[JumpCrisscross]

> some industries clearly needs economies of scale in order to provide the consumer with cheaper and better products

This isn't an economy of scale.

The component that has scale is distribution. A third-party seller selling through Amazon gets those advantages the same as Amazon. What's different is the sourcing and manufacturing of the product.

Amazon has an edge. But it's not one of economies of scale.

[shubb]

They have a data advantage- Amazon basics are just white labeled goods from some Chinese factory, warehoused and dispatched from an Amazon warehouse just like everything else on Amazon Market. The only difference is Amazon but the stock (and bet on it selling).

Amazon has much better visibility on sales, margins, user behaviour than their market sellers. Where risk is high they allow sellers to take the risk, where it is low they enter directly and take more margin.

It's a great business model, like a hedge fund running an exchange with no separation of information. It would be illegal the financial sector.

[User23]

> It's a great business model, like a hedge fund running an exchange with no separation of information. It would be illegal the financial sector.

Maybe I'm misunderstanding, but wasn't Glass–Steagall repealed?

A lot of people don't realize, but hedge funds are the small fry. I mean sure a few hundred million or even a billion or two dollars sounds like a lot of money, but once you realize how much the Fed is pumping through the primary dealers it's literally pocket change. It's outfits like Goldman or BlackRock that are playing heads I win tails you lose.

[JumpCrisscross]

> wasn't Glass–Steagall repealed?

Glass-Steagall banned federally-insured banks from competing with investment banks. Information walls, which have to do with insider trading, are a separate beast.

[robertlagrant]

I hadn't thought of it like that. But is it any different than if they paid for analysts to provide them that info?

[saltking112]

With commoditized products the brand/manufacturer has no pricing power, so in order to go down the cost curve the firm would need to deploy more capital. This means making things in bigger batches, more efficient shipping, more advertisement investment taking ads out on Amazon to get initial reviews etc...

In each of these components Amazon Basics has an advantage over third parties whom are often mom and pop and are undercapitailized.

The points of contention are

1) If amazon competes fairly in Ad bidding so Basics products shows up first on the paid search results, is this anti-competitive?

I don't think so. They just have more capital. Any other well capitalized firm can do the same.

2) Is it fair for amazon to display their products more prominently?

I don't think so. How is this any different than Walmart refusing to carry a product? Or putting their private labels more prominently?

[JumpCrisscross]

> Amazon Basics has an advantage over third parties

Totally agree. But this isn’t an economy of scale advantage.

SoftBank-backed companies had a capital advantage over their competitors. That isn’t per se an economy of scale. Amazon’s products have a distribution advantage over smaller competitors. Again, not an economy of scale.

[jacobr1]

On the sourcing side, they have a scale advantage of placing larger orders which can get them better OEM pricing. Depending upon the product category their probably are manufacturing efficiencies of scale that enable better pricing. And in particular, their purchasing departments have more efficient analytics numbers to make product entry decisions that benefit from the scale Amazon has reached. So the efficiency in which they are likely to operate in making JIT purchases, or predictive purchases, and avoiding costly inventory mistakes and markdowns is only possible with the large market reach and ability to hire a technical depth of analysts (or tools makers for analysts) enabled by their size.