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Comment by BrentOzar | Hacker News Reader

Think of Amazon's role as an online merchant: they've built a 3rd party merchant system where other folks can use Amazon's retail and distribution. Then, they gathered centralized data of what sells, at what prices. They stepped in and started carrying more profitable items themselves.

Now, look at their role here: if this takes off, they'll have data on what merchants are selling, for how much, and to whom. These are items that Amazon wouldn't normally get sales data on because people choose local vendors instead.

If Amazon wanted to start pushing more into local markets (or different kinds of products), they can make a fortune off this data, and that's why they can afford to undercut companies like Square. It's a long term play.

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What makes you think they are not buying this data already from credit card companies?

For example, by using http://www.datalogix.com/.

Credit card companies only know where you are shopping and how much you spend. This gives Amazon product level data.

Precisely. This is deep in the trenches data.

Amazon will gain by knowing what products sell most at what time of the week. It will allow predict where to roll out certain services. One day delivery? Done.

IIRC credit card companies don't have that much of this kind of data. For the most part when you pay with a card, the transaction details (for example line-items) are not reported to the cc company or processor.

Credit card companies do not have this data. They only see the transaction total not the items in the basket.

Also, I guess most of the merchants who sign up will be first-timers who accept cash before. Information from these people are what Amazon needs. Let's say in certain region there has been high sales of tea cups, I won't be surprised if one day Amazon starts suggesting its tea cup selections to buyers from that region, with free shipping and lower prices...

> If Amazon wanted to start pushing more into local markets (or different kinds of products), they can make a fortune off this data, and that's why they can afford to undercut companies like Square. It's a long term play.

Possibly. Alternatively, Amazon seems to operate under a business model something like: 1) enter an existing market with a product offering that is at best the same as the competition 2) undercut said competition with unsustainable pricing until you drive them all out and have a monopoly 3) raise prices, profit

Does it? In what market have they done (3)?

They're raising prices on Amazon Prime (and bundling more things I don't want into it, Microsoft-style).

In what market does Amazon Prime compete?

Shipping.

More like the "shipping of amazon products" market, since I can't exactly ship my stuff with Prime. And I'm pretty sure Amazon was always the only provider in that particular market, so they didn't really do (1).

They haven't really reached (2) in any market besides books. As dominant as Amazon is, Wal-Mart still towers over them for just about every product category that isn't printed on paper.

I'd argue (3) shouldn't read raise prices - that isn't really Amazon's MO, (3) should read "leverage their de facto monopoly to squeeze suppliers for all they've got, Wal-Mart style". This is certainly happening in books.

That isn't a new strategy. Starbucks did it all throughout the 1990s, opening locations sometimes literally on every block of major cities, many of them money-losing. They waited for the existing coffee shops to be driven out of business and then thinned out their locations to a more sustainable density.

They're only undercutting Square until 2015, after that the fee is 2.75%, same as Square. Read the fine print.

> They're only undercutting Square until 2015, after that the fee is 2.75%, same as Square. Read the fine print.

Yes, because Amazon never lowers their prices, do they? Read the news.

According to the site it's 2.5% instead of 2.75%.

Until 2016.

Not quite. The rate after the promo rate is 2.5% which still undercuts Square. The 2.75% rate is for manually Keyed transactions. Also, the promo lasts until 2016, a good amount of time to convince users to switch and then keep them with marginally lower rates.

From the page:

"Sign up by October 31, 2014 to lock in this special rate through December 31, 2015. Pay 2.5% beginning January 1, 2016. Rates apply to all major credit and debit cards."

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