Thread by @stratelogical

/Begin 1/ This is a fantastic thread. Lot to unpack:

(ONE) Amazon sees platform sales & “copies” seller products to compete. How’s that ok?
(TWO) Is Amazon’s platform fair? Eg. does Amazon prioritize owned brands in search.
(THREE) Is there an anti-trust case against Amazon?

https://twitter.com/matthewstoller/status/1092491403719004163

2/ I may be biased because I ❤️ Amazon as a customer & an employee. I agree with @theplatformguy - Amazon’s goal is to increase sellers & sales of sellers on the platform. Amazon’s goal is also to increase sales of private brands which competes with former. How can they coexist?

3/ ONE: Amazon cares about sellers, but they care about customers more. I call it Amazon’s hierarchy of need. Ideally your decisions satisfy everyone, but when forced to make a trade off b/w diff pyramid groups, Amazon will satisfy those higher, even if it pisses off those lower.

4/ So, when Amazon decides to compete with sellers, it’s not so much that Amazon is greedy. More often than not, Amazon feels they can offer a better price or better experience to the customer. In most cases, because sellers are keeping too much margin for themselves.

5/ Also, don’t think of competition just as Amazon the big guy competing and crushing small sellers. Competition goes both ways. When Birkenstock sells $50 shoes for $200, and Amazon makes a “similar” private label product and sells it for $100, is it really bad for customers?

6/ One could argue, as @HalSinger does, that it impedes long term intellectual property development. Why will Birkenstock make $200 shoes like these when they know it will be copied and sold for cheaper? Don’t know, maybe they’ll start pricing it cheaper right away and compete?

7/ Yeah sure they shoulder the development cost & others free ride. But remember, only certain kind of design is can be patented. Maybe ask Chanel how they feel when Zara blatantly copies their exact same designs, and they can do nothing?

8/ This is also why Amazon will likely win the Sonoma lawsuit quoted in the article. You can only protect that which can be patented, not something that is “strikingly similar”.

Current IP laws DO already protect inventions; Amazon can’t copy products that are patented.

9/ As @stevesi says, this isnt new. Retailers have always looked at brand sales & created their own private brands to undercut. WMT‘s GreatValue have not stopped P&G from making better TidePods! And Amazon will not stop sellers from continuing to invent.

https://twitter.com/stevesi/status/1042470786362040321

10/ TWO: Is Amazon’s platform fair? Do they prioritize their own brands in search as @HalSinger claims? I haven’t read through research papers cited in thread, but can give one example that’ll show why this claim doesn’t hold up.

12/ On the day Amazon launches a new device (let’s say Echo), if you search for “Echo” on Amazon, it doesn’t show up on search. Amazon has to place what’s called a search sparkle (a type of search ad) on that term to drive customers to the Echo detail page. 🤦🏽‍♂️

13/ This is bcoz Amazon is unable to influence search results. As more customers click & buy Echo, search results reflect customer behavior. What’s worse is Google indexes Amazon’s own product pages before Amazon’s search does. Next time they launch a new product, notice this 🧐

14/ So that means Amazon’s platform is fair? Right?

Well, it’s complicated. There are structural advantages to being a seller on your own platform: 1) you know rules better, 2) If you don’t know, you walk across ask other team, you have access, 3) you can influence dev plans.

15/ Eg. look at the Echo product page. It’s unique and custom built. No seller will ever get such handglove treatment. Amazon will. Look at ads placements, look at the the homepage and see how Amazon devices get displayed. Just like any retailer, Amazon decides placement.

16/ So then, Finally, THREE: is there an antitrust case against Amazon. Is it a monopoly. Should it be broken up?

I’m not a lawyer but from precedent, there is no anti-trust case for looking at aggregate sales to inform your product direction and creating private label products.

17/ Intervening here will have widespread ramifications across retail - for Walmart, for Target, even for small Mom & Pop stores. It will give brands like Apple, Birkenstock, and others significant power to keep prices of their products higher than it should be.

18/ That said, one of the few areas where Amazon IMHO exhibits anti-comp behavior is in most favored nation clause (aka seller pricing parity). I wrote about it last year. But here’s another interesting read about this.

yalelawjournal.org/feature/antitr…

19/ Hypothetically, if Amazon charges 75% rev share to sell, online prices may increase everywhere, even in non-Amazon platforms that have lower fees. That’s bad for customers. IMHO it seems like a misstep than purposeful anti-competitive behavior.

blumenthal.senate.gov/imo/media/doc/…

20/ So is Amazon a monopoly? No, I’ve argued that it is a monopazari, not a monopoly stratelogical.com/2017/12/amazon…

Nothing wrong with being one. We don’t break companies if they have monopoly. We take action ONLY if they demonstrate anti-comp behavior. Amazon hasn’t. At least not yet.

21/ This tweetstorm will self destruct in 1,2,3 .... poof!

/END