Reminds me of my clever card playing strategy where I peek at everybody's cards.
Have you never looked around to figure out where some dropshipper gets their stuff and bought direct?
The risk is quite a bit larger if a large player like Amazon pressures you to tell them who your suppliers are.
> Have you never looked around to figure out where some dropshipper gets their stuff and bought direct?
Amazon exploiting their market position is not the same thing.
They would buy supply of a product from a startup supplier, who had done all the work of sourcing and designing the production of their product, and then demand ever-declining prices of said supply until the startup supplier had no choice but to abandon ship due to lack of profitability. At which point Walmart would simply re-create the supply chain themselves.
The solution is to never deal with a corporation like Amazon or Walmart, Bezos didn't get to be a pretend-astronaut wannabe by paying his bills.
The depth of data they have is much deeper. Walmart hasn't had 3rd party sellers for as long as Amazon, and that sort of historical sales data is priceless to retailers. They don't willingly share that.
But how do you get around this? Is there a way of engaging with these big companies as a small player? Or is it just a fool's errand?
I'd say yes.
Consider the possible outcomes:
1. your product doesn't sell very well, but doesn't fail entirely. you bought yourself a job, basically, you work longer hours for the same or a little less money than you made when you were employed.
2. your product doesn't sell well enough to stay on the shelves, you've probably sunk some of your own money into a failed venture and if you have debt you're probably looking at bankruptcy.
3. your product sells well, Amazon or Walmart steal it from you.
I'd say the only way to win this game is not play. Build a product for a nice market outside of their clientele's price target that sells at a premium Amazon and Walmart shoppers are unwilling to pay.
Really clever short term strategy. Once word gets out only sellers who don't care will list their products, and your product listings will be page after page of cheap, knock-off crap only an idiot would buy.
looks at Amazon listings
However, by no means is this different from the store branded products you find at Safeway or Walgreens. They do the exact same thing. The vendors pay for shelf space, share their profits, only for the supermarkets to copy the product and sell it as store branded ones.
Like a lot of things a fresh perspective helps. People are talking about it now but it was a minor shock when I saw this the first time I visited the US (2012is). I was curious on how the brands were okay with it. I assume they rely on their brand sway. Apparently it's been a thing that goes back a very very long time.
It is different because Amazon controls exposure to products. In the store if I want ketchup, Heinz and the store brand are right next to each other and easily distinguishable. Amazon can bury the original product on page 2 of the search results. Also, its not always obvious in Amazon's search results that there is a viable option other than the Amazon branded product.
The brick and mortar equivalent of pushing search results to page 2 is to just stop carrying the product—considerably worse than being on page 2.
But no plausible deniability.
Amazon does not purchase most of the inventory listed in its search results.
Retail stores actually buy (almost) everything they sell (albeit at lower "wholesale" prices), and "resell" to end customers. So when a retail store stops carrying a product, they stop buying the product from the supplier, and that is always because the item was not profitable to sell.
(In rare cases, they sell on consignment, but such arrangements would apply to less than .001% of products sold at retail. Selling on consignment has a whole host of separate issues, which is why it is so rare even though it would seem most profitable to retail stores.)
This is true in general, but not absolutely true.
In some cases, manufacturers rent shelf space from stores, then pay the store a commission for each unit sold.
Various power tool manufacturers use this model, the name of which eludes me at this moment. I think Moleskine also does it.
But that is the exception that proves the rule, and suppliers go into those situations with the option of simply selling to competing retail stores.
Vendors do not cover shrinkage, except for the rare items sold on consignment. Shrinkage losses are either absorbed by the store or handled by insurance.
So for example you only find Ryobi tools at the Home Depot but Craftsman and Black+Decker are exclusive to Lowes. Grocery stores do similar exclusivity with certain brands, Sargento's cheese comes to mind.
Some stores manage to get their brands recognized as high-quality, but not nearly as many as you probably think. The usual consumer recognition is that they are knock-offs. So the more known brands don't see them as direct competition.
A comment like this pops up every time this happens with Amazon, and it's not even remotely the same thing at all.
Amazon only "resells" a limited subset of products. Most of the products on Amazon are sold on consignment or by third party sellers with fulfillment by Amazon.
Stores buy all of their products from their suppliers, both the name brand products and the store brand products and "resell" those products to end customers. In fact, the same company (or companies) supplies both the name brand and store brand products. Store brand products are just white label variants of the name brand. The supplier deliberately offers it as part of a market segmentation strategy, with the goal of making the name brand appear (more) premium.
Suppliers also do not pay for shelf space for most products in grocery stores. Paying for shelf space is an optional marketing strategy; suppliers can choose to pay for premium placement, and if they do not the store will simply place the most profitable items in the premium locations.
Suppliers also don't share their profits, and I don't know where you got that idea from. Suppliers sell to grocery stores at wholesale prices. And the grocery stores than "resell" those items at a markup to end customers.
Finally, grocery stores very rarely sell items on consignment, because most suppliers won't put up with that shit. Only low volume or new/trial products with no sales history get sold on consignment, because the store can't and won't purchase perishable inventory without knowing how (or when) it will sell.
That being said, Amazon has taken a step in the right direction by being open about it's brands: https://www.amazon.com/b?node=17728530011
Or we do stop Amazon, and others, or the future will be the corporate hell that 80s movies predicted.
But Amazon won't sign one.
This was recently rolled back for some vendors.
What "entrepreneurial risk" are they taking there? Sending the initial batch of products over and creating a product listing? Are they involved with the design/creation of the product itself? If they're just taking already designed/made products and reselling on amazon, and amazon's cutting them out, I can't say I feel sorry for them losing their middle-man position.
If there was no entrepreneurial risk, why wouldn't Amazon just use it's AI to predetermine all the successful combinations of product+supplier+customers ? There would be zero reason for Amazon to allow third party sellers, except for very niche areas. This is a very predatory practice and I'm amazed they're allowed to do it.
I get maybe for the older population but that’d put a 10-20 year cap on Amazon dominance before the majority of their customer base understands the internet enough to look for alternatives if amazons service isn’t good enough.
Now imagine a company that has been just as effective as Facebook at replacing/consuming/killing it's competition in the retail space and you've got Amazon. If Amazon went down for a proportional extended period, say for a few days, you'd likely see a massive spike in sales at other retailers just as we saw a massive spike in new site traffic when Facebook was down.
Those sales were never yours to lose, right?
Let's say I own a restaurant and instead of improving my food or service I go to my competitor's food suppliers and offer them extra money to not sell to any of my competitors. In isolation, there shouldn't be anything wrong with me making an agreement with another private corporation, but the effect of this is that it creates an unfair playing field for my competition.
Amazon's position as both the marketplace and a competitor in that marketplace, creates very similar "unfair" circumstances that benefit them uniquely on that marketplace (for example placing their offerings higher up in search results, or creating special "recommendations" specifically for their offerings, etc) not to mention, the unique access to information that they have into how well their competitors do (which is not inherently unfair, but when combined with all of the other aspects does make a decent case for fitting the "unreasonably constraining competition" section of anti-trust law)
Personally I don't like what Amazon is doing. But I don't think it is illegal under current anti-trust laws. The laws really need to change, but I don't see that happening.
I think the justification for why something like exclusive dealing agreements in monopolistic conditions is unfair could definitely be applied to why being a competitor in your own marketplace, while leveraging your customer's data, and boosting your own listings could be deemed unfair and lead to monopolistic conditions too.
Is that what Amazon is doing?
Maybe identifying which product is good for the market, who is the best supplier, using social media to market the product and create a demand?
The closest thing to entrepreneurial risk is the "creating demand" claim but that seems unlikely to be very true in most cases. In most cases, they're likely capturing demand on Amazon itself by being among the first to list a product.
It seems pretty clear that they're arbitraging and Amazon is taking advantage of its position to out-arbitrage them. In many cases, it seems reasonable to assume Amazon would've tried selling the product themselves regardless.
These arbitragers probably just have to accept that the reward for finding new products to arbitrage is very time-limited, because if Amazon doesn't start competing with them, someone else will.
This is a great example of a ruthlessness, but highly functional, capitalist market. It seems to work out great for consumers, all things considered.
That's a major risk
Buying on one market and selling on another is not much more than gambling/speculation/trading.
Seems like a real stretch to call it entrepreneurship.
It doesn't sound bad when you're just talking about one product or company but we're not just talking about one.
Amazon has done this to thousands of products as part of a plan to use third party sellers as guinea pigs to see what products will sell enough to rip off. This is systemic anti-competitive behavior that is at the very least unethical if not outright criminal.
Maybe you're going to tell me everything in your home is of the highest quality, but trust me that isn't how the vast majority do their purchasing.
This one was probably affected by the Peak marketing campaign, but when it happens hundreds of times,it's not Verge news any more, it's just life. See: how so many T shirt and hoodie designs in mass market stores are ripped off indie artists.