[CodeCube]

So many comments about, "doesn't everyone know they do this?", and "everyone does this!"

I say there should be an explicit difference between "running a platform", and "selling on a platform", and never should the two meet. By "platform" here, and in the context of selling stuff online or IRL, I mainly mean that the store should never compete with their suppliers ... it's madness and unethical. If everyone can get a piece of the pie, it makes for a healthier ecosystem. We should want the rising tide to lift more than one boat.

And yes, I believe this should be regulated at the policy level.

This of course has implications for other forms of "platforms", such as operating systems, APIs, and clouds; but I'll leave those discussions for another time ;)

[entee]

The major question I don’t have a good answer to is, “Why is this different than brick and mortar store brands like Safeway signature?”

Surely a part of is is placement, but Safeway could put own brand ketchup at the same level (and I think sometimes does) as Heinz and still wouldn’t sell the same volume.

Amazon is clearly getting a big advantage here, I’m just curious about what the underlying dynamics are that allow them to be so much more successful in their context than it seems store brands are in other contexts.

[snowwrestler]

The difference is that Safeway does not have any other sellers on their shelves. Safeway buys inventory at wholesale and sells it at retail. Everything that is sold in Safeway was intentionally selected by Safeway to be there.

If you see a product on a Safeway shelf, the company that makes that product already got paid--by Safeway. If Safeway puts a generic ibuprofen bottle next to a bottle of Advil, that's fine with Advil because Advil already got paid! Safeway is assuming the risk that those bottles of Advil might not sell because everyone buys the generic.

Amazon is different--they sell things themselves, but they also offer to run a logistics platform for other folks selling things. Folks who use this platform believe (are led to believe) that they are going to direct to consumers, NOT selling wholesale to Amazon. Amazon purports to be a neutral infrastructure provider, like UPS or Verizon.

Now, you can say that these folks are naive for believing Amazon about their neutrality, but it is what Amazon said! Many of these companies would never have used Amazon for logistics in the first place if Amazon had said "we are going to use all your data to copy your products and go direct-to-consumer ourselves with our copies, including placing them above yours in search results." Who would take that deal?

[granzymes]

I don't see as big of a distinction between Safeway and Amazon. The demand for pain medication is relatively constant, so if sales of Safeway's generic ibuprofen increase it will come at the expense of Advil because Safeway will start buying fewer units. The harm is one step removed but is still there.

I think a better argument would be the scale of the data collected by Amazon vs physical stores. But on the other hand, Safeway has an online store where they can collect the same information and if they are anything like Walmart then they also already have startlingly detailed insight into the supply chains and logistics of their suppliers that surely rivals what Amazon sees if you use their warehousing service.

I don't think it makes sense to draw a clear distinction between Amazon generics and Safeway/Walmart generics. It seems like a fuzzy line at best.

[ooobit2]

Maybe. One distinction I want to argue is placement: Amazon always places the Amazon Choice options at the top of the search and product listings. They also always include them in the "Popular, Editor's Picks, Highest Rated, etc." box that appears in the middle of most pages on the site. This would be like you walking into Safeway for a bag of sugar, and as soon as you turn down the aisle, there's an employee telling you everyone buys the Safeway brand Sugar or an advertisement with three boxes showing Safeway's as the Most Popular option, and two others next to it.

Where this gets real distinct is in delivery: Amazon is currently purging its warehouses of stock from thousands of vendors so it can keep stock of Amazon-brand and big box brand alternatives to those same products. (See: https://www.bloomberg.com/news/articles/2019-05-28/amazon-is...) So, the Safeway equivalent of this would be you going down the sugar aisle and finding exactly 1 or 2 bags of competing brands with a note that says, "Hurry! Almost out!", and each bag has 10lb. anchor attached to it. But there's 100 bags of Safeway sugar, and there's a line of employees offering to carry it through the store for you do you don't hurt your terribly sore shoulders...

How would you feel if a Safeway associate slapped a tracking device on you when you walked in the door, and then didn't tell you they were recording everything you thought while you were working your way through the store? That's how Amazon.com works. Oh, and if Safeway could just look at your other recent thoughts and know you fapped about 20 minutes before you walked in the door? That's also Amazon.

[sharmi]

Another issue. At Safeway, Heinz ketchup is the real deal. No duplicates.

Amazon, on the other hand, has allowed duplicates, cheap reproductions and false reviews to proliferate. Now the only way you are assured a product is what it says is if it is an amazon brand.

[abacadaba]

Advil may very well be paying for the privilege of being on that shelf. See "slotting fees."

[tick_tock_tick]

That's actually not true at all the shelf space at grocery store are often paid for by the name brands. "Slotting fees" etc. Often if the product doesn't sell Safeway returns it to get the money back.

https://www.npr.org/transcripts/718711109 https://www.vox.com/2016/11/22/13707022/grocery-store-slotti...

[diebeforei485]

> If you see a product on a Safeway shelf, the company that makes that product already got paid--by Safeway.

This is not necessarily true. It's typical to not be paid for anywhere between 30 and 90 days. Additionally, some deals are more complex and depend on actual purchase volume.

[ben0x539]

I think getting paid and getting a fairly solid commitment to be paid at some point in the future are equivalent for this argument.

[pge]

I have wondered the same thing every time this question comes up. It seems the difference is that the companies that put products in grocery stores are very large companies that spend a huge amount on marketing themselves (e.g. P&G, General Mills). So, the "house brand" is less recognizable to consumers and sells at a discount to the known brand that is often a larger company than the grocery chain. The grocery stores need the name brands because shoppers come looking for them (and Safeway gets the benefit of all the marketing they do). In Amazon's case, they are serving as a distribution channel for many, many small brands, none of which are known as well as Amazon (whereas Kellogg's cereal is better known than Safeway). That changes the power dynamic in favor of Amazon.

[chillacy]

I had a friend who worked at a milk factory. They took their 2% organic milk and piped it into cartons with different labels: brand names as well as store brands, off to be sold at various price points.

To his company it didn't matter at the end of the day if people bought the brand name or the store brand, it was all the same stuff.

[entee]

I think you’re totally right. In addition/corollary, it seems a lot of the things Amazon Basics sells are basically commodities. If you have a million iPad stands, eh, just buy the amazon basics one, it’s probably not crap and the reviews look good. I need my stand, my USB adapter, my cable, my whatever to just, “do the job”, there’s not a whole lot of performance differential within the category beyond works/doesn’t work. If there’s a strong quality differentiator in the product I think they’d do less well and I bet their data scientists have answered that question one way or the other.

[samatman]

This also points to a hidden advantage Amazon has which is totally unethical. Namely, Amazon is perfectly willing to sell counterfeit name-brand goods, and presumably this doesn't extend to their own Amazon Basics products.

I don't think this singlehandedly explains why Amazon is so unwilling to do anything about their huge counterfeit problem, but it's suspicious that the dilemma resolves in their favor.

[salawat]

It's because they don't have liability for it because they act as a platform. Whereas with Amazon Basics, they risk their brand.

[dangjc]

Maybe store brands should also be banned.

We allowed this vertical integration in retail when maybe we shouldn’t. Yeah it shaves some costs, but is probably having a huge effect on supplier diversity and margins. If we’re revisiting the consumer welfare above all doctrine, this seems fair to revisit as well.

[rleigh]

The vast majority of the "store brands" are made by the same companies who make the usual branded stuff. In many cases, it's the exact same product in a different wrapper or container, made on the same production line by the same company and the same staff. Sometimes to differentiate the product, it might have subtly different ingredients, or be of slightly lower quality to differentiate it from a "premium" product but still within the quality spec of the original product (for products which are binned or have batches of varying quality, or where there's variability e.g. biscuits which cook differently at different places on the conveyor).

I used to work in a big brewery where we made supermarket branded beers. It was the same product in a different can. Actually, the exact same can, with a custom paint job. It was one of the more generic beers, rather than one with a taste associated with one of the well-known premium brands, but there was zero compromise on quality there. What was packaged for the supermarkets was 100% identical to beers with our own company name on it.

It's only the cheapest of the cheap "value" stuff which has been significantly cost reduced and has compromised quality. That's stuff like pastry with a higher water content in place of fats, or substituted ingredients such as palm oil in place of butter etc. In these cases you're paying less, but obviously getting less product for your money. That's its own specialised segment. These are often made by different companies with their own separate supply chains, and possibly living by a different set of ethics... There clearly seems to be a market for this type of thing, but given the reduced nutritional quality and taste, it's not necessarily providing a genuine cost saving.

[rahul003]

Does it mean that the brand of Amazon is better than the likes of Safeway or Target who sell their own products to compete with more name brand ones? Or it could also be that the brands on Amazon such as the top voted comment here might be smaller brands without enough name recognition to gain the attention of a buyer.

[darkerside]

Such a difficult thing to regulate. The instant you stop Amazon from selling on its own platform, they will open a subsidiary Amazon Retail, which is a favored customer on their platform. Whatever new regulation you can come up with, there will be armies of corporate lawyers ready to satisfy your requirements while still capturing that audience who is ready (and wants) to be captured by a platform-branded generic option.

[drc500free]

This seems a bit defeatist. We've successfully regulated against vertical integration in the past.

[smnrchrds]

Yeah, just take a look at the financial sector. Your typical big investment bank has insider knowledge of a sizable percentage of the companies in the economy and separately, makes tons of trades. The two businesses are kept separate, no information exchanges between the two groups, no winks and nudges. If they get it wrong, they could go to jail.

If it is possible to create a so-called firewall [0] within banks to avoid unfair advantage via insider trading, it is possible to create a firewall between the platform and seller divisions withing Amazon for a similar effect.

[0] https://www.investopedia.com/terms/f/firewall.asp

[gautamcgoel]

Do you believe that investment banks actually respect the principle of a level playing field? Given the widespread fraud revealed during the 2008 financial crisis, I find that a more plausible scenario is the banks pay lip service to the idea of a level playing field and make a show of instituting a firewall, but in practice the firewall leaks information like a sieve, which the banks ruthlessly exploit for profits. The bigger the bank, the more clients they have, hence the more information they have, hence the higher the chance for insider trading and big profits.

[jkestner]

And yet we let politicians who have knowledge and even control over markets have direct investments.

If a firewall can be implemented, fine, but I don’t see any great loss if we were to restrict the growth of a trillion-dollar company.

[dnissley]

Would this apply to physical platforms as well? E.g. Walmart and Target who also do similar things with similar data

[CodeCube]

yes

[shim__]

> And yes, I believe this should be regulated at the policy level.

But why? Nobody is forcing you to use AWS, there in fact heaps of similar services around which at first glance don't share have said problem.

[SeeTheTruth]

Because "consumer choice" isn't a practical and full response to corporate abuse of power. Regulation is complete - if it's a well written regulation it works.

"Nobody is forcing you" misses the point.

[arrosenberg]

Amazon has a dominant position in the marketplace and it is leveraging it in a blatantly anti-competitive manner. As a country we have consistently decided that smaller and decentralized is better - there is no compelling reason to allow Amazon to keep borging small businesses.

[philosopher1234]

This is a ban against vertical integration no? There are real efficiencies (apples entire premise) from owning and running the whole stack top to bottom.

[adrianmonk]

It'd be a ban of any mixture of vertical integrating with not vertically integrating. Which in turn makes it tough to transition (either direction) between the two.

So, Apple would be allowed to vertically integrate and make the chips, hardware, operating system, and applications for their products. But they'd have to stop selling Belkin chargers alongside Apple chargers at apple.com, and the iOS app store would have to contain either only Apple apps and no third-party ones or vice versa.

[akamaozu]

Mind explaining how this is a better situation?

[CodeCube]

It fixes a power imbalance that allows for the platforms to take advantage of their customers. A platform becoming dominant is insidious because it takes away the "choice" ... if you want to do business, you will probably have to engage with them, but as we see here, Amazon is taking advantage of the fact that they own the platform by taking their customers' (the sellers) data, and using it for themselves to put their customers out of business.

[jkestner]

Elizabeth Warren's plan does just this by designating such companies as “platform utilities”: https://medium.com/@teamwarren/heres-how-we-can-break-up-big...

I agree a diverse marketplace is a healthy one, and that requires intervention since clearly the initial rules are not enough. Some like to pretend that free markets are only negatively impacted by regulation, and only positively impacted by its participants.

[URSpider94]

So, force all retail stores to divest their house brands, which they have been selling without complaint as long as I’ve been alive?

[triceratops]

Those are different. Explained elsewhere in the thread: https://news.ycombinator.com/item?id=22961009

[URSpider94]

That seems like a distinction without a difference. Yes, Safeway owns inventory of branded merchandise that's on their shelves, but in modern retail, they probably don't own more than a couple of weeks of inventory. And, in modern retail, it's highly likely that branded vendors (like Coke and Pepsi) have very complex relationships with retailers that include co-op fees for marketing, premiums paid for end-cap placement and special displays, and bonuses for hitting certain volumes.

[CodeCube]

yes

[choward]

App stores are the same thing since most companies with app stores have their own apps. They can decide when the right time is to build their own version of something that's popular and promote it in their app store.

[friendlybus]

Microsoft was trying to do this and it led to antitrust cases. The browser wars ended with windows forced open to multiple default browsers.

[replicatorblog]

So no private label products from Walmart, Target, Kroger, or CVS?

[triceratops]

Those are different. Explained elsewhere in the thread: https://news.ycombinator.com/item?id=22961009

[CodeCube]

ideally, no

[nickik]

> I say there should be an explicit difference between "running a platform", and "selling on a platform", and never should the two meet.

Its a free market, you can do what you want as long as costumers like it. Valve makes its own games and the platform. There are other example where this is true.

Should SpaceX not be allowed to launch Starlink. Falcon 9 is a platform, and Starlink is selling the product that you get threw this platform. Maybe not a perfect example, but one could equally make a argument about that as well.

All of these things are pretty artificial opinion based market restrictions, and everybody want to create different rules based on different was to evaluate this question for every market business and so on.

So you would make totally different choices about what is a platform and what isn't. If my company has a product and then opens up the underlying API, is my product now illegal?

For me this is all nonsense, why not just have both the suppliers, consumers and everybody else involved make choices based on what they think is best. Why do you know better of how to define these terms and what evidence is there that when you force a separation it is better at 'raising all boats'. There is no evidence to prove that in the majority of cases.

In the example of Steam they lost many games because suppliers didn't want to deal with them. Microsoft SQL now runs on Linux because people didn't want to us Windows. In all of those cases, costumers and suppliers are perfectly capable at making those decisions for themselves and then the company has to make choice how adjust to this situation.

Why any of this is bad, is totally unclear to me.

Its easy to say 'see this one bad example' and the ignore a huge amount of efficiency gained by vertical integration. The idea that we have bureaucrats to have control over every single vertical integration decision by every company is pretty insane dream to me.

This reminds me of 'Indian Socialism' where you had to fill out a application for every market each company wanted to get into and the of course super smart regulator would then make sore that the 'correct' amount of companies were in each market. Of course as always there was tons of regulatory capture and corruption to say who got a permit and who didn't. Witch is basically the same pickle you want to get into, just with 100x more detailed determination about ever companies internal structure as well. A recipe for disaster if you ask me.

The idea of enlightned regulator who for each choice of each company on each level can figure if that decision is correct for 'the global population' is a total fantasy. Neither can they do it, nor would their intensives to do it actually be for the good of 'the global population'.

[TulliusCicero]

Nah, the way Amazon runs right now is pretty beneficial to me as a consumer. Having access to Amazon stuff and third party stuff in one place is nice.