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Why do 3rd party sellers matter?

They are just middlemen. It is a good thing that they are going away.

It results in power prices for consumers.

Because those middlemen create competition in an online marketplace that is increasingly monopolizing the online market.

And all 3p sellers are not middleman. Some are manufacturers and others are simply willing to take a smaller margin or are even selling used or refurbished products that people like me usually buy when given the opportunity to save a lot of money.

That's not a truism. If manufacturers only sell DTC (direct to consumer) and don't allow third party sellers to compete they do so for two reasons, price control and brand control. The lack of competition between third party sellers allows them to sell at any price the market will bare since they are the only ones you can buy the product from. When third party sellers can distribute/sell the product as well and there is no enforced MAP (minimum allowed price) it leads to a race to who is willing to accept the smallest margins on the sales, which in turn makes it purely a who can do the most volume with the best marketing. This actually results in the lowest prices for consumers.

> allows them to sell at any price the market will bare since

This doesn't make any sense though, as an argument.

If I am selling to 3rd parties, it is also true that I can set whatever price I want.

So, if I set the price to 5$, no 3rd party will be reselling my product below 5$. So I can still set the price...

The marginal price isn't constant. Third party sellers can buy large quantities for cheaper unit prices. It's essentially the manufacturer decentralizing their inventory risk and outsourcing the costs of dealing with a ton of individual consumers.

It's complicated -

On the plus side, 3p vendors contribute by getting a product from 0->1 or 0->100 units per day. This is what the industry calls "prospecting", and confirming that there is product-market fit for some product, and a lot of times marketing it in a way that causes it to sell. Supporting the customers, troubleshooting the various issues along the supply chain... this is something that a 3P seller usually contributes to (since a lot of times the manufacturer is focused on designing and making large quantities of product and not really focused on the rest of the supply chain).

This up-front work basically gets paid over time till it becomes rent-seeking behavior, at which point it gets disrupted by a direct relation between vendor and manufacturer. And basically the marketplace needs to hash out what's "fair" from prospecting to rent-seeking.

It’s a good question and it’s a shame you’ve been downvoted for raising it. The other answers don’t really get it to the heart of it. The question is why any company would deal with other companies rather than perform those same functions in-house. It has to do with the transaction costs of doing business with other firms and the efficiencies and inefficiencies of making your company larger and more complicated.

Ronald Coase wrote the paper that first got to the heart of this, one of the most important economics papers ever published: https://en.m.wikipedia.org/wiki/The_Nature_of_the_Firm

It won’t result in lower prices. The middlemen are the ones who are responsible for the low prices.

Exactly. Competition is what leads to lower prices. Getting rid of the middlemen and just having Amazon would lead to them having full control of what the price should be.

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