Last week at a House Judiciary antitrust subcommittee hearing on rivalry in the digital economy, Amazon pricing concerns were again invoked. You may have missed it because of that other hearing going on in Washington right now. During his testimony at the hearing, David Barnett, CEO of telephone supplementary maker PopSockets, accused Amazon of “bullying with a smile”, “strong-arming” and failing to remove fake commodities. Lawmakers may now consider And as a result the company gaped to other options to sell its goods, but as you will see in this episode of Watching Amazon, doing digital exchange outside of Amazon is, well, tough. Even when you have a known brand like PopSockets has built.
And the relationships between Amazon and its shipping partners like FedEx and UPS are getting even more interesting as Amazon takes on more of its own shipping needs to get purchasers their material faster and faster. But one expanse that Amazon has not stopped is when its partners ship them products that be brought to an end get sold on the scaffold. UPS controls almost all of that. But will Amazon take a swipe at that very?
My Watching Amazon co-host John Lawson and I go deep in looking at these two affinities this week. Below is an edited transcript of our communication. To picture the full convo watch the video or click on the embedded SoundCloud player below.
John Lawson: PopSockets CEO said that Amazon bullies with the smile to press for lower rates, he actually was speaking at Friday’s antitrust house hearing, which we’re not examining a whole lot about.
Small Business Veers: There’re some other things going on … but yeah, they primarily sell to Amazon. Right?
John Lawson: Right. And Amazon was putting pressure on them for pricing and telling them that they had to match pricing on other platforms.
Small Business Trends: So in other words, they were selling it for a lower premium on their own website.
John Lawson: And Amazon wanted them to match.
Small Business Tendencies: They don’t want to be outperform because why would anybody want to buy it on Amazon if the cost is cheaper somewhere else.
John Lawson: Right. But that’s still an antitrust concern I think.
Small Business Trends: Right.
John Lawson: And I’m sure that’s why they called them and they just talked about the relationship, which is interesting because PopSockets still has a relationship with Amazon in terms of their third party platform for Amazon. One of the things that came out of the storey was that they[ PopSockets] removed their substance from Amazon.
Amazon’s claim to fame thing is, glance, if you don’t like Amazon, there’s all kinds of other scaffolds to sell on. Well they[ PopSockets] went to the second biggest scaffold, which was Walmart and their sales fallen to 1/38 th of exactly what he[ on Amazon ].
Small Business Trends: 1/38 th?
John Lawson: Yeah, 1/38 th. And they’re a big seller with a big brand and people know it. 1/38 th.
Small Business Trends: 1/38 th, I was thinking perhaps 10% or something.
John Lawson: That’s the first thing to frame a number. Exactly.
Small Business Trends: That’s like two place something percent.
John Lawson: 1/38 th of the sales they had on Amazon.
Small Business Trends: Wow. That’s huge.
John Lawson: That various kinds of employs it into perspective.
Small Business Trends: So PopSockets mostly plucked their trash off of Amazon since they are didn’t want to kind of…
John Lawson: Deal with that relationship, yeah.
Small Business Trends: … “re saying”, we have no pricing power on our own makes anymore. So they gathered it off and now they’re selling it in different places. The business is still … I mean that’s a quite substantial drop off there, but the business, they’ve stick to their guns on that.
John Lawson: They’ve poke to their shoots. They’re in negotiations now.
Small Business Trends: So they want to get back on, right?
John Lawson: Well, they just wanted to do direct sales.
Small Business Trends: Okay.
John Lawson: They used to do direct to Amazon sales. They’d sell instantly to Amazon. They want to go direct to purchaser, as a third party. They’re going to experiment that out.
Small Business Trends: Okay, so that’s what, 30% of a commission or something?
John Lawson: 15 to 25 or 30.
Small Business Trends: But they get to control the pricing?
John Lawson: Yes.
Small Business Trends: Interesting. Well okay. All right.
John Lawson: Somewhat. Because actually there is a rule written in the terms of agreements that you have to have parity. However, in recent ages now they have stopped enforcing that as stringently as they used to because I repute of this case.
Small Business Trends: That is just so, such a potent speciman of how powerful Amazon is.
John Lawson: Yeah.
Small Business Trends: These chaps, they’re probably killing it on Amazon, but not making as much profit boundary as they were looking for?
John Lawson: Well, they were killing their label on Amazon. I symbolize, Amazon was hurting their brand. The business publish that they certainly had was not just the pricing, but it was the fact that they had bogus that Amazon wasn’t stopping.
Small Business Trends: Oh, okay.
John Lawson: Right. So the consider is if we pull all of our products off then that foliages everybody else as a copy. Now it’s easier for them to remove the copy. So it was really the forgeries “thats been” hurting their business and they were trying to leverage their persuasivenes and their capability to get Amazon to be more enforcing that principle about bogus. Amazon bounced back like , no, we have you under the you know … we’ve got you by the….
Small Business Trends: 1/38 th.
John Lawson: That’s a inferno of a number.
Small Business Trends: Now, one other thing we’re going to talk about, because I ever thoughts, we just talked about how they made up with FedEx.
John Lawson: Yeah.
Small Business Trends: I always thought that what Amazon is doing is with their Amazon shipping was, go to the last mile.
John Lawson: Right. The logistics at their building, this is all based on customer.
Small Business Trends: Last-place mile customers.
John Lawson: Yes.
Small Business Trends: But when it comes to the third party seller, it’s a entire different ball game.
John Lawson: It’s all UPS.
Small Business Trends: So right now, even though they’ve been spending all this billion dollar on Amazon shipping….
John Lawson: That’s only half video games they’re doing.
Small Business Trends: It got nothing to do with how vendors get the product to Amazon.
John Lawson: Right. The treat is guys, third party sellers have to use UPS to get their wares into the repositories. You don’t have any Amazon trucks attracting up to your target of business, filling it with Amazon makes for FBA and then making it to FBA. All of that happens through UPS.
Small Business Trends: So all these Amazon trucks that we learn out on the street…
John Lawson: None of them are picking up products.
Small Business Trends: They’re solely for extradite to consumers.
John Lawson: Yes. Truck wise too.
Small Business Trends: But from a sales perspective, in order for them to get their product to Amazon to sell it to you.
John Lawson: UPS.
Small Business Trends: It’s not anything else. Precisely UPS.
John Lawson: Pretty much. I signify if you got LTL then you know. Less than a laden you can bring a truck in.
Small Business Trends: My big question to you was just the way long is it going to be before Amazon starts dipping into that?
John Lawson: You know, I don’t know. I mean you’ve got something pretty good going on right now. Because there’s two sides to this. If all the volume that third party sellers are bringing into the warehouse going through UPS imparts them power to get lower costs for parcels delivered to consumer through UPS. So it feeds both sides. And right now they’re only delivering 50% of their own fulfilled.
So that buds the other 50% vulnerable to pricing. And as long as they got 100% of third party seller produces coming in through UPS, they get a better deal.
Small Business Trends: So I reflect the answer is right now, carrying expenditures from Amazon to individual customers to get them their material that’s all on Amazon. They’re paid under all of that ship cost.
John Lawson: Okay.
Small Business Trends: But right now…
John Lawson: I’m wheel my eyes because yeah, it’s still the sale.
Small Business Trends: They surpass it off. But it’s actually coming out of Amazon’s checkbook.
John Lawson: Yes.
Small Business Trends: Now when the dealer ships stuff in into Amazon, Amazon’s not paying a dime for that. That’s all on this dealer. Right?
John Lawson: Right. But the vendor does get rejecting based on the volume.
Small Business Trends: Right, but it’s still their paying it. Even if they’re getting a reject, they’re still physically compensating it.
John Lawson: Here’s the other thing very, is that at one point you could use any provider to do that.
Small Business Trends: UPS had now become the guy.
John Lawson: Last-place few years they said only UPS.
Small Business Trends: There must be a reason for that. Maybe they’re getting a kick back at UPS or something.
John Lawson: A little bit of that. I anticipate because they’ve integrated their labels.
Small Business Trends: Remove some friction.
John Lawson: Remove some friction. Absolutely.
Small Business Trends: All freedom, so until Amazon certainly nails down that last mile…
John Lawson: They’ve got a long way to go.
Small Business Trends: I know that’s what I’m saying before they pin down that whole last mile and get to the same day delivery last mile, get that rationalize and efficient and profitable as possible. They’re not going to touch that part.
John Lawson: No, they’re not going to touch that part.
Small Business Trends: But, at some point.
John Lawson: Look, here’s the consider. If I’m UPS, as soon as you touch that fraction, you get no parts from me.
Small Business Trends: So they’d pull everything out?
John Lawson: Just pull everything and then now you’re just left with, Oh my God.
Small Business Trends: So perhaps this is a good compromise that hey…
John Lawson: You may not need us.
Small Business Trends: We will still let you have shipping from seller to us but all bets are off on.
John Lawson: I don’t think so.
Small Business Trends: Truly?
John Lawson: That’s what I’m saying. I don’t think so. I imagine at some rank UPS is probably sitting back saying, you know we can pull your nonsense like this, but they do have a lever to pull to keep some of that…
Small Business Trends: Oh, the marketer nonsense?
John Lawson: Direct consumer traffic.
Small Business Trends: Interesting. It is so fascinating looking at all this stuff.
John Lawson: There’s a lot of moving rotates there.
Small Business Trends: With all of the other stuff that Amazon has going on, this is the meat and potatoes of the business.
John Lawson: That’s where I will go back to what I told the earlier excerpt because I certainly don’t think that Amazon is looking to get that kind of power just for the revenue. They simply want it as long as FedEx is doing what they do well. I suppose Amazon is more than happy to use UPS.
Small Business Trends: I think you’re right, but I think it’s because that allows Amazon to focus their efforts and their resources on patron experience.
John Lawson: On what the fuck is do best.
Small Business Trends: And if they can keep ahead of everybody else on that. All this other nonsense is driven by that.
John Lawson: Yeah.
Small Business Trends: There’s no point in trying to deal heavy handedly with vendors to some extent. If the customers aren’t buying stuff on the front end.
John Lawson: Right. And there was no reason for them to be heavy handed with UPS as long as they’re meeting their end…Because it allows them to grow and we can all get to share in that experience of the revenue stream. I don’t see that being an issue.
This article, “Watching Amazon: Pricing and Shipping- A Tale of Two Liaisons” was first published on Small Business Trends
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