[HN Gopher] Amazon has radically transformed small businesses in...
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Amazon has radically transformed small businesses in both the U.S.
and China
Author : mfiguiere
Score : 105 points
Date : 2023-01-25 18:57 UTC (4 hours ago)
(HTM) web link (www.semafor.com)
(TXT) w3m dump (www.semafor.com)
| shever73 wrote:
| For anyone who wants to read a small bookshop owner's take on
| Amazon's "transformation" of business, I can highly recommend
| "How to resist Amazon and why" by Danny Caine.
| coderintherye wrote:
| This title, which is not the title of the article nor the study
| (it's the first sentence in the article) could be seen as
| misleading. I've directly worked with thousands of small
| businesses in the U.S. and what is being discussed here has
| almost no relevance nor impact on them. Also the study is based
| on just 40 interviews with Amazon merchants.
|
| What this is really about is highlighted in the study's post[0]:
|
| "This report highlights how Amazon's scale has also given rise to
| new kinds of small businesses -- ones optimized for Amazon"
|
| As well as the lead in the study: "This report recounts a history
| of third-party (3P) sellers who have played a key role in
| building up Amazon's retail business--and thus, Amazon as a whole
| --over the last two decades."
|
| [0] https://datasociety.net/library/amazons-trickle-down-
| monopol...
| black6 wrote:
| It's changed small _online retail_ businesses. The vast
| majority of small businesses I interact with are not even
| retail.
| ChuckMcM wrote:
| Interesting that this "transformation" is pretty close to what
| Sun and other dot com infrastructure sellers were promising in
| 1998. They phrased it as "take your small town business and give
| it a world wide footprint" but it is the same. They missed the
| "we'll take 1/3 of your price too" part :-).
|
| That, in itself, is just curious. But the interesting lesson here
| is that the real thing has not been "web presence" or world wide
| visibility, it was Amazon has built a pretty impressive logistics
| setup for moving stuff from vendors to users. It rivals what
| Sears & Roebuck did in the 60's and 70's. THAT seems to be the
| missing piece which one might call "logistics as a service."
|
| It makes me wonder why Aliexpress doesn't have more warehouses in
| the US. Clearly there are a number of Amazon vendors who buy from
| factories advertising on AE and then drop ship to Amazon, and
| sell at a markup that covers Amazon's take and gives them a
| profit. So basically Amazon is taking a big piece of the "value
| chain" from factory to customer. If you can run a distributed
| logistics operation at 20% or even 15% of the market value of the
| goods your distributing, you can under cut Amazon.
|
| Given that Walmart already has relationships with freight
| forwarders from China and a bunch of brick and mortar stores that
| could double as warehouses, I wonder if they have considered this
| as a "side hustle."
|
| Considering that this hinges on the cost of operations for the
| logistics service the interest in logistic based robotics is
| quite understandable.
| up2isomorphism wrote:
| If you think "taking 1/3 of your price" is big, you might never
| sold anything to an end customer.
|
| No these small business owners are way smarter than you on
| this, they won't even consider Amazon if that's not saving
| their cost.
| jerf wrote:
| "Interesting that this "transformation" is pretty close to what
| Sun and other dot com infrastructure sellers were promising in
| 1998."
|
| Everything promised in the dot com boom has basically happened,
| right down to the much-maligned delivering pet food over the
| internet.
|
| It just didn't happen fast enough to save them in the late
| 1990s, and the space was just overinvested even so.
| time_to_smile wrote:
| Chewy hasn't solved the problem that Pets.com had, we've just
| had enough free cash flowing around for longer this time so
| it doesn't matter.
|
| When Chewy starts to _make more than they spend_ then it will
| be interesting, but as it stands now it just looks like we
| 're in a _bigger bubble_ rather than solving problems that
| couldn 't be solved back then.
| RhodesianHunter wrote:
| A lot of us order our pet food online from our local pet
| stores these days.
| RC_ITR wrote:
| >They missed the "we'll take 1/3 of your price too" part :-).
|
| Maybe revealing - the incentives provided by the 1/3 cut are
| maybe why Amazon succeeded and Sun did not.
| hammock wrote:
| > "take your small town business and give it a world wide
| footprint" but it is the same. They missed the "we'll take 1/3
| of your price too" part
|
| For someone that doesn't sell consumer goods that cut can sound
| like a lot.
|
| But getting distributed in brick and mortar retail, the cut is
| far greater (at least 50%).
|
| And the alternative is direct online sales, which only recently
| has become viable in a scalable way for most consumer brands
| (thinking of the DTC revolution here)
| ChuckMcM wrote:
| I think this is a solid point. Different distribution
| methodologies change the numbers. If you sell to a
| distributor at 60% of list (giving them "40 points" in the
| lingo) and they then sell to a reseller at 80% of list, the
| brick and mortar store has the option of having a "10% to 15%
| off sale" and still making money.
|
| Hence the "rule" that your cost of goods needs to be 1/3 of
| the MSRP if you want to go through two tiers of distribution.
|
| At Freegate we shipped directly to retailers and gave them 30
| points off MSRP, but that meant on a new order, they ordered
| from us, we shipped to them and they shipped to the customer
| so a fairly long lead time between order to arrival.
|
| When I was at Google the PM for "consumer devices" was
| looking at what it would cost to get things on the shelf at
| Fry's and Bestbuy and the price negotiation was more about
| where on the shelf it sat rather than store profit it seemed.
| Something to factor in to the economics as well.
|
| But the bottom line here is that there is a "market price"
| for something, and the "cost to get it to market" + "cost to
| make it" and if that market price is less than the sum of the
| other two, well you can't make it up on volume :-).
|
| I think Amazon's LAAS business made that calculation simpler
| and thus there was less uncertainty about whether or not one
| could make any money selling them.
| TylerE wrote:
| My understanding is that most stores (especially grocery
| stores) basically make no money on sales...purely break
| even +/- a percent or two... all the actual profit comes
| from selling premium shelf space.
| wombat_trouble wrote:
| > It makes me wonder why Aliexpress doesn't have more
| warehouses in the US
|
| My guess would be liability. A lot of what's sold on Aliexpress
| is... questionable. Fakes, products that are patently unsafe or
| don't meet US regulations, fraudulent specs, etc.
|
| What's happening right now is basically a bit of a laundering
| operation where small "front" businesses in the US, often
| registered to residential addresses, import small chunks of the
| inventory, collect markup, and resell it domestically on
| Amazon, eBay, Etsy, walmart.com marketplace, or whatnot.
|
| And if their USB chargers keep catching fire or a big brand
| gets uppity about trademark infringement, the retailer
| disappears, and a new one pops up. Amazon gets some flak in the
| media every now and then, but they are several steps removed
| from the phenomenon.
|
| If you had a Chinese megacorp with a large US footprint, they
| would likely soon find themselves in hot water with all kinds
| of regulatory agencies. Partly because there would be a single
| party with gobs of money to go after, and partly because of
| anti-China sentiments.
| wkat4242 wrote:
| Yes my neighbor is one of those resellers. He's had several
| shipments from Alibaba vendors intercepted by customs for
| non-compliance.
|
| If Aliexpress would do this, they themselves would be liable.
| Here in Spain that do have stores but they have a highly
| curated inventory.
| kneebonian wrote:
| To be honest maybe I am just old but it seems like every
| argument and quibble people have been having over Amazon is the
| exact same arguments I saw back in the early 2000's the only
| difference is the company was Wal-Mart instead of Amazon.
| autoexec wrote:
| There are a few complaints that are unique to Amazon, but
| really it just speaks to how little has been done to fix the
| problems Walmart brought to our attention decades ago. Not
| dealing with those issues back then just opened the door for
| Amazon to come in and screw people over in similar ways. I
| hope people realize that their problems they have now aren't
| just about Amazon either and that unless things change it'll
| be some other company 10-20 years in the future doing the
| same things to the next generation.
| zaphod12 wrote:
| There is one single really key difference. Walmart takes
| responsibility for the products they put in their store. That
| they are genuine and represented as they are. They squeezed
| sellers, encouraged moves to china and all of that, but they
| aren't a marketplace - they are a store. Amazon has abrogated
| all responsibility in that area and pretended they are the
| equivalent of the open field on which a flea market is set
| up.
| makestuff wrote:
| Walmart now operates a marketplace
| (https://marketplace.walmart.com/). However, I am unsure if
| they take those same validation steps as they do in their
| physical stores or not.
| user3939382 wrote:
| Yep. For the curious, go search Amazon for "1 TB USB" for a
| good laugh.
| vel0city wrote:
| Sadly walmart.com is the same kind of trash. I searched
| 1TB USB and the top non-sponsored result was this:
|
| https://www.walmart.com/ip/Jonephe-USB-Flash-Drive-1TB-
| Metal...
|
| Which has some obviously fake reviews along with probably
| a real comment stating:
|
| "Only problem is the transfer speed sucks and it causes
| errors in half the files I transfer to it."
|
| Truly emblematic of how these scam USB drives work. And
| its the top organic result on walmart.com!
| phil21 wrote:
| > Walmart takes responsibility for the products they put in
| their store.
|
| Amazon also did this for it's physical stores. Walmart does
| not do this for it's web presence - it has a third party
| marketplace you need to actively avoid.
|
| I have both Prime and Walmart+ due to credit card benefits,
| and honestly don't see a huge difference in either
| experiences. Amazon is more spammy but faster shipping,
| Walmart less selection and slower but more reliable
| shipping. Walmart is more curated, but you still need to
| ignore the third party crap.
| rileyphone wrote:
| Another really key difference is that Walmart operates
| retail locations that compete with (more realistically,
| undercut) smaller local businesses and gut small town
| America. Let's not paint a rosier picture just because it
| happened a while ago.
| Retric wrote:
| Amazon has killed plenty of small businesses that
| survived Walmart. Walmart didn't go after the hobby shop
| style niche business the way Amazon's million product
| warehouse could.
|
| So people worked out you can compete with Walmart by
| having a deeper selection as long as the population
| density supports it, but it's not clear what small retail
| can do to survive Amazon.
| thaumasiotes wrote:
| > But the interesting lesson here is that the real thing has
| not been "web presence" or world wide visibility, it was Amazon
| has built a pretty impressive logistics setup for moving stuff
| from vendors to users. It rivals what Sears & Roebuck did in
| the 60's and 70's. THAT seems to be the missing piece which one
| might call "logistics as a service."
|
| I can't really agree with this. Amazon started out by using
| existing delivery services. And the quality of delivery from
| Amazon at that time was much higher. Now that they prefer using
| their own delivery services, their delivery sucks. They've
| built a logistics setup that is _much worse_ than what we
| already had.
| [deleted]
| skybrian wrote:
| Walmart does have an online presence and a lot of third-party
| sellers. I don't know how well they do, but it seems like
| they're trying?
| slim wrote:
| It makes me wonder why Aliexpress doesn't have more warehouses
| in the US
|
| because US is not a free market. Gatekeepers got to take their
| cut (if you don't get outright denied access to the market
| because nationalism). Amazon is as good as any other
| gatekeeper, so why change ?
| ChuckMcM wrote:
| I see it differently, do you have a description of what a
| "free market" would be that the US doesn't have? You mention
| Gatekeepers but I'm not sure I understand that reference. As
| I see it there isn't anything stopping me from selling things
| directly from my web site to anyone in the world right? Where
| is the gate keeper in that scenario?
| makeitdouble wrote:
| We're talking about a scenario where AliExpress builds
| warehouses and logistics inside the US to better deliver
| chinese imports, in direct competition with Amazon.
|
| I see an obvious gatekeeper.
|
| As a game, can you find any example of a foreign company
| successfuly setting up infra in the US to chalenge an US
| behemoth ?
| ChuckMcM wrote:
| This may not be what you're thinking but I see many;
|
| Nokia on phones vs the Bell companies, Toshiba on
| laptops, pretty much everyone on the PC vs IBM, the
| entire Steel industry, the railroad industry before them,
| Japanese cars eating Detroit's lunch, Zenith and RCA's TV
| market, GE's appliance market.
|
| Where is the gatekeeper in the Amazon/Aliexpress
| scenario? I'm sorry but I don't see that one yet.
|
| EDIT: You did say "infra" and the best example I know of
| are the foreign car companies that set up factories here
| to build cars in the US to get around import issues.
| Kukumber wrote:
| I don't think Amazon has an impact in China, they already have
| many online marketplaces, and it predates Amazon doing business
| in China
| say_it_as_it_is wrote:
| What quality control is there on Amazon when 40% of its merchants
| are from China? That's a huge portion of the marketplace.
| lotsofpulp wrote:
| Surely it must be 90%.
| baron816 wrote:
| I want to see a study of the impact of Amazon on unemployment and
| inequality. Inequality has been flat and then declining in the US
| since about 2013. Unemployment has remained at rock bottom rates.
| I think a lot of this is the competition Amazon provides for low
| skilled labor.
| luckylion wrote:
| The tone is accusatory, the content is that many companies start
| businesses selling on Amazon specifically and don't just use
| Amazon as one medium among many. I fail to see the problem.
| [deleted]
| whywhywhydude wrote:
| It's interesting how a lot of products in Amazon are just
| rebranded stuff from Alibaba. It seems like the Amazon sellers
| are auto generating the brand names. There is probably some kind
| of drop shipping app that does it for you.
| latchkey wrote:
| I look at Amazon as faster shipping from Aliexpress.us.
|
| Sometimes the prices are insanely different and if I don't care
| about shipping times, I'll just get the same exact stuff from
| Ali for a lot less money. Other times, the prices aren't much
| different and I just get it from Amazon.
|
| Some sort of marriage between the two systems would be nice.
| Ali's search engine is not as easy to use as Amazon's and it is
| a pain searching on both and comparing prices.
|
| 95% of the time, if the sellers name on Amazon is all
| uppercase, you can bet it is cheaper on Ali.
| Sebguer wrote:
| spend five minutes on tiktok and you will get about 30 videos
| from 'influencers' selling you their classes on becoming a
| dropshipper.
| nostromo wrote:
| The influencers are not even creating the content and are
| just dropshipping the courses on dropshipping from another
| vendor.
| artificial wrote:
| It's turtles all the way down.
| LatteLazy wrote:
| It was amazing in the early days on the pandemic here in the UK
| how few businesses could do basic things like know what was in
| stock or let you pay on line. Amazon came through when I needed a
| bunch of what I considered essentials (fuses for my house for
| instance). Brick and mortar stores were useless.
| guardiangod wrote:
| Not sure about U.S. SMBs but Amazon's influence on China small
| business is a rounding number. Only a relatively small number of
| vendors sell items on Amazon. They made good money but the good
| days is almost over given recent quality/piracy crackdowns.
|
| Taobao (under Alibaba) has 100 times more influence on how small
| business in China conduct business. I know small store owners
| whose business were wiped out by the rise of Taobao. Amazon?
| They've never heard of it.
| thetinguy wrote:
| Taobao is a direct influence whereas Amazon is an indirect
| influence through the sellers importing things from China to
| sell on Amazon.
| nebula8804 wrote:
| There is a different 'class' of junk sold on Taobao vs Amazon
| but both stores still seem chock full of junk. Maybe they were
| affected in the same way just by different players.
| hezralig wrote:
| I frequently find the same items on Alibaba and Taobao as I
| do on Amazon. I find myself ordering items next day on Amazon
| and returning them as soon as I receive the exact item for
| 1/10 to 1/100 the price elsewhere.
|
| Returning an item because you have found a better price
| elsewhere is a pre-filled option for a return, so it is
| expressly allowed.
| canadianfella wrote:
| [dead]
| chongli wrote:
| Keep in mind that Amazon tracks people's return histories
| and has been known to ban people who are deemed return
| abusers.
| ApolloFortyNine wrote:
| The one example I've seen of this is someone who would
| order, no joke, 30 different items of clothing and keep
| 2. Regularly.
|
| I haven't seen an example that wasn't obvious abuse.
| sharkweek wrote:
| Friend works at Costco and they have the same tracking
| system.
|
| He says anytime anyone who has been abusing the return
| policy gets angry about being told no, he goes into his
| script about "Sir/ma'am it's clear to me you haven't been
| happy with the goods and services we sell here at Costco.
| How about I go ahead and cancel your membership and offer
| you a FULL refund of the annual fee."
|
| Gets people in-line REAL fast knowing they might end up
| blacklisted from Costco.
| recuter wrote:
| That is quite clever and rational in a dystopian sort of
| way.
| TeMPOraL wrote:
| I'm sympathetic, though. There are plenty of consumers
| happy to abuse any and every loophole or concession they
| can find. The vendors need some wiggle room to deal with
| those cases.
|
| For example: a clothing store accepts free returns for
| couple days after purchase in physical store, or doesn't
| try to obstruct in any way the EU-wide 14-day return
| policy for goods bought online? That store eventually
| gets flooded with returns, as some scoundrels figure they
| can attract their preferred kind of mates by buying
| expensive clothes before a party and hiding the tags
| (instead of removing them), and then return those clothes
| back to the store the very next day, to get full refund.
|
| This is a real thing that was happening where I live, and
| led to clothes being much more annoying to unpack, as
| well as some silly rules on shoe returns, which
| occasionally cause pretty absurd situations (those
| running shoes were quickly labeled as "walking shoes, not
| suitable for running"; we can't accept the return because
| you admitted to running in them).
|
| That use case, along with hedging your risk by buying 10
| different items on-line, fully intending to return at
| least 8 of them, is common enough that there are
| businesses targeting people doing this directly (e.g.
| "clothing as a service" companies).
|
| EDIT: FWIW, I do understand the desire and pleasure of
| figuring out a loophole in a set of rules and milking it
| for all its worth. But in shopping and e-commerce,
| following those rules to the letter selfishly almost
| always involves generating tremendous waste for the
| vendor, the society and the environment, and because of
| those externalities I don't think highly of such
| behavior.
| vel0city wrote:
| The return rates that some people I know find acceptable
| are mind numbing to me. Some people I know return about
| 20% of the non-food things they buy, even after knowing
| that a significant fraction of the returned merchandise
| ends up in landfills.
|
| So many people buy things without even thinking about it,
| use it once or twice, decide they don't need it, and then
| return it. It goes back, often without packaging,
| probably off to a landfill. All those resources and value
| just tossed into a pit, hidden in Amazon's bottom line.
| Its insane to me.
|
| Forever easy returns just seem so incredibly damaging to
| me.
| wmeredith wrote:
| I love this.
|
| "Sir/ma'am it's clear to me you haven't been happy with
| the goods and services we sell here at Costco. How about
| I go ahead and cancel your membership"
|
| "Returning an item because you have found a better price
| elsewhere is a pre-filled option for a return, so it is
| expressly allowed."
|
| Are both excellent examples of malicious compliance.
| baybal2 wrote:
| [dead]
| Barrin92 wrote:
| Yes. There's the concept of a "taobao village" in China where
| you have entire rural communities of online merchants supplying
| smaller towns/villages that otherwise wouldn't really use
| ecommerce.
|
| And the funny thing is these even exist in Germany now. In
| Duisburg I met some Chinese taobao merchants years ago who'd
| settled as expats in the city because it has particularly
| strong ties to the country as there's a direct freight train
| route to Chongqing.
| nomay wrote:
| Amazon sellers are actually researching the market and
| designing new products, which can't be said about domestic
| Chinese brands and sellers that are mired in cutthroat price
| dogfights.
|
| The profits maybe not be that big, but big enough to drive a
| skeleton team, make a small fortune. One item with $500 a day
| in revenue can let you make more money than a typical coder.
| Ztynovovk wrote:
| [dead]
| rcme wrote:
| $500 * 365 days is 182,500 / year. With a 50% margin, that's
| only $91,250.
| selectodude wrote:
| Average income in China is about $15,000/yr, so $90,000 is
| pretty damn good.
| rcme wrote:
| The comparison was to a software engineer, which earns
| more than $15,000 in China. And also with a 50% margin,
| which is extremely generous. Most margins are closer to
| 10% - 20% in manufacturing.
| catach wrote:
| That's a big potential impact for an individual sure, but the
| context here is the existing impact for entire economies.
| nonethewiser wrote:
| > There were an estimated six million merchants on Amazon's
| marketplace in 2021, and around 2,000 opened new accounts each
| day. On average, Amazon collects 34% of each sale they make,
| according to research published the same year by the Institute
| for Local Self-Reliance. Estimates from 2020 showed that around
| 54% of Amazon sellers in the U.S. market were based in the
| country, while 40% were in China.
| hulitu wrote:
| > were based in the country, while 40% were in China.
|
| were based.
| toss1 wrote:
| >>The seller said she spends 80% of her time optimizing the
| keywords she uses in her product descriptions and advertisements,
| in order to ensure her goods rank highly in Amazon's search
| results. "I don't use any other social media channels to draw
| traffic to my store," she told Weigel.
|
| That looks like an opportunity for someone to build some specific
| tools...
|
| I expect there are some already out there, but if the task still
| consumes that much time, i.e., is that much of a pain point,
| obviously there is opportunity still left on the table.
| AdrianB1 wrote:
| If I read correctly, Amazon adds a 50% increase over the price
| from the seller. If we think about the cost of manufacturing to
| the price the person that buys from Amazon, the price hike is
| significant, the buyer is paying a lot of money for something
| that in theory is way less expensive. The 100$ coffee.
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