Good article that goes into details, the crux/tl;dr is:
Amazon has between a half and three quarters of all customers online, so not being able to sell on Amazon is a nonstarter for brands and merchants. As a result, to keep selling on Amazon, merchants are forced to inflate their prices everywhere, with the 35-45% commission baked into the consumer price regardless of whether they are selling through Amazon. When you buy on Walmart, or at some other retail outlet, or even direct from the brand, even if you aren’t paying Amazon directly, the price reflects the high cost of selling on Amazon. As a result, sellers and brands tend to raise their prices across the board so that Amazon users can’t find better deals anywhere else. Prime thus looks like a good deal, but only because sellers are prohibited from offering customers a better one anywhere else.
I think this article spends a lot of effort muddying the waters with irrelevant issues and the paragraph you quoted up through the second to last sentence is the only part that really matters. People who don’t understand that “free” shipping isn’t actually free are kind of a lost cause and Amazon’s monopoly isn’t really their biggest problem.
Selling on Amazon tends to be more expensive than selling elsewhere
If you sell on Amazon you can’t sell those items anywhere else for less
All the argle bargle about Prime and free shipping and Buy Boxes doesn’t really have much to do with the core issue.
problem with amazon is that startup costs to provide anything like Prime service are astronomical. walmart can’t do it. overstock and buy.com couldnt. google probably can’t. even companies like kroger are likely too backward to compete. amazon literally pumped 10 years worth of earnings into vertically integrating procurement, warehousing, marketing, and shipping.
only solution is to break them up regionally, like the baby bells. splitting them by category would be kinda awful for ux.
having said that, once Prime-like service starts handling medications and necessities, regulations will need to make sure all communities are served equally. which they are not right now.
This is the good thing about Amazon! They spent decades building an incredibly perfect logistics machine, sanding away ever consumer inconvenience, blowing up any obstacle in the way of making their site the place people want to shop. And they did such a good job that it’s impossible to imagine companies that have an infinite amount of cash doing as well. That’s all positive stuff.
The Stollerian stuff always ends up chaining pieces of red yarn together in a way that sounds logical, but ends up building to conclusions that are absolute nonsense if you take the smallest step back. Like:
How do sellers handle these large fees from Amazon, and the inability to charge for shipping? Simple. They raise their prices on consumers. The resulting higher prices to consumers, paid to Amazon in fees by third party merchants, is why Amazon is able to offer ‘free shipping’ to Prime members. Prime, in other words, is basically a money laundering scheme. Amazon forces brands/sellers to bake the cost of Prime into their consumer price so it appears like Amazon offers free shipping when in reality the cost is incorporated into the consumer price.
Get that? Quoting an all-in price is deceptive money laundering; stating a headline price of $6.99 with “+$5.99 s/h” in tiny print underneath is transparency. It’s ridiculous. The reason consumers hate shipping charges is because they’re confusing and make it harder to comparison shop. All-in pricing is pro-competitive.
Also all-in pricing is convenient but vertical integration is anti-competitive, but parting things out encourages competition. When a customer of mine buys solar panels one place, inverter another place and hires me to install they are getting a better price and encouraging more competition than when they just tell me to take care of everything. In the same way if they shop manufacturer and shipper separately they encourage competition.
And a massive market leader using their power to stifle competitors is inevitable.
Amazon is the second biggest search engine after google. First for products. Their shipping and customer service has eroded but they still enjoy a reputation of leading those categories.
The free shipping thing is more than just all in pricing. There is a feeling that shipping included is a single transaction where the seller is responsible for the shipping relationship, where if you are paying for shipping as an addition you are starting a secondary transaction between you and a third company that the seller is not taking responsibility for entirely. This is why prime resonates as higher quality and has higher conversion than two day free shipping even on Amazon.
Do any of you actually want to deny Amazon the ability to offer free shipping or premium perks like Prime? Because if not, then none of this stuff matters. They should not be able to restrict sellers from offering lower prices elsewhere because that is clearly using their market dominance to engage in anti-competitive behavior. All the rest is noise.
As for the Buy Box stuff, that only applies when multiple sellers are offering the exact same product, and 99.999% of the time the winner is who has the lowest price. It’s not like somebody with hand-crafted, artisan slippers is competing with Nike. You’ve already selected the specific product which is practically a commodity and it’s just a question of who’s selling it to you.
Not true. There is no buy box sometimes even when there is a single seller. It has a drastic impact on sales and that is very important when you have competitors in the same category of a different brand. People trust the buy box as an endorsement. And there are resellers of products and arbitrage players so even small brands have competitors selling their own brand.
Amazon is tautologically not a free market. It’s a market, it’s almost the market, the sellers have to pay for it and Amazon is powerful enough to dictate to sellers even when they aren’t on the Amazon “platform”. “Platform” goes in quotes because really the world is their platform.
This sounds similar to how HMOs began squeezing health care providers in the 1990s, although since it allegedly didn’t harm patients no one cared about possible antitrust implications or the effect on providers who were arbitrarily denied access onto panels.
It sounds bad when it’s got red yarn linking it to the notecard with BUY BOX scrawled on it in capital letters, but think about what’s really going on here. There are two situations:
A customer browses Amazon to shop for a widget, selects the ACME widget, then searches the internet to see if it’s being sold for less elsewhere, only to find that ACME itself is offering it for less, so they buy it there. It’s the equivalent of going to Barnes & Noble to sit in their chairs and browse through books, only to then buy the books on Amazon. Amazon makes the sale then gets screwed out of a commission? Why on earth would they allow that?
Or maybe the customers don’t comparison shop, and ACME just charges higher prices to people who browse on Amazon and maybe are less price sensitive and then offers better deals in harder to find places to get more budget-conscious customers. But why should Amazon let ACME gouge its customers? It’s spent decades cultivating customer loyalty, and now it’s going to package up its most loyal, committed customers and let them get the sucker’s deal from ACME when they could save money by buying from ACME directly?
It’s somewhat similar to resale price maintenance, which has a complicated legal and theoretical history, but it’s much simpler, because there’s no collusion or price-fixing here. ACME sets all the prices. Amazon is just saying that they can’t have a display case in Best Buy for their widgets while simultaneously selling the same widgets out of the back of a truck in the Best Buy parking lot for less.
This is different though. ~No online merchants allow you to shop separately for shipping. And most of them don’t pass through the actual cost of shipping the item. It’s just an add-on to the price that makes the total cost less transparent.
When I subcontract for someone it would suck of me to offer a lower price to a customer that I know came to me through the sales company so I don’t do that ever. But, they sure as hell don’t get to dictate my prices across the board. They wouldn’t even dare suggest it. But then, there’s no one sales company that controls a ridiculous share of the market. It’s a free market where sales companies have to deal with subcontractors who have some options in where they find work.
The bolded is shocking. It’s just accepting that they control the market. It’s extremely anti-competitive, anti-free market and I’d just as soon the government did it if we are going to cede such power to some organization whether it’s de facto or de jure.
Can you give me an example of this? You’re describing something I don’t really understand. I go to Amazon and if a product is available for purchase there’s a place to click to do so. If there are multiple sellers, there is a place to click see them too, but it is much less visible. Before yesterday I was completely oblivious to whatever the heck a buy box even was and I’m still not entirely sure what it is. Either there’s a spot for me to click to buy something or there isn’t.
Amazon isn’t trying to stop ACME from gouging people who shop on Amazon. They are trying to stop ACME from selling for a profit outside of Amazon. ACME could sell for less if they or the customer didn’t have to pay fees to Amazon. Surely Amazon shouldn’t allow ACME to just link to ACME’s own website on Amazon, but they shouldn’t control pricing off their platform.