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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.
Now, if this were all that was happening, sellers and brands could just sell outside of Amazon, avoid the 35-45% commission, and charge a lower price to entice customers. “Buy Cheaper at Walmart.com!” should be in ads all over the web. But it’s not. And that’s where the main claim from Racine comes in. Amazon uses its Buy Box algorithm to make sure that sellers can’t sell through a different store or even through their own site with a lower price and access Amazon customers, even if they would be able to sell it more cheaply. If they do, they get cut off from the Buy Box, and thus, cut off de facto from being able to sell on Amazon.
The scheme is that Amazon charges sellers fees in exchange for access to Prime members, which fees subsidize the free shipping promise of Prime. This forces sellers to raise prices to cover the fees. Furthermore Amazon restricts access to Prime members from sellers who undercut their price on Amazon with a lower price on competing websites. This forces sellers to charge the higher price marketwide.
Well, of course the consumer is paying for shipping. Free doesn’t exist. The article seems pretty childish and naive. Money laundering? Come on.
To the second point, that’s every business in various ways. No one wants their vendors undercutting them. Think of any digital content. You could sell a video game or a movie in a retail store with all the shipping, packaging costs, theft loss, and store overhead, but it’s the same price aa if you buy the online only license.
B2b customers are always being watched. If you call out higher margins in an earnings call, guess whose listening beyond just the investors? And access to the markets are restricted all over. In the grocery business, that may be the end cap, or the areas closer to the fresh foods, or the lower shelf...or the higher shelf. Electronically, it’s eyeballs and search, but it’s still the same concept.
And retailers have used in house brands or generics to directly undercut pricing and bargaining power of their vendors for decades. Amazon is the distribution and so they can just apply the same pressure through different means by altering the relationship or favoring others.
Last edited by Thatsright19; 05-30-2021 at 05:12 PM..
The scheme is that Amazon charges sellers fees in exchange for access to Prime members, which fees subsidize the free shipping promise of Prime. This forces sellers to raise prices to cover the fees. Furthermore Amazon restricts access to Prime members from sellers who undercut their price on Amazon with a lower price on competing websites. This forces sellers to charge the higher price marketwide.
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Prime, in other words, is basically a money laundering scheme.
That ^^^ is one of the stupidest claims I've ever seen on C-D.
Seriously, OP? Do you have any better criticisms of amazon? I know they're out there.
No need to make it personal. I quoted the gist of the article.
Do have an argument to rebut the claims of the DC AG?
I mean yeah. Money laundering is illegal money being ran through legit businesses to get it back into the banking system. So, Marty Bird knows too well that this isn’t what Amazon does.
It’s basically business 101. Porters 5 forces. Bargaining power of buyers or suppliers.
And this is political theater without merit.
Last edited by Thatsright19; 05-30-2021 at 05:30 PM..
To the second point, that’s every business in various ways. No one wants their vendors undercutting them. Think of any digital content. You could sell a video game or a movie in a retail store with all the shipping, packaging costs, theft loss, and store overhead, but it’s the same price aa if you buy the online only license.
Every business does not have access to almost every household in the US. The question is if Amazon's market power is such that vendors have no choice but to raise prices to gain access to them.
Don't get hung up on the verbiage of the author. His words, not mine. I quoted them because the surrounding passage was the most succinct explanation of the DC AG's argument.
No need to make it personal. I quoted the gist of the article.
I DIDN'T make it personal, at least not against you. Now, the author you quoted ... his argument was idiotic.
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Originally Posted by Avondalist
Do have an argument to rebut the claims of the DC AG?
Money laundering? Does the author of that article actually know what that MEANS? Because it doesn't describe what amazon is doing. It's a ridiculous statement on its face.
I DIDN'T make it personal, at least not against you. Now, the author you quoted ... his argument was idiotic.
Money laundering? Does the author of that article actually know what that MEANS? Because it doesn't describe what amazon is doing. It's a ridiculous statement on its face.
The author of the article is not considering antitrust action against Amazon. The DC AG is. Arguing against the author's florid description of the claim is a straw man.
Every business does not have access to almost every household in the US. The question is if Amazon's market power is such that vendors have no choice but to raise prices to gain access to them.
Don't get hung up on the verbiage of the author. His words, not mine. I quoted them because the surrounding passage was the most succinct explanation of the DC AG's argument.
How much evidence do you think Amazon would be able to put forth in the opposite direction? That being, their market access was used to drop prices for the consumer? It’s far more likely that it’s the opposite. Amazon isn’t a monopoly. It’s arguably a monopsony where there’s many suppliers and few buyers of this scale. If anything, they force their vendors to cut and become leaner just like Walmart is notoriously hated for. Ie reverse auctions putting them against each other for access.
Walmart bankrupted many of its biggest suppliers. GM was known for the same. Being on their top 10 vendor list award might as well have been an obituary. They’d squeeze you on terms like a vampire and dangling more business to you was a trap. Some OEMS would actively turn away new business to prevent too much reliance. It’s why your customer list and supplier list are talked about as significant risk factors in a 10k filing. Auditors ask questions about it every quarter.
And does pushing shipping cost onto suppliers actually cost the customer more than bloated individual companies having their own distribution chain and store fronts? Because those shipping costs and the old distribution and warehousing was all included in the customer pricing too.
It’s overzealous marketing on a loss leader at worst rather than being “money laundering”.
Last edited by Thatsright19; 05-30-2021 at 05:48 PM..
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