When you bring up tech for disabled folk, how the right to repair is constrained looms large. Repair of wheelchairs and mobility scooters is a racket, and since many disabled people have fixed or little or no income for a variety of reasons, there's an underground economy of wheelchair repair.
Great article as always, Matt. One nit: France didn't ban free shipping, it banned free shipping *on books* because book prices are regulated in France (you're not allowed more than 5% discount). Free shipping on the rest remains a thing. And Amazon worked around the free shipping on books ship by shipping for 0.01€. Yeah.
I don't mean this to be rude, but you've clearly never sold on Amazon. Amazon, while not a walk in the park, is the best experience out there for the majority of sellers. It's also immensely protective of its consumers. Let me explain the reason behind some of the evil-seeming moves you've pointed out.
Shipping costs: FBA (the service 3rd party sellers use to offer Prime shipping) is practically unbeatably cheap. Even if the Buy Box weren't a factor, you'd be hard pressed to use any shipping + storage option that's more expensive.
Buy Box existence: would you rather search for "chapstick" and get 15 different listings offering the exact same product? Because that's the alternative. You can be efficient and lump everyone selling the exact same thing in one listing, or be "fair" and crowd my search results.
Buy Box competition: A lot of 3rd party sellers suck. They'll say they have inventory and won't, or take forever to ship. It makes sense that Amazon would prefer sellers use their shipping and warehouse service. They can ensure 1) the inventory levels are accurate, and 2) timely shipping. It gives you as a consumer a better experience, and a brand you can trust to deliver.
Also, not mentioned in the article: the Buy Box will usually go to those offering the lowest price.
Selling commissions: Unless you're already a big brand, it's way cheaper (in money and time) and less riskier to pay the commissions than becoming proficient at online marketing. You only pay for products you sell too.
Punishment for lower prices: Amazon also prohibits you from linking to your website. Why? Because they're not about to invest in a huge brand and let you use it as free advertising. Price agreements are standard across any industry.
"Free shipping": I personally agree that it's a sleazy tactic, but 1) it's not unique to Amazon and 2) people (me included) do prefer it. It´s a common marketing strategy in ecommerce: tell the clients the full price upfront, but call shipping "free". Personally, I find it easier to compare prices if I know the entire price upfront.
As an analogy: a hotel charges $500 for the weekend. If it it turned itself into an all-inclusive offer, raised prices to $800, and offered "free" drinks and food, would that be misleading? Would that be cheating?
Another thought: shipping is obviously not free. Could it not, let's say, be considered 'dishonest' to lure customers attention with unrealistically low prices (prices not including shipping), only to catch them at the end with shipping price once they've already made up their mind to buy?
Amazon has done it's fair share of shitty moves, but I think it's monopoly power is overestimated. It can raise prices a little, of course, as can any company with a big client base. But if it were cheaper to buy or more profitable to sell on other platforms, people would flock. You don't become a monopoly by charging everyone higher prices; you don't stay a monopoly if you charge higher prices.
A lot of your argument seems to me to hang off the assertion that as a seller you will never win the buy box if you offer cheaper options outside of amazon, thus leading to higher prices everywhere. That's an extraordinary claim with crazy consequences. Why is it a single throwaway line in the middle of the post?
Do they scrape every other retailer? 1st party sales on their manufacturers own websites? Have we seen retailers lower prices elsewhere then notice retaliation from Amazon? Was this practice discovered and documented prior to the recent congressional hearings? Why haven't I heard about it before? It seems like a crazy amount of un-automatable scraping work and I have difficulty buying it.
Amazon. I am always unsure anyone specifically sets out to create a monopoly. Lime Matt said it is always couched in business terms like competitive advantage. In internal meetings all of these ideas are richly rewarded. But at the end of the day it creates a big old ugly monopoly. And what successful compony is ever going to admit that!
As for Amazon. The other huge issue related to everything Matt talks about is counterfeit products on Amazon. Bezos is/was obsessed with offerin products for the lowest price. So despite everything you outline it SEEMS like Amazon offers the lowest price. So not only does Prime screw consumers out of price competition everywhere it also screws sellers on Amazon. First b/c of all the reasons you outlined. But second bc fraud and counterfeit is WAY more rampent on Amazon then anyone is willing to admit. It takes a little exaining but counterfeiters have flocked to Amazon. It has literally become a worldwide flea market because Amazon has ZERO incentive to address it for two huge reasons. Which internally to Amazon don't look like negatives but huge positives. 1. They make your aforementioned 30-40% margins on ANY sale counterfeit or not. 2. They have changed the way to "win" the buy box to basically the lowest price. It used to be a whole host of factors (which they stil claim) but it is not anymore. It is simply lowest price. So who offers the lowest price? Fraudulant counterfeit producers. So sellers and manufactuers are getting reamed on the front end and the back end and it is all almost invisible to Amazon. Except in their great end of year financials and bonuses. To Amazon it.looks.like they are doing a great job. To add insult to injury they often comingle inventory of real and counterfeit products. So even if a consumer is smart enough to find the real manufacturer/seller of a product even tho they didn't get the buy box (and pay a bit more for hopefully a real product) there is still a not insignificant chance you will get the fake product. So then you get bad reviews for something that is completely Amazons fault. And no buyer understands the difference between product reviews and seller reviews. It is a comete and utter shitshow. And guess who is stepping down at this opportune momenet. Bezos the king himself. It is all really gross.
I often wonder if Bezos, Zucker, Zuckerberg, Dorsey, et. al., started out evil or just turned evil when they realized how much money their (originally good) ideas could generate?
Anyone who shops at Whole Foods, and isn't a Prime member, should be aware of how much it costs them to subsidize deals available ONLY to Prime members, which means that the less well-off, who don't shop at Amazon, nevermind joining to be a Prime (rhymes with "Crime") member, have to pay higher prices in order to subsidize the lower prices charged to the well-heeled. Are you familiar with the book Freakonomics? (Levitt ... available on Amazon . lol) Calling s/t "Free" (buy one get one "Free" (how is it free, if it cost me the price of the "buy One"?)) gets an irrational response, and since, in a Capitalis society, there is no such thing as a free lunch, no entity with a business license should ever be able to make that claim, as it is always a lie, our entire economic system is built on that fact. Great article, I've been waiting for years, literally, for someone to hash this out, great Job, M. Stoller!
The most-favored nation clause Amazon has is exactly what Apple was convicted and fined for in the iBooks case, even though iBooks has a negligible market share in eBooks.
This model is actually fully in line with typical manufacturing revenue: If AMZ is costing/taking approx 50% of gross rev, that gross rev (importantly!) corresponds to retail price. If the businesses were to sell their wares at wholesale pricing to retail stores (even local/independent stores), the net would be TOPS 50% of retail and/but often less than same. (Mass retailers, for instance, might get the goods at 30% of retail...WITH returns privileges.) So, as an ACTUAL former manufacturer, these fees seem totally fair to me...and they seem to offer a more profitable avenue of sale than the standard wholesale channels I worked within. I would actually have been quite tempted to work with AMZ...although doing same would've raised ethical concerns. I love this podcast, but I would encourage the hosts to learn the manufacturing business before positing inherently flawed arguments such as these. And for the record, I am by no means an AMZ fan. I am just saying that pursuant to the argument put forth here, they are actually a better and more profitable venue of manufacturer sale than typical wholesale-to-retail channels.
Whole heartedly agree with your thoughts here Matt. One area not touched upon puts Prime in place to take out UPS and smaller shippers. You mentioned around 125 million Prime members. I don't know the exact costs of that but do recall about 100usd to join for one year. At todays price that adds 12+ billion to the balance sheet yearly. How many vans, line haulers, and drop shippers did that buy? UPS has their business down, documented and controlled to the point of mandating which of their drivers feet hits the ground first when stopping for a delivery. They generally do not block roads, driveways and such. If they do it is for less than 3 minutes. They drive courteously, use turn signals, emergency flashers and rarely break down.
Prime drivers use something different. I've seen it in Thailand, USA and Europe during trucking slowdowns but generally not as a daily issue. Until you have been on a small truck doing at least 50mph on a 2 lane highway with no shoulders it is hard to fathom. Imagine 2 dragon* trucks coming at you side by side and neither willing to give way. This was a daily occurrence going back home after a work shift at Nakhon Phanom Royal Thai Navy base. The base was located 15 miles inland from the Mekong river with the town of Nakhon Phanom on the river. It was put their for 2 reasons; 1) Infrastructure upgrades to existing base was cheaper than building a new base, 2) So mortars couldn't reach it from the other side of the river if/when fired from Laos. My point being it scared the hell out of us riding in the back or on top of a small Datsun or Toyota truck wondering if we were going to be heading into the swamp/bog on both sides of raised highway.
Lately I've unfortunately had to be in San Jose picking up parts and shopping for myself and see a lot of PRIME trucks. The newest ones look similar in size and configuration to the Brown trucks. Their drivers look to have no rules, oversight nor training. 3.75 billion USD is plenty to start with when attempting to take over and/or wipe out existing competition.
*dragon trucks - highly colorful paints, plastic, glass and lots of lights about the size of small single axle dump truck that have more road rights than anything smaller.
I used to sell a product direct from overseas (Asia). Air freight prices jumped big time in 2008-9. I offered a $20 product (footwear, for the record) and the actual shipping charge to the USA was $13 so the price was $33. RIPOFF!!! potential buyers screamed. How can I be so blood-thirsty and shameless to charge 60% more for shipping???? Well, because that's what it costs, Mr. Magellan. But in the interests of not trying to reason with the unreasonable, I changed the price to $30 and charged $3 for shipping, so the total was, yes, $33. Viola! Orders poured in... well I exaggerate, but you get the point.
Is there a reason Walmart wouldn't sue Amazon over the price manipulation, other than the fact that Walmart enjoys higher prices because of Amazon ? I would think Walmart would have more to gain by knocking Amazon out of the price manipulation scheme, than they gain from the increased pricing, that just keeps them on equal footing with Amazon. Walmart certainly has the competitive advantage on locations, cost of goods and logistics, so they could overpower Amazon if the pricing manipulation were eliminated.
Thanks Matt. These cheaters like Amazon have to be revealed for what they are. This manipulation of the consumer mindset goes back to Edward Bernay's extension of his uncle 's (Freud) psychological theses. In this case "I'm too lazy to go to the store and pick the item up - let alone return it - so absolve me of that guilt and you've got a deal".
Wish there were more sufficient evidence concerning whether Scamazon's margin are such that "landfilling" returns were just rounding error. That's a negative externality that most civically minded people might have an issue with.
When you bring up tech for disabled folk, how the right to repair is constrained looms large. Repair of wheelchairs and mobility scooters is a racket, and since many disabled people have fixed or little or no income for a variety of reasons, there's an underground economy of wheelchair repair.
Great article as always, Matt. One nit: France didn't ban free shipping, it banned free shipping *on books* because book prices are regulated in France (you're not allowed more than 5% discount). Free shipping on the rest remains a thing. And Amazon worked around the free shipping on books ship by shipping for 0.01€. Yeah.
I don't mean this to be rude, but you've clearly never sold on Amazon. Amazon, while not a walk in the park, is the best experience out there for the majority of sellers. It's also immensely protective of its consumers. Let me explain the reason behind some of the evil-seeming moves you've pointed out.
Shipping costs: FBA (the service 3rd party sellers use to offer Prime shipping) is practically unbeatably cheap. Even if the Buy Box weren't a factor, you'd be hard pressed to use any shipping + storage option that's more expensive.
Buy Box existence: would you rather search for "chapstick" and get 15 different listings offering the exact same product? Because that's the alternative. You can be efficient and lump everyone selling the exact same thing in one listing, or be "fair" and crowd my search results.
Buy Box competition: A lot of 3rd party sellers suck. They'll say they have inventory and won't, or take forever to ship. It makes sense that Amazon would prefer sellers use their shipping and warehouse service. They can ensure 1) the inventory levels are accurate, and 2) timely shipping. It gives you as a consumer a better experience, and a brand you can trust to deliver.
Also, not mentioned in the article: the Buy Box will usually go to those offering the lowest price.
Selling commissions: Unless you're already a big brand, it's way cheaper (in money and time) and less riskier to pay the commissions than becoming proficient at online marketing. You only pay for products you sell too.
Punishment for lower prices: Amazon also prohibits you from linking to your website. Why? Because they're not about to invest in a huge brand and let you use it as free advertising. Price agreements are standard across any industry.
"Free shipping": I personally agree that it's a sleazy tactic, but 1) it's not unique to Amazon and 2) people (me included) do prefer it. It´s a common marketing strategy in ecommerce: tell the clients the full price upfront, but call shipping "free". Personally, I find it easier to compare prices if I know the entire price upfront.
As an analogy: a hotel charges $500 for the weekend. If it it turned itself into an all-inclusive offer, raised prices to $800, and offered "free" drinks and food, would that be misleading? Would that be cheating?
Another thought: shipping is obviously not free. Could it not, let's say, be considered 'dishonest' to lure customers attention with unrealistically low prices (prices not including shipping), only to catch them at the end with shipping price once they've already made up their mind to buy?
Amazon has done it's fair share of shitty moves, but I think it's monopoly power is overestimated. It can raise prices a little, of course, as can any company with a big client base. But if it were cheaper to buy or more profitable to sell on other platforms, people would flock. You don't become a monopoly by charging everyone higher prices; you don't stay a monopoly if you charge higher prices.
A lot of your argument seems to me to hang off the assertion that as a seller you will never win the buy box if you offer cheaper options outside of amazon, thus leading to higher prices everywhere. That's an extraordinary claim with crazy consequences. Why is it a single throwaway line in the middle of the post?
Do they scrape every other retailer? 1st party sales on their manufacturers own websites? Have we seen retailers lower prices elsewhere then notice retaliation from Amazon? Was this practice discovered and documented prior to the recent congressional hearings? Why haven't I heard about it before? It seems like a crazy amount of un-automatable scraping work and I have difficulty buying it.
Please elaborate!
Amazon. I am always unsure anyone specifically sets out to create a monopoly. Lime Matt said it is always couched in business terms like competitive advantage. In internal meetings all of these ideas are richly rewarded. But at the end of the day it creates a big old ugly monopoly. And what successful compony is ever going to admit that!
As for Amazon. The other huge issue related to everything Matt talks about is counterfeit products on Amazon. Bezos is/was obsessed with offerin products for the lowest price. So despite everything you outline it SEEMS like Amazon offers the lowest price. So not only does Prime screw consumers out of price competition everywhere it also screws sellers on Amazon. First b/c of all the reasons you outlined. But second bc fraud and counterfeit is WAY more rampent on Amazon then anyone is willing to admit. It takes a little exaining but counterfeiters have flocked to Amazon. It has literally become a worldwide flea market because Amazon has ZERO incentive to address it for two huge reasons. Which internally to Amazon don't look like negatives but huge positives. 1. They make your aforementioned 30-40% margins on ANY sale counterfeit or not. 2. They have changed the way to "win" the buy box to basically the lowest price. It used to be a whole host of factors (which they stil claim) but it is not anymore. It is simply lowest price. So who offers the lowest price? Fraudulant counterfeit producers. So sellers and manufactuers are getting reamed on the front end and the back end and it is all almost invisible to Amazon. Except in their great end of year financials and bonuses. To Amazon it.looks.like they are doing a great job. To add insult to injury they often comingle inventory of real and counterfeit products. So even if a consumer is smart enough to find the real manufacturer/seller of a product even tho they didn't get the buy box (and pay a bit more for hopefully a real product) there is still a not insignificant chance you will get the fake product. So then you get bad reviews for something that is completely Amazons fault. And no buyer understands the difference between product reviews and seller reviews. It is a comete and utter shitshow. And guess who is stepping down at this opportune momenet. Bezos the king himself. It is all really gross.
I often wonder if Bezos, Zucker, Zuckerberg, Dorsey, et. al., started out evil or just turned evil when they realized how much money their (originally good) ideas could generate?
A great article. Keep 'er lit Bro!
Anyone who shops at Whole Foods, and isn't a Prime member, should be aware of how much it costs them to subsidize deals available ONLY to Prime members, which means that the less well-off, who don't shop at Amazon, nevermind joining to be a Prime (rhymes with "Crime") member, have to pay higher prices in order to subsidize the lower prices charged to the well-heeled. Are you familiar with the book Freakonomics? (Levitt ... available on Amazon . lol) Calling s/t "Free" (buy one get one "Free" (how is it free, if it cost me the price of the "buy One"?)) gets an irrational response, and since, in a Capitalis society, there is no such thing as a free lunch, no entity with a business license should ever be able to make that claim, as it is always a lie, our entire economic system is built on that fact. Great article, I've been waiting for years, literally, for someone to hash this out, great Job, M. Stoller!
The most-favored nation clause Amazon has is exactly what Apple was convicted and fined for in the iBooks case, even though iBooks has a negligible market share in eBooks.
This model is actually fully in line with typical manufacturing revenue: If AMZ is costing/taking approx 50% of gross rev, that gross rev (importantly!) corresponds to retail price. If the businesses were to sell their wares at wholesale pricing to retail stores (even local/independent stores), the net would be TOPS 50% of retail and/but often less than same. (Mass retailers, for instance, might get the goods at 30% of retail...WITH returns privileges.) So, as an ACTUAL former manufacturer, these fees seem totally fair to me...and they seem to offer a more profitable avenue of sale than the standard wholesale channels I worked within. I would actually have been quite tempted to work with AMZ...although doing same would've raised ethical concerns. I love this podcast, but I would encourage the hosts to learn the manufacturing business before positing inherently flawed arguments such as these. And for the record, I am by no means an AMZ fan. I am just saying that pursuant to the argument put forth here, they are actually a better and more profitable venue of manufacturer sale than typical wholesale-to-retail channels.
Whole heartedly agree with your thoughts here Matt. One area not touched upon puts Prime in place to take out UPS and smaller shippers. You mentioned around 125 million Prime members. I don't know the exact costs of that but do recall about 100usd to join for one year. At todays price that adds 12+ billion to the balance sheet yearly. How many vans, line haulers, and drop shippers did that buy? UPS has their business down, documented and controlled to the point of mandating which of their drivers feet hits the ground first when stopping for a delivery. They generally do not block roads, driveways and such. If they do it is for less than 3 minutes. They drive courteously, use turn signals, emergency flashers and rarely break down.
Prime drivers use something different. I've seen it in Thailand, USA and Europe during trucking slowdowns but generally not as a daily issue. Until you have been on a small truck doing at least 50mph on a 2 lane highway with no shoulders it is hard to fathom. Imagine 2 dragon* trucks coming at you side by side and neither willing to give way. This was a daily occurrence going back home after a work shift at Nakhon Phanom Royal Thai Navy base. The base was located 15 miles inland from the Mekong river with the town of Nakhon Phanom on the river. It was put their for 2 reasons; 1) Infrastructure upgrades to existing base was cheaper than building a new base, 2) So mortars couldn't reach it from the other side of the river if/when fired from Laos. My point being it scared the hell out of us riding in the back or on top of a small Datsun or Toyota truck wondering if we were going to be heading into the swamp/bog on both sides of raised highway.
Lately I've unfortunately had to be in San Jose picking up parts and shopping for myself and see a lot of PRIME trucks. The newest ones look similar in size and configuration to the Brown trucks. Their drivers look to have no rules, oversight nor training. 3.75 billion USD is plenty to start with when attempting to take over and/or wipe out existing competition.
*dragon trucks - highly colorful paints, plastic, glass and lots of lights about the size of small single axle dump truck that have more road rights than anything smaller.
I used to sell a product direct from overseas (Asia). Air freight prices jumped big time in 2008-9. I offered a $20 product (footwear, for the record) and the actual shipping charge to the USA was $13 so the price was $33. RIPOFF!!! potential buyers screamed. How can I be so blood-thirsty and shameless to charge 60% more for shipping???? Well, because that's what it costs, Mr. Magellan. But in the interests of not trying to reason with the unreasonable, I changed the price to $30 and charged $3 for shipping, so the total was, yes, $33. Viola! Orders poured in... well I exaggerate, but you get the point.
Is there a reason Walmart wouldn't sue Amazon over the price manipulation, other than the fact that Walmart enjoys higher prices because of Amazon ? I would think Walmart would have more to gain by knocking Amazon out of the price manipulation scheme, than they gain from the increased pricing, that just keeps them on equal footing with Amazon. Walmart certainly has the competitive advantage on locations, cost of goods and logistics, so they could overpower Amazon if the pricing manipulation were eliminated.
Thanks Matt. These cheaters like Amazon have to be revealed for what they are. This manipulation of the consumer mindset goes back to Edward Bernay's extension of his uncle 's (Freud) psychological theses. In this case "I'm too lazy to go to the store and pick the item up - let alone return it - so absolve me of that guilt and you've got a deal".
Wish there were more sufficient evidence concerning whether Scamazon's margin are such that "landfilling" returns were just rounding error. That's a negative externality that most civically minded people might have an issue with.
Matt - The most terrifying bit of news I've read in some time, here's yet another reason we need a global campaign to thwart amazon's monopoly: https://www.project-syndicate.org/commentary/ai-that-developed-antibiotic-could-also-neutralize-unions-by-yanis-varoufakis-2023-06?utm_source=pocket_reader&barrier=accesspay