retail news in context, analysis with attitude

Really good story on Vox about how Amazon recently "has removed several barriers that previously made it difficult for customers to purchase a single sub-$5 item on its own. The result is a flood of low-priced items — a $2 roll of dental floss or a 75-cent makeup brush — made available to Prime customers with free one-day shipping."

Such items used to be add-ons - you had to buy such things as part of a larger order, and there was a minimum purchase. The rationale was that it didn't make sense for Amazon to be offer free shipping to Prime members on items that were less expensive than the shipping costs.

But no longer. Or, at least, less often.

"The changes could have huge ramifications for retailers like Target or CVS, where one-off purchases of consumer packaged goods are common," Vox writes, adding that "the combination of these changes, coupled with Amazon recently speeding up Prime shipping from two days to one, means that Amazon could become the go-to retailer for a category of regularly consumed household items that it has yet to deeply penetrate."

But … Vox suggests that "the moves could also add to complaints that Amazon engages in anticompetitive behavior, though current laws typically protect companies that keep prices low for consumers."
KC's View:
I'm not sure how this becomes an anti-competition issue, though I'm sure that some folks - I'm looking at you, Sen. Warren - will try to make it one. Retailers always have had loss-leaders as a way of generating traffic and business, figuring that they'll pick up profit elsewhere. Best I can tell - and I'm no lawyer - this is just a modern version of that.

However … it was interesting to see that the Vox story quoted Andrea Leigh, a former Amazon executive who now is a vice president at ideoclick, which helps brands sell on Amazon.

Full disclosure: Ideoclick is an MNB sponsor.

Andrea's message was that manufacturers that seen an upturn in business because of this new policy should not get complacent, because it seems likely - and in character - that "in six months, Amazon is going to come back to you asking for money and could hold the brand hostage."

Some context from the story: "Last year, Leigh said Amazon approached brands that work with Ideoclick and requested hundreds of thousands of dollars to make up for losing money when selling some of the their goods. When the suppliers declined to pay up, Leigh said, 'Amazon paused the whole account,' not only the specific products in question. 'It’s called going on a pause ... a vendor pause.' Basically, that means Amazon will temporarily stop selling a brand’s products."

Now that seems to walk right up to the edge of being anti-competitive. At least to me.

Though I'm no lawyer.