a powered hub for $20 from BUNCHALETTERZ who will disappear without a trace next quarter, or $35 from Anker that I’m pretty sure won’t burn down my apartment.

Yeah, but normally your competitor doesn't get to choose the price of YOUR widget.

Is that true? This sounds like typical white label type stuff that you'd see at the grocery store. Safeway sells Safeway brand X and also name brand X, and presumably chooses the prices for both.

The grocery store probably has less incentive to abuse the relationship since the shelf space both products take up in the store is limited and valuable.

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