[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.

[gamblor956]

Consignment sales represent less than 1% of retail sales at these stores, and generally only are required for new products that the retailer will not purchase in bulk before the distributor proves market demand.

Generally, for the sales you have described, the consignment sales are paired with marketing efforts by the distributor to demonstrate customer interest. If the test succeeds, the store will purchase future lots from the distributor. If the test does not, the product disappears from the shelves and the distributor stops selling it.

[nkrisc]

I know, but I deliberately didn’t mention that because it’s the exception, not the rule.

If you pick up a random item in Costco, it’s paid for and sold by Costco.

[awillen]

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

[nkrisc]

No, those are Costco’s suppliers which are completely invisible to the customer and completely different.

Costco purchases the items from the suppliers, generally. They then resell them to you for a markup.

With few exceptions, every single item in Costco is sold by the first party seller: Costco. So my point stands: third party sellers are generally not a part of the Costco experience.

[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.