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Comment by ihaveajob | Hacker News Reader

In my opinion, Amazon needs to be split into at least 4 independent entities:

  - Online marketplace
  - Consumer products
  - Internet infrastructure
  - Delivery logistics

Similar to the three-tier distribution system for beer in most states (a brewer cannot be a wholesaler or a retailer). This makes it easier for smaller players can compete with the big ones on quality at least, if not price or recognition.

(Edit: format)

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The three-tier system is absolutely awful in a lot of states for smaller breweries. It has been used to severely reduce their ability to sell on-site for off-site consumption, which is key for smaller breweries. Many states set the revenue/volume cap too low before you have to cut off on-site sales of off-site consumption for you to not take a significant hit to your profit swapping to a distributor.

It also makes it very easy for the bigger groups like AB Inbev to play games with distributors around pushing enough volume of their products if they want to get allocations of more in-demand bottles like Goose Island's Bourbon County Brand Stout.

I did not think I would ever see someone seriously arguing that the three-tier system for beer is a good thing for smaller players.

The thing with the three-tier system is that it only partially disaggregates the system. Market consolidation has a certain gravity to it: once one market is consolidated, they start stripping the margins off their suppliers and increasing prices for their customers. The only defense against this is to consolidate yourself to maximize your negotiating leverage. If wholesalers and retailers were horizontally disintegrated then it'd be a better system.

This is also why businesses are furiously and unanimously anti-union. Labor is their biggest cost and they get ahead if they can keep labor fragmented while they consolidate.

> Similar to the three-tier distribution system for beer in most states (a brewer cannot be a wholesaler or a retailer). This makes it easier for smaller players can compete with the big ones on quality at least, if not price or recognition.

This seems like a bad example given how its arguably led to massive consolidation in beer

I'm pretty sure the beer laws hurt small breweries and consumers. Back in the 1980s when these laws were at their most numerous and strictest, the market was dominated by a few macrobreweries. Even today, the states that restrict brewery self-distribution have half as many breweries per capita as states that allow it.

> a brewer cannot be a wholesaler or a retailer

Reminds me of the weird law in a lot of states where breweries and distilleries can't use the same equipment or physical location - which pushes out smaller more varied players since you need capital in order to operate multiple locations.

Amazon has been cognizant of this[antitrust risk] for a while now I believe. The internal systems are all set up to run independently, most systems are modular and already run as separate entities with permissioned access.

Proof: worked as an SDE for AWS and Amazon for 7 yrs.

Isn't that done because independent modular systems make it a lot easier to build stuff inside of such a large company? Bezos said as much in 2002 when he issued his API mandate.[1][2]

1. https://chrislaing.net/blog/the-memo/

2. https://gist.github.com/chitchcock/1281611

> independent modular systems make it a lot easier to build stuff inside of such a large company

Yep this is definitely true. I sort of saw it as a two birds kind of situation. I wasn't privy to the reasons for c suite decisions but imo they are definitely cognizant of regulatory concerns.

> Delivery logistics

I wonder if there's a model where carriers cooperate on last-mile delivery. Maybe form company they all invest in that goes from regional hubs to homes. It can't be efficient to have 4+ carriers delivering to the same neighborhood.

As someone living in germany: We don't have a three tier system. But we have literally thousands of breweries selling better beer at waaay lower prices than in the US. So your three tier systems sucks...

> we have literally thousands of breweries selling better beer

This may have been true a decade ago, but today there is an entire microbrewery scene in the US where there are hundreds of them inside individual states. Better is subjective, sure, but any kind of beer you get in Germany you will find a few dozen US microbreweries making the same.

If you like expensive, over-hopped IPA made with mediocre ingredients and specially bred hops that are so potent they (kinda) overpower the taste of beet sugar and inferior malts, then America is a great place to pay more money for beer.

There some genuinely good beers around, but they are few and far between and WAAY more expensive than great beer in Germany. And from elsewhere in the thread, it sounds like our 3-teired system does indeed majorly suck for microbreweries. It may be a big part of why they have to cheap out on ingredients and try to cover it up with palette-dominating hops in order to turn a profit and stay afloat.

Europe has plenty of mediocre "craft" beer. I've had tons of beer in Europe that tasted like homebrew - one dimensional.

American craft brewers lean heavily into hoppy IPAs because that's what craft beer buyers like. IPAs are almost always the best selling beer that a craft brand makes. If you talk to them, they will say they'd love to make more varieties of other styles of beers, but IPAs keep the lights on, thus 40% of their product portfolio ends up being IPAs.

I hate IPAs and the style of hops American brewers use, so I tend to drink imported German/Czech lagers and pils a lot.

This is a meme. Most breweries make other types of beer, I go for Pilsner or Kolschs myself, and the beer is not more expensive than larger breweries. You’re regurgitating a stereotype about American millennials.

The USA used to have a system like that, we have a long history of brewing, but then we had to go fight the Nazis, so everything was rationed and industrialized. That's why our most popular beers suck.

I question the assumption that simply letting more small players compete is going to improve outcomes for anyone who doesn’t happen to own one of these smaller businesses.

Vertical integration is fine as long as there are competitors at each layer.

No it isn’t. Integrations, both vertical and horizontal, should be discouraged and companies should do one thing and do it well

This view is not held by economists because it’s really inefficient and is bad for both the business and the consumers. It adds pointless friction all over.

>(a brewer cannot be a wholesaler or a retailer)

Does that mean brewpubs can't exist or just that they couldn't also sell the beer bottled?

But regarding Amazon, I agree.

I understand the point is you can do two, but not three of them functions.

Amazon also has excellent code building and deployment infrastructure that could be it's own business.

I would add a fifth - advertising.

- advertising

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