Amazon forces sellers to divulge COGS, won't reimburse other costs
sellercentral.amazon.com
sellercentral.amazon.com
Should the DOJ be hearing about stuff like this?
They can use COGS to squeeze margins and even decide which merchants and products they can compete with directly.
When a trillion dollar company is stepping on ten million small merchants, that's robber barron behavior and calls for DOJ intervention.
The right governmental department is likely the FTC instead.
(maximize individual ingredient weights given ordering on package must be in weight order, must add up to total end weight, and must be in the following rough proportions in order to be anything like the end product)
Curious what you did.
Also, how's it better than the strategy of just putting it out for bids? If their margin is 7% at a bid that causes them to lose the contract then they'll lower it rather than lose to the other guy, and so will the other guy.
Companies want the branded good because they think it will sell well, but they also don't care if the brand destroys the product. They just want the brand.
The thing where they make a worse version of the product isn't Walmart screwing the seller, it's the seller taking the short-term profit option by screwing the [Walmart] customer until the customer notices. And then the question is whether the customer notices whether the product is worse, or the customer notices that the product is worse from Walmart.
Also, a lot of the store-specific SKUs aren't actually different whatsoever, they just put a different number on the box because it gets them out of MFN clauses with other retailers and the retailer likes it too because it gets them out of price match guarantees since nobody else has that SKU to match against.
Doing this allows them to negotiate a lower price from the manufacturer or get the manufacturer to adjust the ingredients to lower the COGS. So either it increases their own margins or allows them to have lower prices than the competition.
The issue is that the estimate doesn't get you the fraction of a percent because it isn't accurate to within a fraction of a percent, so you don't know if it implies you can squeeze them for much more or not.
It feels wrong to say “this approach won’t work anywhere”, maybe you are saying this approach won’t work everywhere. That’s fine, it doesn’t need to. And I’d defer to the person who did this work, it sounds like successfully, versus someone whose opinion is very broad and I’m not sure what evidence or experience they are basing their commentary on.
Suppose there are 100 suppliers. Or even just two that aren't colluding with one another. The retailer goes to each of them and plays them against each other. They all want the contract as long as they can eek out at least a small margin and the winner is the one willing to offer the lowest price.
What are the possible ways that this doesn't result in the winner having a razor-thin margin whether you know their costs or not?
Possibility one, there is only one supplier or there are a small number who are colluding. Knowing their costs doesn't help because you have no other means to get the product than paying the asking price, since there are no non-colluding suppliers.
Possibility two, one of the suppliers has lower costs than the others. Their costs are $5 when the next lowest is $20, so they can bid $20, have a 75% margin and nobody can beat it because at $20 the competition's margins are already zero. But this is the same as the first one. Even if you know their costs are $5, there is no one else who will give you the product for less than $20 and then they don't have to do it either.
> And I’d defer to the person who did this work, it sounds like successfully, versus someone whose opinion is very broad and I’m not sure what evidence or experience they are basing their commentary on.
Management at different companies has all kinds of opinions on how to do something. Just because somebody did something somewhere doesn't mean it's a useful strategy, only that a manager somewhere thought it would be.
This can be challenging in the decision making sphere, or when events are unpredictable (planning, stock trading). But it would be weird if we didn't allow for deference to people with actual specific knowledge and experience over those who are just surveying from the outside.
Even further, maybe what you're saying is true under general assumptions, for 90% of companies. However, how do you know there aren't outliers for whom the assumptions do not hold true?
Not to be too blunt, but what evidence or information do you have that makes this more than an "armchair quarterback" situation? Have you experience in this particular field to such an extent that it can be extended as a functional rule within the industry, or are you expecting it to behave like physics? We can't just take general principles and assume they hold true in specific circumstances - that is what makes this kind of work so hard.
The right answer here is to have the person claiming inside knowledge describe the bad assumptions and why they weren't true in that particular case. Because that's how you distinguish that case from the one where a bad manager is just assigning arbitrary work.
More than that, you need that information to do something useful with it anyway.
Suppose the answer is that they're doing the research to see if they should enter the market for manufacturing the product themselves. Then this works (a) only in the case where the existing market is uncompetitive because otherwise the existing suppliers already have razor-thin margins and there is nothing to extract and (b) only if you're big enough to justify building an entire factory and buying out all of its output yourself. But under those circumstances knowing the cost of production could get colluding suppliers to cut you a better deal to prevent you from entering the market. Moreover, the cost is further justified in that case because if they won't cut you a deal you'd have had to do that research to start manufacturing it yourself anyway.
Without knowing that context the information is misleading. Because (a) implies that anyone doing it are actually the good guys because the counterparty is a price-fixing cartel or monopolist, and (b) implies that it's a waste of resources for smaller entities to pay to do the calculation when they can't enter the market themselves or credibly threaten to in order to get the deal. And even if you are big enough, you would still have to know that making that threat is what you have to do with the information.
So just saying they used it is useless until they tell you how, and then you can assess their claims by reasoning about what they tell you.
> We can't just take general principles and assume they hold true in specific circumstances - that is what makes this kind of work so hard.
General principles apply unless there is an exception. But if someone is claiming there is an exception, the first thing they should be expected to do is spell out how the exception works.
"When we say “Manufacturing cost”, it means your cost to source a product from a manufacturer/wholesaler/reseller, or produce the item if you are the manufacturer. You can provide the proof of your cost of sourcing and we will reimburse you accordingly. If you do not wish to provide your cost, we will provide our cost estimate and we will reimburse you for it. We calculate our estimate by evaluating the sourcing cost of comparable products sold by Amazon, by other sellers, and through other wholesale channels.
It excludes costs such as shipping, handling, customs duties, or other costs."
You could possibly try setting up your own "reseller" entity, where they act as an in-between, handling the shipping costs, etc and then reselling it to upon arrival for near the price sold?
Later in life I wondered whether this was really fair, as things cost money to order, process, and store. (Though this is normally baked into retail pricing in the markup and also there is normally an accounting allotment for shrinkage.)
Later still I realized that this was perfectly fair! It's an opening point in a negotiation.
The law generally puts responsibility on the party that should know better, which is the professional.
Is that not the case in the US?
No need to downvote just because y’all don’t know the law, lol!
Well that’s just wrong, the damage itself is not a crime but the leaving without paying part is. If I accidentally fall onto your parked car and leave a dent, do you think I can just leave because it wasn’t intentional?
In the case of a no fault accident like a fire, paying back a different amount might be negotiable. A customer causing loss of a product on consignment might or might not have a pursuable compensation path. Under these conditions, the consignor still has a duty of care for their consignee's inventory while it's in their possession. Negligence contributing to loss from external cause tends to undermine negotiation of liability.
A consignor's own processes breaking a consignee's product is none of those things. Attempting to lowball repayment of loss entirely due to the consignor's own equipment and activities should be laughable. Successfully doing so with "show us your books" while actively competing with consignee's product shouldn't be possible without substantial regulatory influence on competing markets to constrain alternatives. There is no reasonable, functioning marketplace where this is feasible.
Previously when Amazon lost or damaged items in their warehouses, they would reimburse sellers the full sales price. Starting March 2025, Amazon will only reimburse the manufacturing cost of lost or damaged items. Sellers have to either accept Amazon's estimated manufacturing cost or provide documentation of their actual manufacturing costs.
Human beings pouring over millions of documents of manufacturing costs doesn't scale. If it doesn't scale, Amazon typically gives up. All merchants have to do is flood Amazon with made-up documentation. What's Amazon going to do? Kick them off the platform? They just come back as ZUHUFRUAH and continue selling.
Use big tech's "scale" fetish against it.
That's an exemplar, not the total space of possibilities, so saying this particular attack doesn't work at this point in time is not the point. Amazon 100% most certainly is in an adversarial relationship with a lot of its vendors who are actively involved in intelligent attacks of their systems, so "vendors will hack the AI by input if you let AIs do all the work" is absolutely within their threat profile. Don't just think of LLM hacks like I show; think of straight-up forging the documentation, for instance. Is the AI going to sniff that out? (As humans would have a hard time with that as well, this is arguably a super-human AI ask.)
You need humans somewhere. And not just scanning over the documents and using their human brains, but actually investigating and verifying the claims, because Amazon is, as mentioned, in a hostile relationship with a lot of their vendors. If Amazon just accepts the provided documents, their vendors will sniff that weakness out in a single-digit number of weeks. There is definitely a lot of money that Amazon is going to have to inject into this to get the benefit.
This isn't a "every single one must be enforced" kind of thing. If they can reduce their costs by 15% on average that is a very large number.
Awwww, thanks. You're a sweetie, too!
Amazon pays less in all outcomes. Amazon gets to reimburse you based on equivalent drop shipped item costs. Alternatively Amazon gets a breakdown of your costs which they can use as insight for their house branded alternatives and even negotiations with suppliers.
I suspect many premium brands are going to leave Amazon with this change.
That sounds like a win for Amazon, they get to fill the void with their house brand
Lina Khan could have acted on this information. Too bad she's being ousted. We needed her.
That quote was originally talking about him undercutting competitors on price because they were greedy about margins, and building a huge and loyal business on it, back when Amazon was much smaller. but in light of this new policy and its ability to gather data in an asymmetrical way That leaves Amazon significantly more powerful, it really sounds bad.
“For items that are lost or damaged after a customer order in Amazon’s store, we’ll continue to reimburse you for the sales price on the original order minus applicable fees”
>Car insurance is often for “replacement value”, right?
I think it depends upon your insurance. The insurance I have for cars is always based upon the value of the car at accident time, usually far less then its replacement value.
0. https://marketplacelearn.walmart.com/guides/Walmart%20Fulfil...
Plus, is Amazon loosing goods a common occurrence or this is a policy designed to solve an extraordinary issue?
The title is misleading, regardless of how bad the policy is.
They used to have a fairly high loss/damage rate. Lately it seems rare, for what it's worth