
Amazon’s New Competitive Advantage: Putting Its Own Products First - doener
https://www.propublica.org/article/amazons-new-competitive-advantage-putting-its-own-products-first
======
saltedonion
I don’t see what’s wrong with this.

Many retailers reserve some of their best shelves paces for their private
label products, both as a form of differentiation and to extract higher
margins.

You could argue that Amazon is unique in that it is large and potentially has
a monopoly over eCommerce, but it is hard to say that in the end, consumers
are on the loosing end.

Most amazon basic products are commodities, and prices gets lower because of
economies of scale. Should amazon jack up the price, consumers will just
switch to another whitelabel/run of the mill variant from another seller.

It will be problematic if amazon dumps on the market and drives theirs party
sellers out of existence, but I don’t think that is the case here.

~~~
aeturnum
I think it's easy to describe why it's problematic without even referring to
antitrust.

Amazon's brand (as a store / marketplace) is that it helps you sort through
many options to select the product they believe you will like the best. This
is different from the service offered by traditional grocery stores which
offer many different products, but are not arranging those products in
relation to a particular request.

This means that, when Amazon is operating as a store, any re-ordering of the
display results disrupts the value they provide to consumers. It also, of
course, disrupts the value they provide to the products they sell. Any other
product that receives poor reviews would be punished by being displayed later,
but Amazon branded products will never suffer that fate. The same is true of
any other algorithmic sorting.

Amazon is, with one side of its mouth, suggesting a business model that it
claims will benefit both sellers and buyers (that the best products will win
and consumers will be shown the product best matched to them) and also
explicitly excluding itself from that system.

To return to the supermarket situation, you might imagine a supermarket which
stocks all brands, but the first item in every row is the store-brand
equivalent of that product which you must remove to get to the branded one.

~~~
txcwpalpha
>This is different from the service offered by traditional grocery stores
which offer many different products, but are not arranging those products in
relation to a particular request.

Grocery stores (and all other brick-and-mortars) spend _tons and tons_ of
money and effort specifically arranging their stores to influence which
products you will buy. It's done on the scale of which aisle certain products
are on, all the way down to the scale of specifically which shelf (and even
exact inches away from eye level) certain products are on.

Every single time you walk into a store, the first product you see (maybe in
front of the entryway, maybe it's a big banner hanging from the ceiling, or
maybe it's the design of the shelf near the cash register) is all meticulously
planned.

~~~
jimnotgym
>Grocery stores (and all other brick-and-mortars) spend tons and tons of money
and effort specifically arranging their stores

And if I don't like Tesco I can go to Asda. If Tesco won't sell my product I
can try and sell it to Sainsbury's or Waitrose.

The equivalent with Amazon is "If I don't like Walmart, there is some guy with
a market stall selling fish, another with apples, a store 5 miles away that
has carrots...". Or even, "Tescos won't buy my carrots so I will just drive
them to every person myself".

I have said it a few times, you can't be the marketplace and sell through that
marketplace. Imagine finding the NYSE were trading shares, and were giving
themselves 30ms advantage over everyone else (if you can't imagine, have a
browse of the Cryptocurrency markets). Imagine a commodities market who own
90% of the oil themselves, and price themselves into every order (maybe
onions...).

~~~
Terretta
> _you can’t be the marketplace and sell through that marketplace_

To be competitive, you can and you should.

Amazon is a platform company. Platforms commoditize the complements. They
didn’t have toys, so partner Toys’R’Us, didn’t have shoes, so partner Zappos,
etc.

As the platform, platforms observe transactions, such that through time, they
can value complements and decide to co-exist, acquire, or compete.

This is by now a well-known strategy.

Rabbit hole:
[https://www.gwern.net/Complement](https://www.gwern.net/Complement)

~~~
greyhair
Just as long as, being Zappos, if you sell through Amazon, expect Amazon
branded shoes a couple months to years down the road.

------
masona
Working at an agency that mostly did CPG work for P+G, I remember how so much
of the design work was about catching someone's eye on shelf: how to stand out
in a sea of packaging. Millions (and millions) of dollars were spent trying to
crack the code.

But it's no longer a flat canvas where you can see everything all at once. The
shelf is not flat, it's deep. You have to move through products one by one. In
the article they say that the first spot is 'valuable.' More like 'life or
death.'

~~~
telchar
I think the depth is inversely proportional to the utility of search - the
better I can search for the combination of features, price, etc that I need
the less deep the shelf gets. The endless generic white-labeled junk plus poor
metadata really makes the problem bad though.

~~~
luckylion
Okay, that sounds conspiratorial, but: is that why Amazon's search is
atrociously terrible, so that they can sell the top spots for more? If you
could search by attributes reliably, the top spots lose relative value.

~~~
preommr
Well I doubt they actively try to make it worse.

But I would believe it if because of the lack of incentive, they din't make
active efforts to improve it.

------
bingdig
The main problem is that current antitrust law doesn't clearly prohibit anti-
competitive behavior like this. Modern antitrust law has largely been created
by judges (often without any economic training) interpreting early 20th
century laws. This is a great summary of how regulations could be adapted to
stop this sort of activity:
[https://www.yalelawjournal.org/pdf/e.710.Khan.805_zuvfyyeh.p...](https://www.yalelawjournal.org/pdf/e.710.Khan.805_zuvfyyeh.pdf)

In short, competition needs to be increased (i.e. more platforms). For
example, Amazon wouldn't be able to pull so many shenanigans if users could
export all shopping data to jet.com and easily shop on multiple platforms.

The other solution is updated regulations that follow in the footsteps of
historical frameworks of antitrust in industries like utilities where it's
accepted that monopolies are efficient, but strict measures are put in place
to limit abusing market power.

~~~
koheripbal
I don't believe the bottleneck here is the law or judicial interpretations.

The problem (IMO) is that there is no political pressure for the Justice
Department to seek corrective action against these near-monopolies.

The lack of action (IMO) comes from two motivations...

1\. The desire for US politicians to see US companies attain global near-
monopoly status as a mechanism to help propagate US policy & surveillance.

2\. The campaign finance influence these corporations buy through lobbying in
Congress and their local/state officials.

1 & 2 aren't even all that independent. Amazon didn't setup HQ2 in DC for
nothing. Bezos even literally bought the largest mansion in DC explicitly to
host congressional networking events.

The solution is simple, in principle. Nurture, fund, and support alternatives
to these companies. Realistically, globalization means there is little hope
for regulatory breakups in America's future.

~~~
bingdig
Sure, there could be some corruption going on, but theres a much more mundane
legal reason the DOJ won't bring cases. They often won't prosecute because the
costs of losing anti-trust cases are so high, largely because of the way
antitrust law is written. When the DOJ brings a case and loses, the agency
loses all future power to bring a similar case because precedent is binding,
so they only prosecute the most obvious anti-trust violations. As all these
conflicting comments in this thread and related articles suggest - an
antitrust case against Amazon is quite complex and not your straightforward
monopoly or price fixing case.

------
SkyMarshal
Honestly, I’m so sick of all the fly-by-night ALLCAPS no-name brand names on
Amazon setup by armies of passive income-seeking YouTube-advertising
dropshippers. Amazons shopping experience these days is trash.

If Amazon starts giving their own brand preferential treatment over this crap
it will be an improvement to the service. The few Amazon brand products Ive
purchased, like USB and Lightning cables, are among the best available, for
good prices.

As is, I try to shop elsewhere these days, even if the shipping takes longer.

~~~
renw0rp
Couldn't agree more. There is so much crap advertised and sold there, with
fake or paid for reviews that I buy only "sold by Amazon" 99% of the time I
shop there. If only I could permanently enable such a filter site-wide...

------
sevensor
Amazon's own-brand goods are generally servicible from what I've seen. It puts
them at a competitive advantage that their own items are quite unlikely to be
counterfeit, while all other brands are subject to suspicion.

~~~
latortuga
That's some pretty serious doublespeak. A huge portion of the problem of
counterfeits is a result of Amazon's decision to comingle inventory.

~~~
notyourwork
Do they co-mingle their own products? Seems unlikely a 3P could FBA some
Amazon Basics products.

------
ABeeSea
I just did the “ground coffee” and melatonin searches.

Entire first row was an ad for bulletproof coffee and sugarbearhair vitamins.
Second row had the amazon brand on the left with prominent amazon logos on the
coffee bag and the pill bottle and a tag that says “featured from our brands”
and the first word in he title for both items was Amazon. The next three items
were sponsored ads.

I don’t see amazon being deceptive here. They are making it very clear you are
buying the “Amazon Brand.”

~~~
mthoms
FWIW, I just did a similar thing. The first 5 or so Amazon brands were clearly
labeled as such. Then I searched some of their lesser known brands and found
many weren't clearly labeled.

Try it yourself. The hard part is finding out what Amazon's brands are since
they (surprise!) don't publish a list. This is the best list I could find in
my short time searching

[https://www.businessinsider.com/amazon-owns-these-brands-
lis...](https://www.businessinsider.com/amazon-owns-these-brands-
list-2018-7?op=1)

------
zck
I don't know that I love Amazon putting their stuff first, but this criticism
of Amazon's actions was interesting:

> The new approach violates Amazon’s mantra that every decision must put the
> customer first, said Tim Hughes, a consultant who used to work in product
> management at Amazon. “Why would their brand be a better option for
> consumers?” said Hughes, chief operating officer of a firm that helps brands
> manage Amazon accounts. “It doesn’t necessarily have to be cheaper, or
> better, or anything. So then what’s their justification to say, ‘We’re just
> going to put this up in front of everybody else’? This is just another
> example of Amazon being able to manipulate the platform for its own good
> use.”

I don't disagree with this, but at the same time, if you're arguing for
advertising determining what gets the top slots, why would a manufacturer that
can pay more be a better option for consumers?

------
robertlagrant
> The new approach violates Amazon’s mantra that every decision must put the
> customer first, said Tim Hughes, a consultant who used to work in product
> management at Amazon. “Why would their brand be a better option for
> consumers?” said Hughes, chief operating officer of a firm that helps brands
> manage Amazon accounts. “It doesn’t necessarily have to be cheaper, or
> better, or anything. So then what’s their justification to say, ‘We’re just
> going to put this up in front of everybody else’? This is just another
> example of Amazon being able to manipulate the platform for its own good
> use.”

Tim Hughes should probably figure out that the previous system had exactly the
same properties

~~~
colinmhayes
He's lobbying for the 3rd party firms, what else can he say? "My job is to
complain when amazon consolidates power away from my 3rd part clients"
wouldn't go over as well.

------
dsign
Amazon has been criticized before for selling some third-party products of
very low quality. Something they can solve by using the top-spot for their own
brands, without completely marginalizing the third-party providers.

And it's not like you can't make your own online shop or at least a nice web
page explaining your product better than at Amazon. I wish more sellers would
go to the trouble of doing that.

------
wwarner
Haters gonna hate.

Every retailer has a store brand. Why is it a public good that I have to pay a
premium price for a cable from a pre-approved seller? Why should anyone
selling on Amazon think that they have an exclusive relationship with their
customers? Sellers can, and always have, cannibalized one another's products.
Yes, in school it's cheating, but in retail it's called competition.

Every retailer can compete with Amazon on any axis they want to, whether it's
selection, price or service. Walmart does, IKEA does, and Ebay and Etsy and
FreshDirect and Target and Powells. I buy online from all of these companies.

Amazon never seems to get credit for things that it does that are good for
society. There are the obvious things, like trustworthy ecommerce, huge
selection, fast shipping and low prices. But then there are things like
raising the minimum hourly wage to $15/hr, supplying PPE and food during a
pandemic and providing tax revenue through salaries. Add to that creating new
economic sectors and leading the world in distributed s/w development. None of
these things is inevitable, none of these things are easy to do.

~~~
raz32dust
This has been discussed in threads below, but the jist of the issue is that
Amazon is pretty much a monopoly as an online product discovery service. If
they put their own products at the top, people will end up with no way of
discovering other companies. It would be using its monopoly position as a
product discovery service to profit its own manufacturing subsidy.

> Every retailer can compete with Amazon on any axis they want to, whether
> it's selection, price or service. Walmart does, IKEA does, and Ebay and Etsy
> and FreshDirect and Target and Powells. I buy online from all of these
> companies.

That's the crux of the debate IMO - whether or not Amazon is a monopoly. You
say that other retailers can compete effectively as a product discovery
service. I am not sure. I think the vast majority just searches on Amazon at
this point, so it is sort of a monopoly.

~~~
malandrew
It's absolutely laughable when people say that Amazon operates as "a monopoly
as an online product discovery service".

There are so so so many options out there. I use plenty of online retailers
all the time. Complaining about them being a monopoly in this way is like
going to the same brick and mortar retailer and complaining they are a
monopoly because you're too lazy to see what other retailers are available. If
anything it's even more absurd because the closest brick and mortar
competition might be miles away while online the competition is mere
keystrokes away.

Every single search engine is also a product discovery service too: Google,
Bing, DuckDuckGo.

~~~
raz32dust
I suspect you are an outlier. Amazon takes ~50% of online shopping market
share [1]. Admittedly it is lower than I thought. I expected it to be closer
to 70%. Google for search is actually at 71% [2]. Either way, I think 50% is
enough market power to be treated as a monopoly, not sure about the legal
definition.

That said, I am not particularly worried about Amazon basics as these are
commodity products, as long as they are being transparent about it. Monopoly
is a problem only if they use tactics that prevent competitors from emerging -
example could be incentivizing vendors to sell only on Amazon.

[1] [https://www.statista.com/statistics/788109/amazon-retail-
mar...](https://www.statista.com/statistics/788109/amazon-retail-market-share-
usa/) [2] [https://www.netmarketshare.com/search-engine-market-
share.as...](https://www.netmarketshare.com/search-engine-market-share.aspx)

~~~
malandrew
Taking 50% of online shopping share because your product is that much better
than the competition is totally different than there are no other options.

Imagine you have 1000 stores all on the same street and one is so much better
than the other stores that 50% of sales happen in that one store and there are
no shenanigans where that one store is disadvantaging the other 999 stores.
How can you argue that that is a monopoly?

------
CapriciousCptl
Basically, Amazon's going to push and push until the courts push back.
Business is dog-eat-dog coopetition, it's not some sort of place where people
play nicely together. The irony here is by directing users to their private
label and simply away from SKUs contaminated with fakes they may already be
providing a better customer experience. Same goes for directing users away
from items with fake reviews.

------
fulldecent2
Since Amazon.com is a free product, they need to make money in other ways such
as inserting ads or adding their own brands to the top of product searches.

Now if only they were able to charge money for their services then maybe they
would need to do this, or maybe they could even come up with a monthly
subscription program for anybody visiting their website...

------
simonkafan
Large corporations use their market power to gain competitive advantages -
fully understandable from Amazon's point of view. However, it is completely
incomprehensible why the authorities do not intervene in the market in a
regulating way in these cases more often.

------
miguelmota
Is Amazon an open market? I can't buy Google Home products on Amazon so it
appears that it's not an open market. If not an open market, then isn't it the
same as a dealership promoting their own brand of cars first?

~~~
pinfisher
>" can't buy Google home products on Amazon"

Yes you can

[https://www.amazon.com/s?k=google+home&rh=p_89%3AGoogle&dc&q...](https://www.amazon.com/s?k=google+home&rh=p_89%3AGoogle&dc&qid=1591648086&rnid=2528832011&ref=sr_nr_p_89_2)

~~~
miguelmota
I only see Google routers and cameras in that link. Can you provide a link to
an actual Google Home or Google Nest Mini (Alexa competitor)?

~~~
sosuke
Shrug, I see what you're saying but we can't be sure they are trying to list
those items and are being told "no".

[https://smile.amazon.com/stores/Google+Inc./page/080B7645-82...](https://smile.amazon.com/stores/Google+Inc./page/080B7645-8292-4117-A6CA-1BF598F3FE26?ref_=ast_bln)

~~~
miguelmota
Being told "no" by who? Google? It doesn't make sense that Google would allow
Amazon to sell all their products except for things like Google Homes and
Google Nest Cameras which Amazon has direct competing products (ie Amazon
Alexa, Amazon Ring Doorbell). If people can buy Google Homes and sell them on
eBay but not on Amazon then Amazon is not an open market because Amazon is
restricting selling specific products that compete with their product line.

------
greyhair
Live by the sword die by the sword.

A lot of small businesses got their start by leveraging the ubiquity of
Amazon. Far cheaper than trying to roll your own services and also got a large
set of eyes on their product.

Which is great until Amazon collects enough data to decide that it would be
'useful' to them to enter that same market.

So basically, you leverage Amazon to bootstrap your business, and Amazon uses
your marketing experience and success to decide which markets to develop and
enter.

~~~
greyhair
It makes me think of the small companies that completely outsource their
hardware design and construction to Shenzhen, that are later shocked, shocked
I tell you, to find the product on Alibaba for pennies on the dollar. Under
about twelve different brand names.

------
deegles
I wonder if it's cheaper in the long run to create their own products over
shouldering the ongoing costs (both operational and reputation) of policing
all the fake product listings.

------
d23
This becomes really problematic when you're searching for something, and
Amazon place their brand item high in the listing despite not being what
you're searching for. I've made a couple of mistaken purchases because I
assumed the product had a feature it didn't have because it ranked near the
top for a search for that exact feature. (Think "Disposable X," all of the
non-amazon items are disposable, and Amazon's, despite being the first or
second result).

------
BWGB
Amazon are just using their competitive advantage. The world has changed,
potentially through the introduction of Amazon, whereby consumers now want
cheap products, now! Amazon can do that. People who are shopping for the first
product they see don't have any brand affiliation and therefore it makes
sense. If I loved a particular brand of coffee I would seek them out on
Amazon.

Amazon are using their platform to cover off those customers who are neutral
in their brand preference.

------
JoshTriplett
> Although customers don’t necessarily realize it, brands have for years been
> able to bid on search terms to secure the most visible listing positions at
> the top of Amazon’s product search results pages, where their products carry
> a “sponsored” tag above the description.

And where they're blocked by an adblocker, as they should be.

------
DubiousPusher
It's interesting to see how "vertical integration" has gone from being an
unacceptable form of monopoly to widely expected. The government broke up film
companies for controlling production, distribution and exhibition in the 40s
but it's been pretty par for the course in retail for the past 40 years.

------
mthra
If FooCorp chose to list competing products on their own website (and to help
facilitate payments, returns, etc.), and it became popular because it allowed
consumers to comparison shop more easily, would that also be an antitrust
issue?

Is their a legal distinction that establishes Amazon as a platform first, and
a seller second?

~~~
SolarNet
Antitrust is kind of a nebulous smell test (I'll know shit when I smell it
kinda thing), and from before the internet era, so I don't think the
distinction exists. It's more about how consumers end up interacting with the
market due to the actions of the companies being prosecuted/regulated.

The issue in this case would be that Amazon is manipulating the markets
involved by effectively being the market. If FooCorp was a minor player in the
market, didn't buy up competing marketplaces, and was clear about it's brand
as a seller of Foo products that would be fine (think Costco and Kirkland
Signature branded products). The issue with Amazon is that it is _half_ of all
eCommerce, buys up competing marketplaces to shutter them, it is hellishly
difficult to determine what is an Amazon sold product and a marketplace sold
product on their site, _and_ their brand is as a marketplace.

------
jchook
Has anyone created a free and open source Amazon marketplace?

It seems like something the world desperately needs.

~~~
dwighttk
huh... In my experience Amazon marketplace is like 10% "cool, that was a good
product" and 90% "this is why I no longer trust Amazon"

------
radiator
Reading this, one gets the feeling that Amazon advertise their products on
some sort of public place, and that this is perhaps not right.

But in reality they simply own the whole thing and it is perfectly reasonable
to do however they want.

~~~
Fauntleroy
Oh definitely, if you ignore the whole monopoly aspect.

~~~
dhruvkar
I see this argument a lot for Amazon.

monopoly: the exclusive possession or control of the supply of or trade in a
commodity or service.

Aren't suppliers free to start their own store, drive traffic to it and make
money? Aren't suppliers free to list their products on Amazon, Ebay,
Craigslist, Etsy, Shopify etc.?

How is this considered a monopoly? I'm actually interested in an answer. I
might be missing something.

~~~
Spivak
I think the strongest case I could make is that the advantage of stores like
Amazon (and Target) is customer acquisition. They're where customers go to
discover products and comparison shop. The limited resource they control is
the supply of customers who are there to buy a specific type of good. And buy
favoring certain products they can choose the winners/losers in this game and
edge their own products in.

------
macspoofing
I am surprised that they are doing it. They are going to attract the attention
regulatory bodies in North America and Europe - especially once competitors or
users of their platform start complaining.

------
somethoughts
So an interesting question is whether or not Amazon will allow independent
resellers to list Amazon branded products with commingled inventory or if the
Amazon brands can only be sold by Amazon.

------
Causality1
It's almost impossible to find something with unusual features on Amazon.
Every search page is flooded with "recommended" products that don't match your
search terms.

------
nojito
No different than when you go to the store and the store's brand products are
at eye level and the name brands are lower on the shelf.

~~~
doener
Very different, because Amazon is mot one market, but THE market online in the
Western World.

~~~
llsf
Particularly true in US. But less so in Europe. And worldwide, Amazon is not
number one at all. 1\. Taobao.com: 16% of worldwide e-commerce 2\. Tmall.com:
13% 3\. Amazon: 10% 4\. JD.com: 8% (source:
[https://www.statista.com/statistics/664814/global-e-
commerce...](https://www.statista.com/statistics/664814/global-e-commerce-
market-share/))

The lack of competition in US (Walmart and Target took e-commerce seriously
only recently) let Amazon take almost 50% of e-commerce. But hopefully Ebay,
Walmart, Target and Costco would add more competition.

Painting Amazon like this only online market that we cannot escape is a bit
misleading. Amazon has a long way to go to beat the asian e-commerce, and now
has domestically more competition with Walmart, Target and Costco.

------
ummonk
Isn't this functionally saying that Amazon is outbidding other products for
ads on its own platform?

------
TheArcane
This is why I’m long on Shopify

There’s less and less incentive for you to put up your commodities on Amazon
for a vendor

------
abbadadda
Anyone in this thread that is saying there is nothing wrong with this practice
likely has an agenda.

------
nickpinkston
I think this has been an advantage for a long time, but yes it keeps
expanding.

------
mycpuorg
Seriously, what is wrong with this? It's a for-profit private org. Does this
really deserve the top spot on HN? What's next? "Toyota showroom wants you buy
a Corolla instead of a used VW"?

------
antonzabirko
They've been doing this for a few years now.

------
TLightful
Mods, please can you change the title to what it really is in the link. Thanks

>> Amazon's New Competitive Advantage: Abusing its Monopoly Position

------
coronadisaster
that is not new, unless that article is old

------
aussiegreenie
Amazon delenda est (Amazon must be destroyed)

Amazon ___ALWAYS_ __acts illegally.

------
jcims
Worked for Google with AMP.

------
vernie
It was cool when I was looking at the product page for a battery and there was
a recommendation for an incompatible AmazonBasics-brand battery.

------
beamatronic
I wanted a shredder. Wirecutter recommended the AmazonBasics one. I bought it.
It’s great. Wanted another one. No longer made! Bummer.

Need some light bulbs. AmazonBasics ones look good. Oh, doesn’t ship to
California.

~~~
sigjuice
That is so strange. Why wouldn't they ship light bulbs to California?

~~~
nickff
I am not sure, but my guess is that the packaging is not compliant with
proposition 65. California has a variety of regulations which force small
changes to packaging and manuals.

------
ForrestN
There is another unfair competitive advantage that Amazon had for many years,
which lead directly to this situation: no profit expectations from its
shareholders.

Amazon chose not to earn the normal profits that most businesses need to
survive and grow in order to offer unrealistically low prices on all sorts of
products specifically in order to gain this advantage. They didn't just happen
to gain the market dominance that allows for this sort of anti-competitive
abuse, they bought it by convincing shareholders not to punish them for
choosing not to earn a profit.

