[Gasparila]

Thought exercise because I legitimately struggle with this. Is this fundamentally different than Costco using sales data to choose which Kirkland products to launch/sell? If so, how? If not, then why do we not pursue Costco with the same gusto as Amazon? To me this behavior by Amazon seems worse, but I can't figure out why.

[jasallen]

The difference is between retailer and marketplace. Both Amazon and Costco are retailers, and both could use that knowledge to decide what products to self-source for better retail margins. Either way, still a retailer, but maybe also a manufacturer / wholesaler.

But Amazon is also a marketplace. In that role it acts as a "rentable retail space". Using the data of the retailers in your marketplace to decide what to make/wholesale and then retail is another layer.

You could easily argue that it reduces to the same thing. But societally we've excepted that the retailer is a full layer in the system and gets full access to the data flowing through it. The marketplace itself is historically more of a fee-for-use type of thing, so its not an ingrained concept for us.

[dehrmann]

> But Amazon is also a marketplace

Meanwhile, https://news.ycombinator.com/item?id=24174276

"Amazon Liable for Defective Third-Party Products Rules CA Appellate Court"

It seems both regulators and Amazon want whether or not it's a marketplace to go both ways whenever it's convenient.

[legutierr]

This explanation makes the most sense to me, but there is something that you are leaving out. Not only is Amazon a marketplace, but it is THE marketplace. Amazon has an effective monopoly on small-seller logistics and marketplace services in the United States (and many other places), soup-to-nuts.

If you are anything other than a massive corporation, any manufacturer that chooses not to sell through Amazon and utilize all or most of its services (marketplace listing, payments, warehousing, delivery) will be at a massive cost disadvantage and will not be able to compete with other sellers that do choose to participate with Amazon.

And more significantly, perhaps, if you don't sell through Amazon's marketplace, you are often unable to compete with Amazon itself.

[Manuel_D]

I'm still not understanding the distinction here. Costco and Amazon both sell company-brand products, alongside non-company products. Costco and Amazon collect and analyze sales data from the sale of both company and non-company products.

[chaostheory]

> But Amazon is also a marketplace. In that role it acts as a "rentable retail space".

Most brick and mortar retailers also sell space to manufacturers. Product positioning in the store and even on the shelves isnt solely due to UX

[lsaferite]

So how do you factor in the recent ruling in California?

> An appeals court in California has ruled that Amazon can be held liable for products sold through its marketplace by a third-party seller

That seems to obviate the distinction of 'marketplace facilitator' vs. 'retailer' for them. That makes them much more like Costco with a special relationship with vendors to set up vendor-specific sections in their store.

Personally, I've always detested the 3rd-party market in Amazon and wouldn't mind seeing it go away.

[tlogan]

Majority of big retails also rent majority of their shelves to vendors. This is called consignment contract.

So no big difference...

[Nasrudith]

That sounds awfully like the Platform vs Publisher distinction "logic".

[carlps]

I'm not intimately familiar with either side, but I see it as: - Costco buys x amount of product at y price from seller and then sells it in its store. - Amazon provides a platform for sellers to sell with a cut going back to Amazon.

There is a fundamental difference between being a retailer and providing a retail platform.

All Costco would really have access to is how much they've bought and how that has performed for them. Meanwhile Amazon is providing a platform for companies with a policy that they will only use their data to help them, which is what is allegedly not happening.

[PoignardAzur]

> I'm not intimately familiar with either side, but I see it as: - Costco buys x amount of product at y price from seller and then sells it in its store. - Amazon provides a platform for sellers to sell with a cut going back to Amazon.

This isn't really how it works. Retailers very often have arrangements to defer payments until after the product is sold.

In fact, in France, retail margins are so thin that supermarket chains reportedly make most of their profit by selling the inventory, investing the money in short-term funds, then paying the suppliers one month later and keeping the interest.

[Y-bar]

I used to stuff shelves at a grocery chain ~20 years ago and one difference seldom mentioned is that grocery chains bought from the manufacturers. That meant that we as a grocery chain were responsible for the sale to consumer, we were not merely a marketplace for a bunch of different brands.

So, even if we had our own competing labels for some products, the manufacturers would never be left in the cold with unsold stock (if for example we chose to drop one brand or run a promotion for our own).

[zachware]

This is generally not how grocery operates today.

Most large grocers:

  - Sell shelf location slots to the highest bidder.
  - Include a consignment clause in their vendor agreements requiring vendors to take back spoiled, customer-damaged, and unsold inventory at X point or on-demand.
  - Require merchandisers to keep inventory in-stock for as many products as they can get vendors to manage (e.g. the coke delivery person is in-store several days a week.)

All of this is especially true for shelf stable products and beverages.

The modern grocery store is effectively managed like a flea market and is allowed to do so because the chains have so much leverage.

So while we can take issue with Amazon’s practices, we have to remember that most of large-scale retail operates in ways that if written about to the level of Amazon, we’d also be griping about.

[notyourwork]

Disclaimer: I'm not a legal expert, just an engineer with my own opinions.

I struggle with it as well because conceptually in my mind this is the same as a grocery store using customer buying data to inform itself. Grocery chains have been using private label brands to compete with name brands for years. Check your cereal aisle for the "fruit loops" in the back without a box that are ~50% cheaper than the name brand boxed real fruit loops.

I never saw this as wrong growing up. I saw this as the store offering a cheaper comparable and consumers were able to chose which they want. In fact, the grocery store also controls what is on the end cap and what is on top and bottom of each shelf.

I think the landscape is heavily skewed in favor of the dominant online retail merchant. This skew and dominance is what causes people to claim afoul behavior is going on.

[ClumsyPilot]

Difference in quantity has a quality all of its own.

There are kinds of behavours that are acceptable for an individual or a single groceries store, but if a large company adopts it across the country and puts it in the policy, then they are beaking the law.

[dathinab]

Grocery stores select which products they want to sell and have limited capacity.

Amazon provides a platform through which "everyone" can sell "anything" with no tightly constrained space/slots.

As far as I know Amazon is legally closer to a market place where everyone is up their own stand (but they are required to look mostly the same) and which happens to also require you to use their payment system.

I.e. Amazon is just a proxy while the grocery store legally buys and resells the products.

[_up]

I am not from the US but I think Amazon has much more market dominance than Costco. If Amazon had 20% market share nobody would mind, but they don't have real competition that comes close.

[jagged-chisel]

Suppose Costco allowed other vendors to be present and selling in their stores. Costco requires these vendors to use Costco's checkout systems. Costco then takes the data gleaned from those sales to determine which products to compete with and then begins aggressively pushing their competing product.

Is this fair to the vendors?

[nerdponx]

This is an interesting thought experiment. Maybe the objection is that Amazon is erroneously considered a neutral marketplace, and not a "store". But practically is there a difference between these arrangements, other than the incidence of who technically is the retailer and who is the wholesaler?

I think the real issue is how people shop online versus in stores. Online, they see a linear feed of individual products and buy whatever is near the top. In a store, they see a variety of displays, and it's almost hard not to comparison shop even a little bit.

It's much, much easier to be "anti-competitive" on a web store than a physical store. Imagine if Costco did what Amazon does, deliberately making Kirkland products easier to find in the store and look more reputable/trusted compared to other brands.

So I don't think the problem is that this particular move by Amazon is any more anti-competitive than anything a normal store with store brand would do. The problem is that Amazon already engages in other anti-competitive activity, so pretty much anything they do related to their own store brand is distasteful.

[dathinab]

No in that case Costco would likely get into legal problems.

Actually there had been legal cases with unfair market practices in grocery stores between different competing products sold there. I think there is currently a ongoing case with Oreo.

[MengerSponge]

Imagine if a Costco sales rep offered to swap something in your cart with the Kirkland clone, or if they suggested the Kirkland product as you reached to grab something else off the shelf.

[krumpet]

Take a quick trip the Costco website and you'll see they use the same recommendation tactics. Looking at a bag of Peet's brand coffee, I see Kirkland Signature brand coffee sitting in the "Similar Product". Just saying...

[cptskippy]

I've never had amazon offer to swap anything from my cart.

[tylerrobinson]

Aren't traditional grocery stores doing the same thing but using price, sales, positioning, name, and label imitation? When I reach for Quaker Oatmeal Squares, and Wholesome Oatmeal Squares Cereal is right next to it, for cheaper, also in a blue box?

[notyourwork]

Are businesses in the business of increasing efficiencies (more revenue, more profit, lower costs) or are they in the business of doing what is in the best interest of consumers or both?

I don't think your example really holds weight. I goto Costco because they offer products I want at a price I like. If during shopping they were trying to give suggestions to better deals I'm not sure as a consumer I get to complain about it do I?

[zachware]

This is a good point. I don’t think Amazon’s practices are structurally different than those historically of Walmart or Costco.

Each captured sales data and built private label alternatives to key brands on a regular basis. Small differentiator in the case of Costco is that they have a practice (though not a policy) of offering the leading vendor the opportunity to produce the private label before doing it themselves. But that’s a small detail.

Besides the fact that headlines about this get traction, there is a differentiator with Amazon in that they actively market themselves as a marketplace for small businesses in the way we’ve come to view Shopify. Costco and Walmart were always very clearly retailers...they buy stuff and sell stuff at a margin.

So while I think a lot of the blowup about this is overdone, there is a legitimate argument about the difference between how Amazon markets itself and what it does. But, frankly, for anyone with any level of experience with retailers or, frankly, tech platforms, this kind of capture behavior should be expected.

[HWR_14]

> Is this fundamentally different than Costco using sales data to choose which Kirkland products to launch/sell?

It's 100% different. Costco doesn't make any of the Kirkland brand products. Their suppliers do. And Costco usually only carries one brand of, say, batteries. They go to Duracell and say "We want to buy X Duracell batteries and Y Kirkland batteries from you over the next Z years". If Duracell doesn't want it, their next call is the same thing to Energizer.

Basically, Costco says to their suppliers "We want to give you X high margin sales and Y much lower margin sales." And you know that going in. And are ecstatic because all those sales would otherwise go to your competitor.

Amazon says "here's a flea market", then uses their security cameras to see what items are selling at everyone's stalls. The next day, the stalls of the people who run the flea market (right next to the front door) also have the best selling items. Oh, and their tables are infinite and maybe they also fuck with the listings on the map to make it harder to find that those items are also at your booth.

[jquaint]

I think its a matter of scale. Say Costco makes a Kirkland brand cereal, there are other stores that you can buy cereal at and there is competition. For a lot people, all online shopping comes from Amazon. Amazon uses this position to their advantage in many ways (high quality customer data, branding, etc.). This actually disincentives people from making compelling products because of the risk that Amazon will just steal the product.

[michael1999]

Costco is a retailer. Amazon claims to be a neutral 3rd party when providing marketplace services to 3rd party sellers. Especially when trying to disclaim product liability. They tried to have it both ways, and now they'll get neither, and deserve it completely.

[Tiktaalik]

I recall hearing on a radio show a while ago about this topic a lawyer noting that a difference in these cases is that a retailer "takes a risk" in order to get the data, that is that they open up their storefront to this supplier, allocate space for them, and pay the supplier. The only way they learn that the supplier's product could be a success is by selling the suppliers product.

In contrast Amazon takes on zero risk. It snoops on the data of transactions, and then launches competing products.

[jitendrac]

Costco launching/selling products with own sales data is one thing.

To make it clear, Here you should consider Amazon.com different entity than Amazon Seller Account. Now would you sell on amazon.com if amazon.com leaks your data to "amazon seller account" owner to boost his sales of a similar product, which you sell.

Moral thing is, Amazon seller division who deals with product directly sold by Amazon, should never have access to the data of other sellers.Fullstop.

[toss1]

The Amazon and Costco situations are different.

When they start by doing independent market research, selecting a product, building/sourcing it and marketing it, then analyzing data generated by their own sales of these products in their own stores (brick & mortar or online), they are the same.

The DIFFERENCE is that Amazon also hosts other sellers and uses THEIR data.

So, an entrepreneur comes along having designed, arranged fabrication, and imports a product, then pays fees to sell it on Amazon. Amazon now uses THE MERCHANT's own data against them to notice the successful product, decide that it will be profitable, then search out the same manufacturer, offer a better deal, start selling on their own market as Amazon Basics, then kick the original seller off the market. [1], [2] It happens repeatedly enough to call it systematic.

So, if you are only marginally successful, you can continue selling unmolested.

But, if you find good success, Amazon will use your data to chop the top success zone right off of your business, after charging you for services while you spend decades building it.

It is even better than Zuckerberg's plan - at least Farcebook doesn't charge you to hijack your data for their purposes - Amazon charges you AND hijacks your data.

Just because it evades existing laws does not make it right.

I will certainly not be selling anything on Amazon that either 1) I'm 100% certain cannot be reproduced elsewhere or 2) I only intend to be a small or temporary market.

[1] https://www.wsj.com/articles/amazon-competition-shopify-wayf...

[2] https://www.hitc.com/en-gb/2020/12/24/amazon-tripod-company-...

[gamblor956]

The distinction comes down to the legal differences in how they operate their sales operations:

Costco is legally a "reseller" that purchases items from manufacturers/distributors (at wholesale prices) and "resells" them to customers. (Note: only a tiny fraction (<1%) of Costco's inventory is sold on a consignment basis, meaning that the manufacturer/distributor only gets paid for units actually sold on. This arrangement generally only applies to some new products being sold on a trial basis.)

Amazon is also a reseller of items sold through the Amazon.com seller...but not for items "sold" by third-party merchants. The distinction is that for Amazon.com seller sales, Amazon has legally purchased the inventory sold, even if the payment terms may more closely resemble consignment transactions than wholesale transactions.

[xmly]

It is like Microsoft learns your business through your emails and starts the undercutting. Does it sound more serious?

AmazonMarketplace is a software vendor and data should belong to sellers only.

[munificent]

This is a good question. It rests on an implicit assumption that we think Amazon's behavior is anti-consumer ("bad") and Costco's is not ("good").

But perhaps one way to resolve this dissonance is to consider that Costco's behavior is anti-competitive too. They are a beloved brand, but that doesn't mean our emotional attachment to Kirkland products is an accurate reality-based moral stance.

[nnain]

You need to consider whether there's a difference between physical mail and Email (esp. Gmail)? And whether Google's business model is monopolistic because its 'software' over the internet.

[baq]

Two helpful questions I don’t know answers to, but I’m quite confident that the difference between answers are the crux of the matter:

Who are Costco customers?

Who are Amazon customers?

[jquaint]

I think that most Costco customers also use Amazon. I.e. I get my basic bulk items from Costco and my specific items from Amazon. Perhaps this is why amazon is trying to get these customer with "Subscribe and save" which offers discounts for subscriptions on basic items.

Although, I have not seen any real data on this. Just my gut read.

[rtsil]

I'm not familiar with Costco. Do their sellers operate their own stores inside Costco's premises?

[jquaint]

I don't think they do. It's similar to a grocery store that sells other companies products. Costco is different in that they sell products wholesale/bulk.

[poidos]

I'm not sure if it's fundamentally different, but maybe you're just (like I am) more inclined to perceive Amazon as a "bad" company. Costco has a lot of goodwill with the public.

[curryst]

Amazon is pushing people towards Fulfilled by Amazon. It makes sense as a marketplace, providing a more consistent experience. However when they compete in that marketplace, it means they're charging you to get data to outcompete you (via FBA fees). It also means that if they do enter that market, they're double dipping. They're taking away your revenue stream for their own profit, while simultaneously increasing what they charge you because it's harder to get your inventory out of Amazon's warehouses via selling it. They can also almost always outcompete you, because they don't have to pay the marketplace fees (they get the service at cost). They can also use the money they make from marketplace fees to undercut you, selling their competing product at a loss (but net zero after you pay your fees) until you get off the marketplace. Amazon also has a perverse incentive to not sell your goods because they don't have to pay for them, so they're totally okay if they can ensure that no one buys your product.

Costco has to buy the goods they sell. If it's on a shelf, Costco wants it to sell. If they don't want something to sell, they stop buying it/carrying it. They can't make any money by buying a competitor's product and letting it sit in a warehouse.

The incentive structure for Amazon is bad for everyone else. Their ideal profit scenario is to have warehouses full of other companies' stuff that never sells, and to sell an Amazon branded alternative to each consumer with demand. Costco's ideal profit scenario is to never buy third party products and only sell Kirkland goods (assuming demand stays the same). Amazon needs to pick one; they're either a marketplace, where their ideal profit scenario is to sell literally anything they have without preference, or they're a retailer and their ideal profit scenario is like Costco.

[chii]

> To me this behavior by Amazon seems worse

only seems worse because amazon is so big, and so monopolistic, that a lot of people hold them to different standards.

It's the same idea that people expect a rich person to pay more taxes, or contribute more philothropically.

[notyourwork]

I'd rephrase this:

"only seems worse because amazon is so big, and so monopolistic"

as:

"only seems worse because amazon is so big, and so dominant"

I don't think monopolistic is a fair adjective because it has an implied legal connotation. Is Amazon a monopoly or just the largest e-commerce retailer today?

[nerdponx]

> It's the same idea that people expect a rich person to pay more taxes, or contribute more philothropically.

This has to do with diminishing marginal utility of wealth and nothing to do with holding different people to different standards.

[ClumsyPilot]

I know man, this idea that people in power have more responsebility that a random homeless person, socialism!