[Renaud]

>By this logic though shouldn’t “store brands” at the grocery store or “CVS brand” medicine at the drug store also be “illegal.”

No they don't. Stores buy their stock. They can choose to stock other brands or to make their own products, but they invariably have to purchase what they sell.

The Amazon market place makes you think it's the same but it's not. Sellers are using the platform to sell their own products and they pay Amazon for that service.

Amazon is accused of using sales data from the sellers, like their sales volumes, margins and customers profiles, and then undercut them by producing their own version. Amazon basically benefit from the traffic, interest and sales data of sellers to then displace them and promote their own product.

It's like if you had a small business but your landlord had access to all your data and saw that they should also sell their own copies of your most profitable items by opening a bigger shop right next to you and selling for cheaper because being the landlord, they don't need to pay rent.

Maybe illegal, maybe not, but in any case it's cause for at least some amount of concern and deserves some overseeing.

It's way too tempting to abuse that absolute power in some way, whether as a matter or policy or just because some overzealous Amazon manager found that pushing the envelope was in their own interest.

You can't just ignore that and brush it off. We've created a potential bully and we should at least keep watch.

[dredmorbius]

The B&M retail story is ... considerably more complicated. For grocery stores, "slotting fees":

“Slotting fees” (or “slotting allowances”) are fees that manufacturers pay retailers to appear on their scarce shelves. It can cost millions of dollars to launch a product in the nation’s groceries, and through that cost, these fees shape our supermarkets and diets long before we’re able to make a purchase decision ourselves.

It’s easy to think that these fees show supermarkets are “rigged” — against both consumers and smaller manufacturers that can’t afford the fees. But as the above video shows, the debate is an intense one, with strong partisans, and decent arguments, on both sides.

https://www.vox.com/2016/11/22/13707022/grocery-store-slotti...

Not excusing or arguing for Amazon (I'm not a fan), just noting real-world complexity.

[gamblor956]

Importantly, those fees are only paid to launch a new product. They pay them because retailers won't buy inventory of a new product until they know it sells.

So again, not even remotely the same thing as what Amazon does.

[galkk]

This is not correct. There are also placement fees that are paid to put the products on better locations on the shelves etc

[txcwpalpha]

>No they don't. Stores buy their stock. They can choose to stock other brands or to make their own products, but they invariably have to purchase what they sell.

This is incorrect. I wish people would stop repeating this in this thread. Some stores purchase their stock. But the really big players do not operate like that.

When you go into Target and go to the cracker aisle, Target has not actually purchased all of the cookies and crackers that you see on the shelf. Target effectively rents out shelf space to Nabisco, who then comes in and puts their items on the shelf (or will pay Target to take the product and put it on the shelf for them). The pricing agreement can get quite complicated and depends on the amount of shelf space, location in the store, and can also depend on number of items eventually sold... but the takeaway is that Target does not just outright buy boxes of Oreos and then try to resell them. If the Oreos don't sell (say perhaps because the customers opted to buy the Target brand sandwich cookies instead), Target isn't out any money, because they still got their shelf rental fees from Nabisco.

Going even further, Target also engages in the same type of activity Amazon does with their analytics (including sales volume, margins, customer profiles etc) and use that information to decide who gets to rent how much shelf space and where. Target et al spend incredible amounts of money optimizing this stuff, which isn't far off from what Amazon does.

People have this old rusty view of brick & mortar stores, but the reality is that they've been masters of this stuff far longer than Amazon has even been around. Amazon championed bringing these practices to the online space and became the most obvious juggernaut, but that doesn't mean these other companies are angels.

[gamblor956]

I used to have customers in both retail and on the supplier side. What you have deacribed is not at all how Target operates.

You've inverted the dependency of the relationship. People don't buy Nabisco because it's at Target; they go to Target because it has Nabisco products, hopefully for cheaper than other stores.

Thus, stores absolutely pay for every item of inventory that appears on their shelves except for some new products that might have special consignment arrangements.

Suppliers do not pay for better shelf placement. Stores determine that based on sell through and margin; the products that generate the best overall revenue get the best placement on the shelves.

Suppliers will pay for in store marketing, like displays, etc. This is usually a separate term for which no money changes hands or which offsets part of the invoice. They may also pay stores for analytics, but most stores provide that for free since it is in their interests to have better selling products.

[txcwpalpha]

>You've inverted the dependency of the relationship. People don't buy Nabisco because it's at Target; they go to Target because it has Nabisco products, hopefully for cheaper than other stores.

This is true for smaller stores (eg the mom-and-pop corner store or even large stores), but once retailers get to the super-large sizes, eg Target/Walmart, the relationship flips. People go to Target first and buy Nabisco because its at Target. If Nabisco wasn't there, they buy something else, but they don't stop shopping at Target.

>Thus, stores absolutely pay for every item of inventory that appears on their shelves except for some new products that might have special consignment arrangements.

>Suppliers do not pay for better shelf placement. Stores determine that based on sell through and margin; the products that generate the best overall revenue get the best placement on the shelves.

This is 100% incorrect. As I mentioned in my previous comment, some stores may operate like this, but not all. I can tell you from personal expertise in this space, but also just from a simple Google search about how retailers operate (do a search for the terms: slotting allowance, shelf-space rental, pay-to-stay, pay-to-display). See below for some links to get you started. Big retailers do not own all of the products on its shelves, and they certainly do make arrangements where manufacturers can pay extra fees to get preferential endcap placement, shelf placement, and shelf space. I have even seen agreements where a manufacturer will literally own (rather than rent) a specific shelf in an important store and can do whatever they want with it, as long as they pay recurrent fees (it reminds me of someone owning a condo in a building and paying HOA fees).

Big retailers may of course choose to not sell a certain shelf placement to a specific product because they want to reserve it for another purpose (like another competing product), but as a general rule of the thumb, if you're willing to pay enough, you can have whatever shelf spot you want.

Big retailers will also charge fees to manufacturers for the transportation and storage of the product for when the product is being stored in the retailer's warehouses or being moved by the retailer's trucks (sound familiar to what Amazon does?). The reason they can do this is because the retailer doesn't own the product, the manufacturer still does. The retailer profits by facilitating the sale of the product.

In some situations, big retailers may indeed purchase a block of products, but in every scenario I have personal experience with, the agreement was always one in which the manufacturer was obligated to buy back any product which did not successfully sell in the store, which ultimately has the same effect as just renting shelf space.

Further reading:

https://www.npr.org/transcripts/718711109

https://www.vox.com/2016/11/22/13707022/grocery-store-slotti...

https://www.cbsnews.com/news/how-grocers-wring-extra-cash-ou...

https://www.businessinsider.com/r-wal-mart-to-impose-charges...

https://cspinet.org/resource/rigged

https://smallbusiness.chron.com/rent-space-grocery-store-ven...

[JAlexoid]

Buyback agreements don't change the fact that the ownership of goods is transferred to BigStore(tm).

BigStores do place based on profitability, that profitability may be boosted by marketing spend...

Theoretical Nabisco also cannot force a discount on their products... or even set a sale price.

I worked in procurement contracting long enough to know that despite some risk sharing(aka buybacks), the products are in full ownership of the retailer. They own the price, the discounts and the locations.

[eridan2]

in Europe a supermarket buys the products; usually it will pay in 90/120/180 days and it has the option to return unsold items and will have advertising agreements for better/larger shelves, but everything is in the store is own by the store

[txcwpalpha]

This is not universally true. Slotting fees and shelf rental agreements are a thing in Europe, just like they are in the US.

[JAlexoid]

Having a Nespresso concession stand that sells stuff on their own, doesn't change the fact that the retail side of the operation is inherently the owner of the products.

[curryst]

> No they don't. Stores buy their stock. They can choose to stock other brands or to make their own products, but they invariably have to purchase what they sell.

This is technically true, but I don't think it accomplishes what you think it does. In large retail agreements, it is fairly common to include buyback clauses. I.e. if the goods don't sell within a specified time frame, the supplier is contractually obligated to buy them back from the retailer. In some cases, they are not even required to return the inventory they have left, but the supplier must still "buy them back". In other agreements, payment isn't made until the goods are sold (which is what Amazon does).

So having to buy the goods doesn't give a brick and mortar store much extra incentive to make sure the stuff they "bought" sells. They can still undercut a product with an in-house version and suffer no losses from not selling whatever they replaced.

It's a shitty business model, but Amazon isn't alone here. If it makes sense to stop Amazon from doing it, we should stop everyone from doing it.

[gamblor956]

Buyback clauses are very rare. Generally, most suppliers refuse buyback provisions except for new product lines.

And most retailers build spoilage into their profit models. It's why margins are so low even though they sell everything marked up by double digits.

[JAlexoid]

The stores would have to have a dominant position or abuse that position.

EU competition comission only cares about maintaining a competitive market. Until the overwhelming majority of the stores in my area are Amazon - there's no ground to target B&M stores.

[baskire]

Not all stores “buy” their own stock. Take Walmart what doesn’t sell they just give back to manufacturer and don’t pay for it.

[JAlexoid]

Walmart outright buys most of its stock.