Stating the obvious I guess. All retailers do this and create their own white-label brands to squeeze profit from well-performing categories.
Target, for instance, is very upfront about it and they have like a gazillion white-label brands that compete in hundreds of categories, which makes it very gray for the customer.
Does anyone really think that any retailer launches a competing product in a category without looking at all their supplier data?
If you want distribution you risk this. The only way to avoid it, it's to do direct to consumer or having a product that is extremely hard to copy.
> Stating the obvious I guess. All retailers do this and create their own white-label brands to squeeze profit from well-performing categories. Target, for instance, is very upfront about it and they have like a gazillion white-label brands that compete in hundreds of categories, which makes it very gray for the customer.
IIRC, many traditional white label brands are actually manufactured by the name brands themselves, and they're part of a strategy to segment the market.
The difference here seems to be that Amazon has been cloning relatively unique products made by smaller companies, while traditional white label brands are fungible commodities made by large players with little differentiation. From the OP:
> Because of the limitations of shelf space, traditional retailers stock far fewer products than Amazon’s hundreds millions of items. Typically, they create private-label products to compete in generic categories such as paper towels, rather than copycat versions of items created by smaller entrepreneurs, private-label executives said.
That is largely not the case. I spent ten years making private label medical devices for CVS, Kroger, Target, and dozens of other stores.
There tend to be specialist manufacturers who fill the store brand niches. E.g. in pharma, close to 90% of the pills, tabs, and liquids sold in front of the pharmacy counter are made by one company, Perrigo, whose entire model is predicated on being a store brand supplier.
I don't think Kimberly Clark makes the store brand paper products, nor does P&G make the store brand beauty/cleaning supplies.
And I can give an opposite case. I used to work for a large 1st-tier manufacturer of consumer batteries (hearing aid, AA, 9V, etc etc).
We were constantly competing with the other manufacturers for the Wal-Mart, Walgreens, CVS, etc white label brands. It was increased volume for our plants and they would usually suck up surplus supply.
The catch was that your contract was continually up for renewal and you had to beat the others on price and other criteria. After all, nobody else would know that the rack at Wag's was half-bunny and half-coppertop, right?
It was also a headache because defective parts and customer complaints counted against you hard. We actually tested our white label products more than the name brand SKUs.
I work in this industry as well. That said - private label is a small (but growing) area in the US markets, so it's hard to make a generalized statement of how much someone does or does not participate.
Many retailers are beginning tie production of private labeled products in with being the captain of a category - which begins to create incentive for companies to start to pursue these private label opportunities.
K-C and P&G are two examples of companies who largely resist the private label trends in the US - you could counter with ConAgra and Treehouse.
A lot of that has to do with the product and what-not, of course.
I really don't think Target is that upfront. How am I supposed to know Mossimo and Goodfellow are Target brands. I do however understand that Kroger groceries are made by the kroger store.
>On March 28, 2000, Mossimo, Inc announced a major, multi-product licensing agreement with Target stores, for $27.8 million.
>In 2017, Target underwent a makeover, introducing new smaller lines and eliminating bigger billion-dollar lines, including Mossimo.
>Target distanced itself from Mossimo amid Mossimo Giannulli's alleged involvement in the 2019 college admissions bribery scandal, saying that Target had not been involved with Giannulli in over a decade
I mean. That's what I meant. Upfront in the sense that they compete with their suppliers by having a lot of brands that are hard to distinguish as white-label brands by Target.
To me that is not a problem as long as they are not giving their own products better placement. If 50 brands of cornflakes and in them target has a 10 white-label brands that is not a problem but if all 10 white-label brands are put in front of other brands ie first few in search results then it is a problem.
In all seriousness, not giving your own brands prominent placement would be ignoring the benefits of vertical integration, leaving money on the table, and violating your fiduciary duty to stockholders.
The idea that corporate directors (of whichever kind) have an legal obligation to maximize profits/shareholder value is a myth. Taken directly from Alito's (non-dissenting) opinion in Hobby Lobby:
"While it is certainly true that a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so."
Additionally, even if there were such a requirement, it would be toothless. The corporate directors of a company facing criticism from its shareholders that it is not maximizing profits (in the short-term) could simply retort that they are pursuing a strategy that maximizes profits in the long-run, and that investors should look elsewhere for short-term gains.
As a practical example, consider any company that pursues more environmentally sound practices, or tries to source materials more ethically. By doing more than the bare minimum, they are surely cutting into short-term profits, however they may in the process be building a more resilient and popular brand that profits more in the long-run.
This would actually be an interesting test of that decision and the law of Business Judgement, which normally shields corporate directors from micromagement via lawsuit.
I doubt it would pass the threshold of "grossly negligent" that you'd typically need to sue a CEO as a shareholder, but it's certainly different from an otherwise positive action that simply uses company resources - like raising salaries or making charitable donations.
Frankly all that distinguishes these “brands” is literally just the packaging. How’s this better than planned economy where every item is just labeled with its dictionary definition?
I mean seriously, if this is end-game capitalism what’s the added value?
Amazon is a monopolist in several categories. Different rules apply to monopolists than other organizations. A basic constraint is that a monopolist may not use their position of monopoly in one area to give them an advantage in another.
Similarly, Netflix's sometimes odd choices for their deals or for original content production is certainly driven by the performance or certain metrics of previously acquired content.
Does anyone really think that any retailer launches a competing product in a category without looking at all their supplier data?
So, if cars are inevitably becoming computers with wheels, what's going to happen to insurance companies? The major weapon of underwriting is data, and a company like Tesla is going to have a huge advantage in data over external insurance companies.
Is it really a societal good for big companies to control all of this data, or should the data belong to the consumer/owner/user? I suspect it's the latter which gives people the most choice and freedom by fostering the most competition.
There are insurance companies who already sell trackers that plug into your car's OBD-2 port and have onboard hardware so that the insurance company sees your acceleration, handling, sudden braking, times you drive, miles you drive, etc.
Right now, very safe and low risk drivers can use these companies to get discounted insurance.
Eventually, every safe driver willing to install these trackers will do so for the lower insurance rates, leaving a much higher risk pool with the non-tracking insurance plans, and it will become very expensive to not be tracked by your car insurance company.
I know. So again here's the heart of my point: Even with the OBD-2 port, the data available to these apps is nothing compared to the data available to Tesla. Tesla can figure out how often you get close to bumping into something, exactly how far, how fast you were going, and what the lighting/weather conditions were like at the time. That data is orders of magnitude better than the stuff coming out of the app.
Sure, but what's stopping any other car manufacturer from buying and using the same sensor kits? Look, I get that you can't get the same data with a 3rd-party kit but if you're an insurance company you're gonna be working with car manufacturers anyway.
Sure, but what's stopping any other car manufacturer from buying and using the same sensor kits?
Nothing, though I'm guessing they will be far behind for a year or so even after they deploy. (Unless that team is super competent, and they have absolute management backing.)
Look, I get that you can't get the same data with a 3rd-party kit but if you're an insurance company you're gonna be working with car manufacturers anyway.
It completely changes the dynamic of the business. One won't be able to compete, except as a manufacturer partner, and not all manufacturers will be equal. It will limit choices to consumers, and very strongly drive consolidation. I'm not saying only Tesla will be able to do it. What I'm saying, is that the nature of the business will change massively, in a way where customers will wind up with fewer coices.
Insurance companies are already offering discounts for using their apps while in car.
I was debating on whether I should include mention of these apps. Here's the thing about that: The data available to these apps is nothing compared to the data available to Tesla. Tesla can figure out how often you get close to bumping into something, exactly how far, how fast you were going, and what the lighting/weather conditions were like at the time. That data is orders of magnitude better than the stuff coming out of the app.
It's very analogous to iOS app makers competing with in-house Apple iOS apps. It's hard to compete, when your competitor controls the APIs.
All the things you name are available to a phone app as well. Particularly, if it has enough penetration to be in the vehicles near you. Local weather + data aggregation from all the insurance companies apps and suddenly about the only thing they don't have is whether you were looking at the road, and the condition of your tires and other vehicle specific metrics. Sure the GPS/accel data might be off a few percent vs the car but does that matter?
(BTW, Assuming a deal with your credit card company, they probably can approximate your tire age too).
All the things you name are available to a phone app as well.
Only 'kinda'. You might get 1 camera feed, and you can see what the weather report was for the area. Tesla has something like 8 camera feeds, and they can tell if visibility was compromised because the other car situated at 7-o'clock to the rear was in a building's deep shadow. The app could only kinda get that if one were lucky.
suddenly about the only thing they don't have is whether you were looking at the road, and the condition of your tires and other vehicle specific metrics
That and a lot more! Also, with far superior granularity, and with fewer data quality problems.
(BTW, Assuming a deal with your credit card company, they probably can approximate your tire age too).
Again, mostly. I would agree that the apps could compete. They're competing at a significant disadvantage, though.
The difference is aggregate vs specific data. If insurance companies use the cars' data to change their policies in aggregate, there's no problem. Meaning, if they discover that cars of a particular brand have more accidents, they can raise premiums on owners of that brand of car. On the other hand, determining that YOU drive really fast, should NOT trigger a higher premium.
It should absolutely trigger a higher premium if driving faster means higher losses. Otherwise the people driving slower are subsidizing the risk that the people driving faster are taking. How is that fair?
This is the same situation that happens on most platform plays.
You can see this in how Salesforce and Shopify are leveraging their platforms to learn what is popular and produce/buy their own products to sell to their customers to capture 100% of the value, rather than 30% of the value of the solution to the customer.
I think the biggest issue isn't the "copy product by leveraging data", but more like, their products play by a different set of rules.
They could copy products and launch them abiding by the same guidelines, policies and everything else.
That's not the case, and that's where the unfairness comes to play: Amazon plays on their market place by a different set of rules.
It's not only Amazon. Google, Apple, and so on. The question starts to arise, if they want such massive platforms and play on such marketplaces, they must obey their own guidelines, else they are either stripped from the playground or someone else should own the play ground.
if they want such massive platforms and play on such marketplaces, they must obey their own guidelines, else they are either stripped from the playground or someone else should own the play ground.
So here's a question: Is a store really a marketplace? It seems to me that Amazon, Target, Macys, etc, do a lot of curation and editorial work with regards to standards of production and marketing for items in their stores. Isn't that more akin to publishing?
I think the grey area and critical zone is this: Should a company be allowed to advertise their ecosystem/playground as akin to a "marketplace" when what's really happening, is that they are tightly controlling the product and harvesting the information for themselves? Seems like a bait and switch to me! ("Your margins are our opportunities," is the most fundamentally aggressive business statement I can possibly imagine, and Jeff Bezos said it!)
Apple, Amazon, and YouTube all seem to fall into this general pattern: A "marketplace" or "ecosystem" which is less bazaar and more their tightly planned cathedral. "Partners" who are put upon, data-analyzed, and sometimes cannibalized. This pattern seems to be very widespread, and it only stands to reason, given the tremendous increase in the ability of companies to leverage technology to harvest such data in their own playgrounds.
I understand your idea, but I still think they are and should be defined as marketplaces, with a scrutiny any marketplace should get.
The first reason is, Amazon isn't doing much curation (if any), due to their size they can't do proper curation, and bots are terrible at it (either based on keywords or reporting). This is proven by counterfeit items being sold, listings being stolen/manipulated, biased report systems.
Then Amazon claims they aren't liable for the products sold - the customer belongs to Amazon (you can't even have access to their names anymore), the listings belong to Amazon, everything except what arrives at the door.
At last, Sellers pay for the product advertising Amazon does, it's called a Referral Fee (ranges from 8% to 15%). In fact, the Seller pays for everything (and they should, yet the amounts are up for discussion).
So they have all the symptoms of a marketplace, yet Amazon plays what ever role is more suitable for them.
I only think they should be enforced the rules of a market place in any developed place in the world.
No real private marketplace would be open if they were selling counterfeits. Even if they sold legit products as well, until they purged everything counterfeit they would not be open, and they'd pay fines for it.
I bet if any public Health/Goods inspection force would be deployed on ANY amazon warehouse, they'd find shady shit. But such public organizations don't have the tools/protocols to do what they do in the real world.
I agree with you when you say, this isn't limited to Amazon.
For example, why can't we get the full data from the customer that purchases from us? Why can't they be our customer on Amazon? Amazon hoards everything, and we get the scraps.
What kind of "full data" would you want from the customer? Earlier, you mentioned their name. Why can't the customer's transaction be as anonymous as possible, if they choose to be?
It seems as if Amazon, likely prodded by the GDPR and CCPA, is limiting the personal information they share with third parties. I think that's a good thing, for the consumer at least.
That's a slippery slope: is the person the seller customer, or Amazon's customer?
Their name was an example of something required to provide feedback, make amendments, or any kind of engagement that's required with that customer.
Anonymity is one of the reasons review manipulation thrives on Amazon.
Honestly I doubt it was due to GDPR/CCPA, or user privacy concerns, and more turning FBA into a pipeline of homogeneous suppliers that race to the bottom.
This questionable business practice is neither new nor limited to online companies. Brick and mortar companies like Costco do have their own products competing from other vendors, and I am sure they analyze sales data before jumping on selling their own.
Everyone is arguing as if Amazon is the only retailer here. Yes, they are a platform, but they are one of many.
In fact, many people here contradict their own argument by saying that they are forced to go to other websites or direct to the supplier. Stating as much is tantamount to admitting that the market is functioning correctly.
Amazon is great for some things and bad for other things. If it doesn’t meet your needs, go elsewhere instead of rewarding it with your business and then complaining that it’s too big and powerful because people like yourself keep rewarding it with your business.
This is common practice in the retail industry. Large retailers want to ensure that they can offer their customers the lowest price on all of the products they sell.
This is totally false - the number of retailers who have testified before congress that they don't use seller data to compete against sellers - and then who go ahead and do just that is basically zero.
Additionally, most other retailers actually BUY the third parties products and take the risk of promoting and selling it. On Amazon third parties take the inventory and many other risks and may have to pay amazon to promote their product.
The story here is that amazon has testified it does not do something, has supposedly the "highest ethical principals" - yet goes ahead and does exactly that which it said it doesn't do.
Do that not matter to you from a trust / credibility perspective?
"Nate Sutton, associate general counsel at Amazon, told lawmakers the company doesn’t tap data from individual third-party merchants to determine what new products to create."
Of course they don't use data from individuals, they use all of the data, in aggregate, from everyone including themselves.
Amazon has promised individual sellers it would not use the data for their products to market against them (not individual buyers).
Despite the ludicrous lengths Amazon goes here to say there were multiple sellers and so this data was aggregate, we all understand (and amazon did too) that if you generate statistics such as median sale price per month / day etc where 99.95% of the data comes from one seller, you have the data from that seller.
> Amazon has promised individual sellers it would not use the data for their products to market against them (not individual buyers).
Again, there's that word. Individual.
They get off on a technicality with that comment to congress. The second you have even 0.05% (Your example, not mine.) of any category occupied by a second reseller, you're no longer targeting individuals -- you're entering a 'product vertical'.
Amazon does exactly what you're claiming they do not.
Major retailers buy and sell their product line data from neilson and others. I worked on a project with one of them so I know first hand. So the idea that they don't use seller data to market their own products has to be false.
And amazon sellers can sell their data (and do sometimes) as well. All that is fine.
Remember, for major retailers, a) THEY are the seller in most cases and b) in most cases they get mfg's to agree to whatever is going on in the agreement UPFRONT.
I mean, let's be objective for a minute here. Do you really believe that Walmart, Target, Costco, Kroger, etc, are more ethical with their suppliers than Amazon?
Let's not forget that many of these large retailers have moved to the practice of taking up to 90 days to pay their suppliers. 90 DAYS! That's three months before you see the money of the product you sold through their channels. And they do this because they simply can.
I believe that there's not a single retailer that doesn't leverage its distribution advantage to squeeze their suppliers. If you're not Coca Cola, PepsiCo, Unilever, Procter and Gamble or Colgate Palmolive, you have little to no room for negotiation.
I've done consulting for small business distributing into major stories.
Other stores are very very UPFRONT on what they will do. Many make the small mfg sign an agreement that not only will the store have all the data, but the mfg will need to pay the STORE if they want the data.
The difference here is that a) it is all upfront and b) the mfg can make an informed decision - is this worth it.
If you need store / day detail on sales because you are running promos and in-store marketing vs just being a low cost volume seller - all affect your view of this.
Finally, in grocery retail - once you have the order and deliver, you DO get paid regardless of whether product sells. This is an important positive even selling through Target in some cases especially with more perishable goods. Amazon as a seller you can't plan as well - their alog or someone else paying for promo could cut your demand in half overnight.
Additionally retail stores actually drive demand / discover ability when they purchase your product in a way amazon often does not.
> Finally, in grocery retail - once you have the order and deliver, you DO get paid regardless of whether product sells.
It's been quite a long time since I worked in the grocery business, but I don't think this is accurate. A lot of vendors stock their products themselves or use food brokers that do it, and they are on the hook for expired and returned product. And there was a shitload of bribery and corruption happening to steal shelf space and end unit space from competitors. It's a surprisingly cut throat business.
> The difference here is that a) it is all upfront and b) the mfg can make an informed decision - is this worth it.
You sign the same deal when you sell on Amazon, probably even signing away more rights. I'm not sure I haven't read the full EULA when you sign up to sell.
> Amazon as a seller you can't plan as well - their alog or someone else paying for promo could cut your demand in half overnight.
This is about the only thing you've said I agree with. But it's not due to lack of data, it's due to barrier to entry with retail sales you have less competition. Right for the wrong reason here.
> Additionally retail stores actually drive demand / discover ability when they purchase your product in a way amazon often does not.
Amazon drives way WAY more discoverability than any retailer.
Pretty much your entire argument contradicts real world experience, common sense, and actual reality from what I know of the situation. I can tell you for a fact your assertion that 'Amazon doesn't do this' everything you're saying is 100% false.
Amazon drives way WAY more discoverability than any retailer.
This is completely false. Amazon provides significantly less discoverability than a retailer. With a retailer, you get a product that actually shows up in front of people's eyeballs, and the ability to provide in-store promotions to attract customers, and, most crucially, the store lets you know how the promotions perform. A small minority of retailers make you pay for this data, but most don't because they want products to sell through. Many stores will even work with new brands to promote their products, such as (temporary) eye-level product placement, end-of-aisle placement, special displays, etc.
Source: Before going in-house I used to rep manufacturers of all sizes from startups to billion-dollar behemoths selling to major, regional, and local retail chains. Grocery stores are the best at working with brands (but also the fastest to drop products that don't sell), Target is about average, and Walmart was the worst at the time though I hear they've gotten better.
As a non shlock product seller you are much more comfortable in local retail I think? I just thought retail was easier to actually talk to real people.
The schlock sellers I think are more expert in the amazon game (image / product swapouts and seller targeting, review spiking games, competitor flag and return / hazard attacks etc). So much BS and so little real recourse - the scale of marketplace must be nuts.
Tim - have you actually ever reped / managed distribution into retail at the moderate scale at least?
Do you have a reasonably high volume ($1M+ sales) amazon account to compare to?
I just ask because for such strong opinions "everything you're saying is 100% false" you don't seem like you have actually worked with businesses in this way.
Beleive it or not, you can actually talk to real human beings at your local retail stores. And yes, you can talk to real people at amazon, but if issue is outside their box (on seller side) you get little mercy. If inside box some of the treatment is amazing (amazon payments for goods they show as lost by them as a sale with no return risk)
"Nate Sutton, associate general counsel at Amazon, told lawmakers the company doesn’t tap data from individual third-party merchants to determine what new products to create."
> The online retailing giant has long asserted, including to Congress, that when it makes and sells its own products, it doesn’t use information it collects from the site’s individual third-party sellers—data those sellers view as proprietary.
Amazon agrees that what is being reported goes against their policies.
'"However, we strictly prohibit our employees from using nonpublic, seller-specific data to determine which private label products to launch." Amazon said employees using such data to inform private-label decisions in the way the Journal described would violate its policies, and that the company has launched an internal investigation.'
That carefully phrased language could be technically accurate but still allow them to use seller-agnostic information about the market for batteries or speaker wire to decide to launch Amazon Basics batteries or speaker wire.
(Which by the way, I’m totally fine with, because there’s no reasonable way to prove you’re not doing it and any brick-and-mortar retailer is almost surely doing it as well.)
It's also ethically fair game to base your decisions to launch a product on the amount of consumer interest the category gets. Everyone does that.
What they promise not to do is take a look at seller specific data. That makes sense because it won't get them much extra compared to looking at categories, and the sellers ethically claim it's their data.
Actually - as the article described, they DO spend a lot of time looking at SPECIFIC seller data for unique products because it gives them LOTS extra that category details don't provide.
Could you please stop using allcaps like this? This is in the site guidelines: Please don't use uppercase for emphasis. If you want to emphasize a word or phrase, put asterisks around it and it will get italicized.https://news.ycombinator.com/newsguidelines.html.
> This is totally false - the number of retailers who have testified before congress that they don't use seller data to compete against sellers - and then who go ahead and do just that is basically zero.
I can't understand this at all. Retailers create in-house brands all the time. Do they somehow make decisions of which products to create in a black box? How would they even do that?
If you go into the Walmart pharmacy, their store-brand equivalents are full of statements such as "Compare to the active ingredient in Advil".
a) actually sell their product to walmart, even the branded product is owned, priced and managed by WALMART. So there is much less SELLER specific data to datamine.
b) sellers to walmart AGREE that the data on products priced, sold, and promoted by walmart (even branded one) belongs to walmart, and in many cases the seller has to pay extra if they want day/store level detail on sales. So in most cases it is a very upfront relationship, and walmart takes a lot more risk in pricing, promoting etc.
Here Amazon has enticed sellers by reassuring them that in CONTRAST to target, Amazon will NOT use the data they provide amazon to market against them AND sellers give amazon a lot more "seller" data because the sellers are often doing their own price management etc etc.
Does anyone really think that any retailer launches a competing product in a category without looking at all their supplier data?
If you want distribution you risk this. The only way to avoid it, it's to do direct to consumer or having a product that is extremely hard to copy.