
Amazon wants to control third-party sellers’ product pricing - ilamont
https://www.modernretail.co/platforms/a-slippery-slope-amazon-wants-to-control-third-party-sellers-product-pricing/
======
privateSFacct
Once again a click-bait headline that misses why these companies domination
continues to grow.

First - a link to actual FAQ:

[https://www.reddit.com/r/FulfillmentByAmazon/comments/cl7jll...](https://www.reddit.com/r/FulfillmentByAmazon/comments/cl7jll/sold_by_amazon_sba_faq/)

Second:

This is an OPT-IN offer to sellers who want it.

Third:

Amazon will be seller of record. That means Amazon will handle all sales tax
issues. That alone is a big win.

Amazon is handling all return costs (huh?). So in short run until that changes
another win.

Amazon probably thinks they can do a better job pricing products than sellers,
increasing the cut for both parties potentially. I'll let reader decide if
amazon has any skills in pricing.

This continues a trend towards automation that amazon has adopted when they
think computers can do (on average) a better job than people.

If this is a stupid idea, ebay won't copy it. If it isn't a stupid idea - look
for SBE (sold by Ebay) in the future :)

~~~
bertil
I don’t think the problem here is that Amazon is doing something unhelpful. Of
course, they have more information than anyone and can set prices better.

The issue is that (according to legal theories on anti-trust) market control,
no matter how helpful, is anti-competitive in the long run. Even if companies
don’t have to set their own prices, they would be crazy not to: over-price and
they don’t sell anything; under-price and they leave money on the table.

I know those rules sound like we are punishing success and good service but
the idea is that if a company dominates, no one will challenge them. The
service won’t improve or innovate, new companies won’t be able to scale to
prove their ideas. It has happened repeatedly in the past, for beloved
services. Thinking about those things dynamically helps.

~~~
dwild
> over-price and they don’t sell anything

Well, that depends on the service itself. I often buy from Amazon not because
it's cheaper, but because I know that shipping will be quick, even if it's
imported the charge won't be taken by the carrier with an absurdly high fee,
that if something has to be returned it will be easy. I even usually avoid
third-party sellers on Amazon because of that, even if they are much cheaper.

> under-price and they leave money on the table

You just said that overprice and they won't sell anything. Seems like the
alternative isn't money on the table but nothing at all on the table.

> if a company dominates, no one will challenge them

I think that's the wrong part. If someone can do just as good or better than
Amazon, they'll do it. Amazon is the proof itself, there's so many products
that still have third party on Amazon itself that compete against Amazon.

This option will just let Amazon have access to a bigger inventory for a lower
cost than owning it themselves... That's not a huge advantage. I'm sure their
algorithmns are already pretty good to balance the right amount of stock.

------
acollins1331
Stop selling your stuff on Amazon. eBay is better. If you're too large to sell
on eBay, then get out of retail right now, are you crazy? Selling products
other people make used to have bigger margins because it was a lot of work
(opening and running a store). If your only work is buying stuff wholesale and
boxing it up and sending it to Amazon then you, frankly, don't deserve much
profit for a few hours of monkey level work.

~~~
adossi
My brother has an Amazon store. He pulled in about $400,000 in sales last year
and saw a profit of close to $200,000 doing exactly what you stated (buying
wholesale, boxing it up and sending it to Amazon). Huge margins, I know.
However he doesn't work a few hours a day, its more like 9 hours a day driving
around to different auctions to buy wholesale. Its a lot of work.

~~~
acollins1331
9 hours a day of driving pays every other job about 1/5th what your brother
makes. Not advocating a race to the bottom, but expecting to clear 200k a year
by driving around to auctions all day is still insane relative to what other
people make doing similar work.

~~~
jeromegv
Are you serious? He's not being paid to drive around. He's being paid to go to
auctions, analyze the price of things being sold in large quantities, and
decide if there is a business opportunity to sell products in a different
market. He then ends up with a large inventory that he must sell, otherwise he
is stuck with unsold inventory (risk). He also has no guarantee that the
aunction will be selling the same products the week after, so it seems like
there is a scarcity risk as well (not having a homerun product to sell
constantly)

This is what the retail business is.

He's not just "driving around".

~~~
ccvannorman
Yeah, this whole thread is based on a false assumption, that the work he does
is "easy and equivalent to driving around." It's not easy or trivial to start
a business, plus he assumed risk up front.

That's like saying "Property owners just sit around and collect rents, so they
shouldn't make any money." It totally misses the point of using capital to
invest in and maintain real estate, which is not "sitting around" at all - it
only becomes easy after you've done a significant amount of work to make it
so.

~~~
mAEStro-paNDa
Real estate is a very poor example considering countless cases of landlords
neglecting repairs and maintenance. In some states in the US, there's little
or no accountability for this.

~~~
bdcravens
Sounds like confirmation bias.

------
jakelazaroff
_> With SBA, Amazon also exerts control over the product’s sale price, by
dynamically pricing products to make sure Amazon’s prices are lowest._

 _> Since only brands in Amazon’s Brand Registry can apply for SBA, the pitch
is that SBA will guarantee that the brands themselves won’t be priced out of
ownership of Amazon’s buy box by other gray market sellers that focus on
undermining retail prices. The buy box all but ensures the product listing on
Amazon that will get sold over competitors, and sellers “win” the buy box by
offering the lowest price._

 _> To ward off concerns over margins, Amazon is offering SBA sellers a
minimum gross proceed — which guarantees set profit for sellers based on a set
selling price, even if Amazon lowers the price — for each product. The catch:
Amazon wrote in its FAQ about SBA that MGP would be revisited “typically once
every six months,” and that brands would have seven days to accept the new
MGP, or reject it and deactivate a product from SBA._

So basically, Amazon always promotes the cheapest products, and they'll
automatically lower your product's price to make it cheaper than the
knockoffs. You get a guaranteed profit no matter the price, but that can also
lower every six months.

This strikes me as a bad deal for sellers.

~~~
prklmn
It’s not only knockoffs. A friend of mine works in CPG and their company’s
biggest problem with sales through amazon is that they sell at a loss to
compete with grey market sellers who are selling stolen at a much reduced
price.

~~~
dpark
You cannot “compete” by selling at a loss, unless you’re competing for the
first spot at bankruptcy court.

Whenever I hear about someone selling at a loss, I automatically assume that
either they’re buying market share as a long bet (e.g. typical new gaming
console) or more commonly misrepresenting the actual economics (e.g. car
dealers neglecting to mention all the rebates they get off their supposed
price).

~~~
kd5bjo
The other common case (not applicable here) is a loss leader: sell something
at a loss in the hope that the customers it attracts will buy high-margin
items at your store instead of the one they usually frequent.

------
j-c-hewitt
The headline is pretty misleading and I have not seen people in the seller
community interpret it in this way. SBA is just a different way to sell.
They're not getting rid of the other options. It can be a good option for some
kinds of brands. You would probably not pick the option otherwise.

Also big nitpick here: gray market has a specific definition and this author
misuses the term. The sellers he refers to are not necessarily selling gray
market products. Another inaccuracy is that you win the buy box by having the
lowest price. This is not true. Any experienced Amazon person could tell you
that it is a blend of price, fulfillment method (prime or not), delivery
latency (is this offer for a product that is in a warehouse physically close
to you), and seller feedback rating.

SBA is actually a good idea from Amazon and they even put in some volatility
protections for people who enroll. It is also a good alternative to the Vendor
program with some of the benefits without some of its headaches.

If you look at it from the perspective of it being a better alternative to
Vendor for some brands, it makes a lot more sense. It is not pitched to
conventional sellers who stock tons of brands. It's pitched to brands who want
to sell direct to consumer on Amazon. Historically Vendors have also gotten
the kinds of indirect marketing benefits that are being pitched to new users
of SBA, so even that is not actually a big change.

For example, Vendor products (those shipped and sold by Amazon.com) have
always received a massive buy box benefit even if the price is not the lowest.
In the weighted buy box system Amazon has always assigned itself a massive
bonus score. So in that there is not much that is changing.

Naturally, "incremental bureaucratic change pitched to brands as a middle
ground between two existing bureaucratic programs at gargantuan mega-company
pitched to other faceless corporations" is not that interesting of an article.
This type of opt-in program would work for a very specific type of company and
isn't really indicative of a big upcoming change of how the whole thing works.

------
swamp40
Great quote: _“But Amazon is smart and they know when your — for lack of a
better word, addiction — to Amazon increases. Once Amazon is 20% of your
business, it starts to claw back that profitability.”_

~~~
zeroego
This is not true in my experience. I work for a medium sized CPG in their
eCommerce department. We were clearing many millions of dollars through Amazon
1P a couple years ago, but it was nowhere near 20% of our business. Amazon
asked for ridiculous price cuts and we walked away. It hurt but there's no
point in selling on a platform through which we are not profitable.

On a personal level I hate Walmart and their business practices. Not much of a
fan of Target either. But, on a professional level, I'm excited to see their
marketplaces take off. Amazon is absolutely horrible to work with and their
tools for sellers are obnoxious at best. I'd love to see some real competitors
in this space.

~~~
shostack
How do those conversations typically go in the real world? Is it an actual
meeting w/ a buyer agent there? An automated message?

If a live conversation is it a fairly hostile "look at all the sales we're
driving for you. Give us this price or they go away because we have all the
leverage here"? Or is it a bit more of a back and forth?

Curious to hear any real world examples of how that typically goes.

~~~
zeroego
I'm sorry I didn't see this reply. Amazon assigns an account manager to
essentially squeeze you as much as possible from day 1. We were amicable at
first, but they just kept asking for bigger and bigger discounts. After we
flatly refused the account managers pricing for a couple of months in a row
the 1P PO's just stopped showing up one day, the manager didn't pick up their
phone, and that was that.

We have since re-established our 1P relationship and our new account manager
_seems_ to be more understanding. Time will only tell.

------
ilamont
The really interesting dynamic would be if a seller doesn't participate in
this program, but its competitor _for a similar, essentially non-
differentiated product_ does (or more than one competitor) and Amazon
optimizes pricing according to what the non SBA-seller is charging. As sales
of the SBA product picks up, network effects kick in for search, detail page
carousels, and recommendations to customers with similar profiles to the
buyers. The non-SBA seller is forced to manually reduce prices, or lose a huge
chunk of market share.

The key here would be product differentiation, reviews, external marketing, or
something else to keep sales up. But for sellers competing on price, SBA could
be a disaster, regardless of participation.

------
delfinom
So the same exact thing that Walmart does? You know, the retailer that's
bigger than Amazon?

It is terrible but they aren't exactly breaking new ground here.

~~~
buckminster
Walmart is the retailer. With third party sellers Amazon is not. So they
sidestep sales tax (in the UK anyway) and various consumer protections. With
this change Amazon becomes the retailer in all but name. I hope the tax
authorities and consumer groups take note.

~~~
unreal37
Amazon doesn't pay sales tax? Amazon collects and remits VAT in the UK and
across Europe.

[https://www.amazon.co.uk/gp/help/customer/display.html?nodeI...](https://www.amazon.co.uk/gp/help/customer/display.html?nodeId=201895760)

~~~
fatfox
They also started billing advertising services through a separate UK branch
with UK VAT. However, they're definitely not big on corporation tax:
[https://www.theguardian.com/technology/2018/aug/02/amazon-
ha...](https://www.theguardian.com/technology/2018/aug/02/amazon-halved-uk-
corporation-tax-bill-to-45m-last-year) (Aug 18)

------
sct202
So basically you have to manage your own inventory for Amazon, pay Amazon for
fulfillment of orders of your product, pay Amazon for storage of your product,
and also let Amazon control the pricing to get preference on the buy box. I
can see that there may be advantages, but it seems like an awful lot of the
burden is shifted to the vendor.

Edit: On second thought, if Amazon has dynamic control of the pricing it may
be difficult for the vendors to accurately forecast and stay in-stock.

~~~
unreal37
Don't forget, if you're successful, Amazon will create their own version of
your product as "Amazon Basics" and you lose.

~~~
jwin742
Many amazon basics products are just white labeled products. Amazon isn't
actually spinning up assembly lines

~~~
swagasaurus-rex
No but Chinese companies will be happy to spin up assembly lines making a
product identical to yours and undercut your product, while Amazon slaps on
the 'Basic' brand and pushes it to the top of the rankings.

~~~
dbuder
They totally have relationships with multiple tier 1 manufacturers and have
teams pouring over data to pick products to undercut. I hate it when people
say this, but I don't know why you've been downvoted.

------
canada_dry
> Amazon exerts control over the product’s sale price, by dynamically pricing
> products to make sure Amazon’s prices are lowest.

I believe their automatic pricing checking engine only bothers to go to work
when it notices a sudden drop in sales of a product. Otherwise, their
'dynamic' pricing seems to try to _increase the price_ as often as possible!

------
binarysolo
SBA is an interesting offering meant to address long tail brandowners who
can't qualify for vendorcentral now that they raised the requirement for it to
be ~$10M/year. That's all, nothing insidious here, Amazon is just trying to
recapture some of the long tail it cut off earlier this year when they stopped
buying direct from small vendors.

This is not a good thing for boutique shops selling premium goods because
Amazon will not respect your MAP. This is a reasonable deal if you're selling
commodity CPG items and less sensitive to MAP but are not a big player.

Source: low eight-figure seller on Amazon, had a few manufacturer/wholesaler
friends get booted off vendorcentral during the VC purge earlier this year.

------
8bitsrule
"To participate in the program, called Sold by Amazon, sellers have to already
be enrolled in Fulfilled by Amazon..."

Not to be confused with Fulfilled by Amazon Donations, which will donate
unsold merch to non-profits instead of trashing it.

[https://www.theverge.com/2019/8/14/20806167/amazon-
marketpla...](https://www.theverge.com/2019/8/14/20806167/amazon-marketplace-
donate-products-fba-sellers-vendors-unwanted-inventory)

------
lazyant
This is an example of something fishy:
[https://www.amazon.ca/dp/B00JE36GLQ/?coliid=I3I52QIK9800LI](https://www.amazon.ca/dp/B00JE36GLQ/?coliid=I3I52QIK9800LI)
this is a $40 coffee maker offered at $2 (plus $15 shipping) from a newly
created shop.

Another example of fraudulent products is posting an existing ($10) book at
$100 and have it at the top of the results because they changed the
publication date with a fake one.

~~~
newguy1234
Looks like he got one victim already:

"Still have not received my package even after paying for expedited shipping.
Order was shipped 4 days after ordering. I would like a refund for payment of
expedited shipping."

Seller now has a 0% feedback score so it is pretty obvious to any buyers that
the seller is garbage. The real interesting thing though is the buyer is
complaining about a refund on the review so it kind of leads me to believe
that the buyer doesn't know how to do a refund lol?

------
viburnum
Amazon should just distribute everything themself and market financial
instruments tied to prices and quantities (gambling on retail).

------
bitL
I think this addresses two problems:

1\. Allowing brand owners to completely remove 3rd party sellers and sell
directly on Amazon without much effort

2\. Helping new sellers to sell at least something; these days one has to
immediately subscribe to some realtime algorithmic repricer if they want to
get buybox for/sell a single item; this makes algorithmic repricer a part of
SBA

------
Aloha
This is just a way of amazon moving the carrying costs of merchandise off of
its balance books and on to someone else's, without the complexity of a floor
lease. It mostly sounds like a win-win.

------
Judson
Am I missing something, or does this render “Ships and Sold by Amazon” useless
as a heuristic for receiving an authentic product since sellers who opt into
the program also receive the label?

------
happycube
More accurately, Amazon wants third parties to pay for carrying their
inventory...

(which isn't _always_ a bad idea, mind... especially at the beginning, before
Amazon whittles away at the margin)

------
segmondy
Not surprised, they already do this with ebook. You sell your book for $10 or
less you get 70%, you sell it for more, you get 30%

------
vfc1
It's for sure true that an algorithm setting the price instead of a human is
going to increase sales and be beneficial to both the retail seller and
Amazon, but where does it end?

Right now it's optional but it's clear that it's only a matter of time until
it becomes mandatory.

I think these companies, especially Google & Amazon are only going to stop
when they are split apart by the government due to monopoly concerns.

------
Aperocky
What an awful title, people should stop using logical fallacies to label their
argument.

------
reroute1
Less slippery if they keep both a user rating and an Amazon rating.

------
TheGoodBarn
I mean we all remember what happened to the Grand Exchange right

------
NicoJuicy
Illegal in Europe

------
SilasX
HN Monday: "It's an atrocity when Walmart/Amazon use their monopoly/sony power
to force down supplier prices. That's unsustainable, destroys market signals,
and hugely disincentivizes the production process for goods."

HN Tuesday: "It's awesome when governments use their monopsony power to force
down pharmaceutical prices, that has no downsides except for lower profits for
someone who didn't deserve them anyway."

~~~
monster99
Difference is, one is about the populations health. Given that the US is
backwards when it comes to healthcare.

Given the sea of corruption inside the US since it is an oligarchically run
state where the citizens basically have no rights (if in doubt look at IP
law).

~~~
SilasX
That's the point: the dangers of these pseudo-price controls are irrelevant to
whether the goods are health related. Do you believe that it's great when
Walmart does this for aspirin, but horrible when they do it for lawnmowers?

~~~
monster99
I don't believe in the ideologies of the time, call me a doubting thomas that
the human race is actually intelligent. I know too much about how human beings
and corporations actually function to believe in free market mythology.

See here for if you want more acedemic take:

[https://www.youtube.com/watch?v=WHj2GaPuEhY#t=349](https://www.youtube.com/watch?v=WHj2GaPuEhY#t=349)

There are all sorts of things wrong in reality with how capitalism actually
functions. The reality is most people are too irrational and too stupid for
any market to function as a "market". The videogame "market" is a perfect
example. For the first 20-30 years of PC game history, we were getting good
software for a fair price. Then the masses got internet and shit went
sideways.

AKA people started buying software they didn't own, nor control, giving super
powers to corporations to extort them and engage in all sorts of abusive
practices and raise prices astronically because the internet now gave them
access to people with addictive tendencies and impulse control problems 24/7
and in order to gather the worlds evolutionary unlucky regarding gambling
addiction all games now have microtransactions.

I watched my hobby be destroyed, my software robbed and my os infested with
dishonest code because stupid got internet. Before the internet Microsoft and
game companies had no incentive undermine software ownership because it was
impossible to do so.

The market for videogames today is a market for lemons, a total shit show of
broken games, stolen games, etc. Because a rational game buyer would never buy
a piece of software that a corporation controlled.

------
telaelit
All hail our Amazon overlords

