[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.

[cgriswald]

You have the wrong mental model. Amazon isn’t Costco. Amazon is a shopping mall that has access to its tenants’ sales information and also owns an anchor store in the same mall.

Costco can determine that Best Brand shoes sell in its stores and decide to source shoes themselves and stop carrying Best Brand.

Amazon can determine that the Footlocker in their mall is making a killing selling Best Brand shoes and either sell Best Brand shoes in their anchor store or source their own shoes, all at a price that Footlocker can’t match. They can also advertise those shoes throughout their mall and change the layout so customers have to walk past their cheaper shoes to get to the Footlocker.

[awillen]

This explanation doesn't explain the difference to me at all. Costco can see that vodka sells well, so they can make Kirkland brand vodka. They control the layout of the store, so they can change the layout so people see Kirkland brand first when they get to the liquor section. They know the pricing of other vodkas and which ones sell well, so they can source Kirkland vodka at an ideal price point.

None of what you've described about Amazon differentiates it from Costco at all.

[codemac]

It's simple, Costco actually buys the inventory, and resells it. There are more advanced kinds of agreements (like buy back X number of coats of you sell less than Y) but that's largely how they operate.

Amazon is much more like a digital mall in that they rent out their store features for sellers.

However, Amazon would like to be seen by the customer as Costco and this causes dissonance between how they treat sellers, and how they treat customers.

[awillen]

Okay, you've described the business models, but so what?

In both cases, they still use the sales data available to them to create and sell their own products at the expense of third party sellers. In Amazon's case, that means diverting customers away from third party listings to their own. In Costco's case, that means making fewer purchases from third party sellers because the amount of shelf space available decreases as Costco puts more of its own products out.

The type of sales relationship that they have with third party sellers doesn't change the fact that both are using sales data to create and sell their own products at the expense of those third parties.

[ClumsyPilot]

>"Okay, you've described the business models, but so what?"

That the defining feature mate!

Getting paid an extra to provide premium service to a customer is normal in some areas, but it's a crime of you hold public office.

[hirako2000]

S/he may argue that public officials manage to do it too, despite its illegality, hence it's Okay for Amazon to do so. For some, whatever Amazon does is okay, there will always be some other cases happening elsewhere that in some twisted ways are the same. I think most people are only ever consumers, and can't escape their subjectivity on this matter. They get theit toys delivered within a couple of days, the invoice says free delivery, they want things to remain that way so what ever Amazon is doing is okay (for them, for now)

[cgriswald]

You can't see the difference because you're conflating the terms seller and vendor. There are no third-party sellers at Costco.

The difference really comes down to three things: the layer on which the competition occurs, whose data is being used, and whether the competition is fair (which comes down to risk/reward).

At Costco, the competition occurs between manufacturers. Costco uses its own retail data as a retailer. The risk to the vendor to sell at Costco is marginal (even if they have to pay for shelf space) compared to being in the market at all. Costco can compete with a store brand, but if they want to sell the vendors products they have to go to the vendor. They can't undercut the vendor with an equivalent product unless they make an equivalent product for cheaper. The risk is spread out and Costco owns a healthy amount of it.

At Amazon, the competition occurs between retailers. Amazon uses its competitors data, which it gains by being a 'marketplace'. The other retailer carries all the risks associated with being a retailer. Amazon takes a piece of it, the size of which depends on what 'services' the retailer uses through Amazon's marketplace. If the retailer fails, Amazon loses nothing. If the retailer wins, Amazon can use the retailers' data and begin selling the same product. It can use its size and the retailers' own numbers to get a better deal with the vendor and undercut the other retailers price on the same exact product. (Store brands are also an option and an issue, but if you're focused on that, you're missing the forest for the trees.) The retailer takes the vast majority of the risk, but Amazon can, at its option, swoop in and take the majority of the reward.

[cwyers]

In the Costco model, Costco pays up front for the vodka and incurs all the risk if the vodka doesn't sell. In the Amazon model, Amazon charges third-party sellers "rent" to be on the platform in the form of a cut of all transactions, but the third-party sellers still incur all risk for inventory that doesn't sell. And then Amazon turns around and uses the sales data from the third-party sellers to undercut them later on.

[megaman821]

I am not sure about Costco, but Best Buy does not purchase all the items it sells. For some items it only remits a payment to the manufacturer after the item has sold. Should they not get to see the sales data?

[dec0dedab0de]

In both cases, they still use the sales data available to them to create and sell their own products at the expense of third party sellers.

Costco doesn't have any third party sellers. Costco is the only seller.

[nkrisc]

> relationship that they have with third party sellers

There are no third party sellers at Costco, it’s only Costco.

[colejohnson66]

Not always true. Usually, Costco/Target/Walmart/etc. pay for it before it sells, but it’s not always like that. “Vendor” products like Frito Lay, Bimbo, etc. are sometimes given the ability to just put product on the floor at no cost to the retailer. When it sells, the retailer will send money to the vendor.

[awillen]

Costco buys products from third party sellers. That is a relationship with third party sellers.

[arrosenberg]

Yes, but the terms of the relationship make Amazon's behavior anti-competitive. Costco isn't going to various brands and asking them to sell at Costco, they buy inventory and resell it at a profit. Amazon has convinced a large portion of the retail market to feudalize themselves on Amazon's platform, then they are using the data accrued to take over the markets of their current and former tenants.

[HWR_14]

Costco sources Kirkland products from people they already do business with. So if they see your Vodka is doing great, they call you and ask (well, as a giant customer of yours "ask") you to make a Kirkland version as well. On those bottles you'll make less, but you're still going to make a lot of money there. And getting cheaper people to buy your product without diluting your brand. And a lot of money off your branded product. Most things I've seen from manufacturers online is that being asked to supply Costco with their product and the Kirkland version is a win from both asks.

[411111111111111]

I think the only difference is that Amazon is a digital marketplace, so they can and do let their users pioneer what gets sold.

Space is at a premium with a physical location, so the likelihood of an actual store exploiting that is extremely unlikely

[awillen]

Unlikely? I literally just described an example of Costco doing this right now with vodka. That's not a hypothetical - Kirkland brand vodka is a real thing.

Your logic is backwards - when space is at a premium, making the most profit off each item in that space is critical. It makes more sense for Costco to do this than it does for Amazon, not less.

[fredophile]

Store brand products are not new and not the issue. Let's pretend that Costco didn't currently sell vodka at all. If Costco wants to know if they should start selling vodka or bottling their own vodka and selling that they don't have access to the sales data from the liquor store next door to Costco. Amazon is letting other businesses take the risks and using sales data from those businesses to outcompete them.

[gamblor956]

That's the right way to look at it, missing just one crucial detail.

Costco pays for the items that appear on its shelves (excepting the <1% of goods that are on a consignment basis, usually new trial products). The distributor of the store brand and the name brand have already been paid for the products (and are usually the same company).

Amazon gets paid by the distributors (aka third party sellers) on Amazon.com for handling their sales (even in instances where it is not handling fulfillment), while also competing against them. That is where the anticompetitive concerns arise.

If Amazon just sold stuff through the Amazon.com seller, and didn't have third-party sellers, (or if it operated a separate website for third party sellers) that would be fine.

[judge2020]

But Costco does sell Vodka and wouldn't have made that product if Vodka sold 10% of what it actually sells. Because Amazon sells literally everything, is it a crime to do what Costco does, just on a bigger scale?

The only end-goal that would actually solve the problem fairly is if companies couldn't sell first-party products (or products from a partner where they have a vested interest in) in their store. If you just take care of the one company, you end up with other companies doing the same thing in 20 years like how iOS still has a default music player when MS got burnt for that with having a default browser.

[raisedbyninjas]

When Costco sells Kirkland brand vodka and Grey Goose, all bottles of Grey Goose are sold the same way. Costco purchases directly or from a distributor. Grey Goose may or may not pay for shelf space, IDK. Purchasing premium shelf space is a common practice for other retailers and grocers. When Grey Goose is sold on Amazon, either Amazon buys it and re-sells it or Grey Goose sells it through a marketplace account incurring Amazon's marketplace fees. So Amazon can always have two listings for one product, a marketplace listing and an Amazon listing. Their Amazon listing can always be cheaper.

[mattmcknight]

They don't have two listings though. They list the prices of all sellers in one item, with the lowest price as the default.

[criddell]

Maybe Costco is different, but at a lot of stores the line is blurrier. You might be able to get your product on store shelves, but if you want good placement, you basically have to rent that shelf space.

[Closi]

> Costco and Amazon collect and analyze sales data from the sale of both company and non-company products.

It's similar, although personally I think the relationship between the companies is meaningfully different:

Costco purchases product from manufacturers, and may choose to source product from other manufacturers (including under its own brand name). It uses it's own sales data to make this decision.

Amazon acts as a marketplace for other businesses to list and sell their own products. These businesses are online retailers which use the Amazon platform, and pay Amazon fees for this service. Amazon is then using other retailers sales data in order to inform it's own business.

The difference is with Costco it is their own sales data, while in Amazon it is the sales data of other retailers. It would be an issue if Walmart had access to Costco's sales data and not visa-versa (this would provide Walmart with an unfair competitive advantage). Similarly other smaller online retailers do not get access to Amazon's sales data, but Amazon get's access to the other retailers sales data who use their platform, and will then use this to compete with them.

[judge2020]

Despite this I don't see how the case is that Amazon is being anti competitive while Costco isn't - just because they purchase and resell inventory doesn't mean Costco (or Walmart or Sams Club etc) doesn't hold the same power over their product suppliers that Amazon does to do data science on their sales to determine what new products to make in-house.

Plus, walmart is now a marketplace as well. This overpriced GPU is 'Sold & shipped by Monoprice Inc'. It's only a matter of time before Walmart commits the same anticompetitive acts as Amazon using Marketplace data. https://www.walmart.com/ip/Zotac-NVIDIA-GeForce-RTX-3080-Gra...

[fredophile]

Analyzing their own sales and analyzing other people's sales on their platform are two different things. Saying that Walmart may also try to do this in the future does not make it right or excusable.

[judge2020]

How is it different? The same outcomes and potential power abuse happens in both situations.

[fredophile]

Who takes the risk in each scenario is different. If Amazon was only using their own sales data then they'd need to start selling a more diverse range of products themselves to acquire that data. Some of those products would sell well and some would be flops. Amazon would have invested money into selling all of them so the cost for the flops negatively affects their bottom line.

In the current scenario someone else sells things on Amazon and is taking the risk that the item they're selling will not sell well. If the item is a hit, Amazon swoops in and starts selling it themselves or possibly makes a competitor and sells it themselves. Either way, Amazon reduces their own risk of selling poorly performing products while also cutting into the upside for the vendor who took that risk when they are successful.

Edit: I forgot to mention above that the people taking this risk are paying Amazon to do so.

[hansoolo]

I really think you don't get the point of how Amazon marketplace works

[Closi]

> Just because they purchase and resell inventory doesn't mean Costco (or Walmart or Sams Club etc) doesn't hold the same power over their product suppliers that Amazon does

With the Costco example, Costco as a retailer holds power over their product suppliers. If they are making an own brand, what they are doing is buying it from another supplier and asking that manufacturer to put their own label on it. These relationships can be anti-competitive and present opportunities for market-abuse, but in a meaningfully different way to the Amazon example.

With the Amazon example, Amazon holds power over other retailers using their platform.

And with the Walmart example you have stated, I do think that suffers from the same problems.

[smithza]

To be competitive, Amazon would be able to say everyone has access to the same information to rent out the online marketplace's booths. This is the issue at hand--Amazon has all of the information and is breaking its own rules in using it to give them advantage in the marketplace. Greedy greedy capitalistic cheesey.

[hirako2000]

Amen.

[NegativeLatency]

When Costco sells a product they’ve already bought it (a retailer) on the other hand when Amazon sells something they’re just acting as a middle party for the item in most cases.

[mrandish]

That's often not the case. Retailers like Costco, Walmart, Best Buy etc have a wide variety of different selling arrangements. I've sold products through all three and often did so on terms that gave them full right of return for any unsold product as well as significantly delayed payment.

This combination basically nets out to be financially the same as pure consignment. They won't pay me for my product until well after it has sold-thru to an end user. Everything that's unsold comes back to me (and they bill me for shipping both ways!) In the meantime, all I have is basically an "IOU" promise to someday pay IF it eventually sells (and they always drag out the payment beyond the already-extended due date).

Also, if I want to be featured in their circular I have to "buy" that just like an ad in a magazine except the retailer will (usually) DFI (deduct from invoice) the "ad" cost, which means they just owe me less (if and when the product sells and they actually pay). The same is true for getting my product displayed on an end cap or with in-store signage.

The big retailers bring in new products to "test" all the time and do so at basically no financial risk to themselves (other than the opportunity cost of the shelf space) while capturing all the sales data.

[soperj]

>(and they always drag out the payment beyond the already-extended due date)

That's pretty much their business model isn't it? Make money on investing for the days between product sold and payment.

[vkou]

You can only make a little money on that because interest rates are near zero, and investments with non-zero returns carry risk.

[Manuel_D]

I'm not sure how Costco works specifically, but that's not the case in all retail. At GameStop, game publishers only got paid when their games sold not when they were put on the shelves. If there are 100 disk cases put on the shelves for Call of Battlefield and none of them sold, eventually GameStop would return them and the publisher got nothing.

[hammock]

>When Costco sells a product they’ve already bought it (a retailer)

In practice that's not the case at all. Many if not most retailers require suppliers to buy back unsold inventory

[FactolSarin]

All of Amazon's "we're not actually a monopoly" and "we're not responsible for defective products" arguments are based on this. They claim they are very much NOT a Costco or Walmart.

[elzbardico]

Costco buys the products it sells. Then it decides how and for how much they will be sold. Their product, paid for. That’s the difference

[eropple]

Amazon sells products and facilitates others' sales.

If Amazon carried the entirety of their inventory themselves like Costco or like Walmart used to be (before the expansion of their own online marketplace), it would be a distinctly different situation.

[8note]

That doesn't sound aligned with the California case yesterday?

[LanceH]

Costco buys products and resells them. Costco's research numbers are paid for entirely by Costco.

Amazon rents space to merchants where those items are sold through the site for a fee. Amazon is never on the hook for a sale and is basically getting paid to do the market research to set up as a competitor.

Yes, Costco does do some referral sales but I can't think of anything which has gone on to be a Kirkland product.

[foerbert]

I think the difference they are getting at is something akin to this.

In one situation you run a stall and buy products from people to sell at that stall. At some point you use what you've learned doing this to sell your own product.

In the other, you don't buy anything from anybody. Instead, you rent out a stall for other people to sell things from. You then watch the stall and use that information to open your own stall.

The first case seems pretty normal to most people, I think. The person you were buying from originally doesn't inherently get some kind of assurance that you will always buy from them in the future. There's no difference to the seller if you buy from somebody else, don't sell any of that product, or make your own. We just don't expect that buying goods from somebody inherently adds any other kind of obligation. It's two equal parties making an exchange, and nothing more.

The second case, however, I think is not so clear cut. All of the sudden you have a lasting relationship between two unequal parties. These are the sorts of situations where you tend to find more implicit or inherent obligations on the participants. It's no longer the guy you sold that thing to not buying from you again, it's your landlord competing with you.

I'm not trying to pick a side here, so much as I am trying to explain why people might not see the two situations as identical. And of course there are plenty of real-world complications too.