Hacker News Reader

Comment by toasterlovin | Hacker News Reader

Some perspective: we sell on Amazon as a 3rd party seller. Amazon takes about 9% of the sale price of our products as their commission (it’s actually 12%, but includes credit card processing). To which you might be inclined to reply, “Ah, but 9% is a reasonable commission, so that’s okay.” But we sell physical goods, which cost money to produce. It’s typical for our products to have 20-25% gross margins. So as a share of what’s left after accounting for the cost to produce and transport our products, Amazon’s commission is similar to Apple’s App Store fee.

Just something to think about if you want to argue that a 30% commission is too much for facilitating a high trust purchasing environment with customers who are ready to spend money.

Oh yeah, and you’ll never guess what Amazon’s policy is about steering customers off of Amazon.

View on HN

Amazon customers are still available on other platforms. They use credit cards and they can put their details into any site, and I imagine most of them frequently do. Their shipping address is also accepted by every company.

iPhone users don't carry a second Android phone, and their purchasing decision has committed them to only buying on the App Store for at least a few years at a time. And the crazy part is they are paying the Apple Tax even for services like Spotify that they might primarily consume on other devices. You can't make a store that ships to Apple users - only Apple can.

I'm not quite getting your point.

The parent seems to be saying that when you take the difference between physical and digital goods into account, that Amazon is leaving him with a similar slice of the revenue.

You seem to be arguing that he has alternatives to Amazon.

However, you also seem to be making the point indirectly that the motivation for selling on Amazon, and why businesses sell in the App Stores, is that they want the additional sales that come from targeting those marketplaces.

Isn't then there little real distinction from selling products on Amazon (where you could sell elsewhere, but dramatically fewer would see and purchase your product) or the App Store (where you could make a web app and sell elsewhere, but dramatically fewer would see and purchase your product)?

Companies like Amazon and Apple are free to set prices, but there are rules about being a monopoly and what that entails. Amazon is not a monopoly, it just has a dominant position. Apple has used technological means to make itself a monopoly.

Web apps are not a real alternative. Firstly, an app you can only use on a desktop is a non starter for almost every use case. So you need a mobile layout. Now, some features like background audio and video are not available as a web app. Some are less reliable like user sessions, timers, push notifications and offline behaviour. Technical innovation is not possible due to the standards based approach - for video calls you have to use WebRTC for example, for games you have to use WebGL. Some features like notifications, vibration, were delayed by Apple until users were trained to only accept native apps. There's others like battery status, Apple Watch, Settings pane that I don't know the exact status, but I'm sure App Store gets an advantage there too.

Your whole second section seems like a startup pitch to solve those issues.

"Web apps for mobile".

I think the difference is that amazon is not a platform. You sell on Amazon because it is where everyone is and they did that by burning lots and lots of cash to ensure everyone margins cannot be larger than a paper atom.

Now that they're trying to capitalize on it they're becoming worse as a store and I can't remember last time I used them (in NL).

If you buy an iphone there is no one to compete, Apple does not have to play the low margins game because there is no other game in town. Amazon does not take 9% if you sell somewhere else and does not care if you sell cheaper elsewhere, Apple does.

> If you buy an iphone there is no one to compete

This. The problem is not the 30%, the problem is that iPhones do not have an option to buy apps from, lets say a Amazon Store or Epic Store.

That has been the style of argument made to regulators so far.

However then people get shocked that Apple says ok, we've rolled out the ability for third party app stores, we still review all the apps before signing, and the store owes us a 20% commission.

They haven't rolled out the ability for third party stores.

Yes, people are shocked. Apple's provisional approach to legislative compliance isn't working, their indifference towards public opinion is what brought antitrust regulators onto the scene in the first place.

Their App Store monopoly is the most literal definition of anticompetitive bundling in the 21st century; they're tying the primary product (Apple hardware, software, APIs, etc.) to a secondary product (the App Store) that can be offered from multiple competitors.

Again, this is what I think people get wrong when they talk about anticompetitive bundling.

Apple will continue to take a cut to make apps for the phone. The App Store and in-app purchases are how they take their cut today.

The bundling is anticompetitive against the potential market for third party payment providers and third party app marketplaces, sure. However, decoupling it is independent of reducing Apple's high fees. Apple will continue to charge a substantial fee for their part, even if due to regulatory compliance they offer less services to developers.

Someone would need to make a legal case directly against the fees Apple charges. I suspect that is a very challenging thing to do - least of which because they have never raised rates. The fees Apple collects have been the same since the first app was sold for iPhone, and the success has grown under that framework.

I don't expect the fees to go down. If you decouple Apple from the iPhone app distribution network, they can charge 100% fees for all I care. That is an entirely separate charge from the $99 developer registration fee, which they can also change to reflect their "SDK cost" or whatever. That's why ultimately, I don't care if Apple charges outrageous fees for their ecosystem. As long as competitors have equal access, there's no captive market to exploit.

What I expect is that, for the first time, Apple and their App Store partners will be forced to reckon with user choice. Their business will have to change if their success is predicated on a neverending source of R&D funding from payment processing revenue.

Which is, in this context, like Amazon taking 9% if you buy something from Ebay.

> like Amazon taking 9% if you buy something from Ebay.

If it's shipped via Amazon.

But also if people didn't have mailboxes, they just had Amazon Boxes or Ebay Boxes, and if you had an Amazon Box they explicitly forbid you from shipping anything to it with any other delivery company.

And also if we were talking about software rather than physical goods, and there were about a thousand other complications that made it not quite a 1:1 metaphor.

> Amazon does not take 9% if you sell somewhere else

So we do sell on other e-commerce platforms and you’re never gonna guess what their fee structures are.

(Basically the same as Amazon’s)

But there's actual competition underlying this fee structure, since the users can easily move from Amazon to e.g. eBay or really anywhere else in search of some item that they want. The only lock-in that Amazon might have on them is Prime membership, which the users have to actively opt into.

Whereas Apple could start charging 50% tomorrow and still have all the major apps in the store because of their market dominance position combined with ecosystem lock-in and walled garden.

> Amazon... ...does not care if you sell cheaper elsewhere

I can't find a good source for it, but Amazon is very sensitive to prices for the same goods on other sites. My understanding is they automatically match lowered prices on a number of competitors. They are also getting sued by the FTC[1] for punishing sellers that sell lower elsewhere.

1. https://www.businessinsider.com/how-amazon-forces-customers-...

There's plenty of digital goods with low margins that apple forces a 30% cut.

e.g. Spotify, Twitch, Patreon etc. Most of the funds go to the creator. Completely breaks the model when Apple forces a 30% cut of gross.

That being said, i'd also argue Apple's app store is a complete monopoly on iPhones. Iphones and app stores are such an essential part of life, they deserve to be neutral a la internet neutrality. Not sure how we all become pro internet neutrality but somehow suffer Apple's 30% tax.

I don't think you can sign up for Spotify using in-app-purchase. Once you're in the app it says:

"You can't upgrade to premium in the app. We know, it's not ideal"

You have to go to their site to upgrade your account. Apple gets a 0% cut of Spotify's subscription revenue

I believe that is a special deal that apple made them which does not apply across the board.

Apple will approve apps that prevent sign-up in the app. The problem is that they will deny you the ability to even tell the customers where to go to sign up. Notice that the message displayed in the Spotify app doesn't have a link, doesn't even mention that you can sign up on their website. The customer has to infer that that is what's going on -- good on Spotify for using "premium" as a trigger word because Apple rejects apps that contain the words "purchase" and "subscription" _anywhere_ in your app if you're not using IAP. We were rejected once because those words appeared in an error message sent from the server.

I don’t think it’s special for Spotify. It comes under the “Reader” apps clause (originally carved out for Kindle?) where apps which sell: music, movies, books, email can require that a user create an account on the web first (but cannot link to it, which is stupid)

I know a few vendors who sell on Amazon. With advertising, they end up paying close to 60% of the selling price to Amazon.

How can Amazon pricing be so competitive if the cut is so large for third-party vendors?

1. Because you don't know how much vendors actually pay for the products

2. Because some products might be sold at breakeven price to attract and retain customers

3. Because some products might be loss leaders to attract and retain customers

a) Amazon pricing in general isn't competitive. I regularly use geizhals.at, a price comparison website, and Amazon rarely is the cheapest option.

b) I don't know if parent poster was talking about FBA (fulfillment by amazon) sales or not. If they are, then Amazons cut includes shipping and storage costs, which for low value items are often more than the stuff costs itself.

"third-party vendors" on Amazon includes a galaxy of drop shippers that do little more than create product pages and let Amazon and the actual manufacturer sort out everything else between them, such as logistics, delivery, returns, etc.

It's a myth that Amazon's prices are competitive. One vendor I know sells his product through Shopify at a steep discount compared to Amazon and yet most of his revenue comes from Amazon. Amazon benefits from multiple things including their brand image as a competitively priced store, consumer trust, brand awareness, Amazon Prime members who get shipping "free", massive user data, etc.

> How can Amazon pricing be so competitive

It's not anymore; the reason they continue to be so popular is locked-in mindshare (just like you think of going to Google to search the web) and because of the fast shipping and easy return policy (esp through Prime).

Because these third-party vendors are, most of the time, selling third-party China manufactured stuff at 1/10 of the price they are selling it to you. The problem is that China can't communicate well enough. At least not for niche products.

Just a note that for my business (and many others) Apple takes a 15% cut

Apple will lower their cut to 15% if you earn less than $1 million USD/year across your app businesses, or if you sell subscriptions and your subscribers persist for longer than 1 year (so 2nd - Nth year of subscriptions are split at 85/15)

Not defending the size of their commission, but in practice it does vary from the 30% that is commonly quoted

That’s just the commission on the sale itself. It doesn’t count FBA or advertising fees which in practical terms are often necessary. After all is said and done, Amazon is usually taking much more than 9%.

Yeah, exactly, but I wanted to compare like for like: just the commission on the sale. You can also pay for ads on the App Store, which would be in addition to Apple’s 30% take.

What that 9% buys you I guess is access to people like me. I'm not Amazon's biggest fan, but their protections and guarantees have always been solid to me. If it doesn't arrive, I get a replacement or refund. If it's broken, same. If it's junk, they'll take it back and issue a refund.

I've been burned by too many places to just start arbitrarily buying from someone I've never purchased from before directly. I've had companies just not respond, accuse me of stealing, tell me missing packages aren't their problem, charge enormous restocking fees, and in more than one case call me an idiot that doesn't know what I'm talking about. None of that with Amazon.

Maybe after establishing a relationship of being a reputable brand I could be swayed over, but even then there's no benefit to me unless the price is cheaper.

Are they toasters? Because I hear there might be some competition.

But genuinely, your comments enrich this sort of thing. I love your input.

Reply on news.ycombinator.com