1. I still think they are stupid for turning it down. 2. Especially after it turns out that they weren't really taking care of security and stuff 3. Especially when teenagers are fickle and are already onto the next thing. 4. I've been reading The Everything Store (great read. strongly recommend, especially if you enjoyed Steve Jobs biography) and my favorite parts so far are how Bezos crushes his competition. It's awful. But amazing. Here's a link to one excerpt about how they got Diapers.com. They did a similar thing to Zappos. Quidsi could now taste its own blood. At one point, Quidsi executives took what they knew about shipping rates, factored in Procter & Gamble’s (PG) wholesale prices, and calculated that Amazon was on track to lose $100 million over three months in the diaper category alone. That's apparently how the game is played in this high stakes, fast paced tech world.While they were in that early morning meeting with Bezos, Amazon sent out a press release introducing a service called Amazon Mom. It was a sweet deal for new parents: They could get up to a year’s worth of free two-day Prime shipping (a program that usually cost $79 a year). Customers also could get an additional 30 percent off the already-discounted diapers if they signed up for regular monthly deliveries as part of a service called Subscribe and Save. Back in New Jersey, Quidsi employees desperately tried to call their founders to discuss a public response to Amazon Mom. The pair couldn’t be reached: They were still in the meeting at Amazon’s headquarters.
This isn't just cutthroat, it's a sickness on America. I don't exactly know how to stop it, but it's ruining the country. At least in MI, and I think in other states, too, it's illegal to sell alcohol below cost. Maybe there should be a rule about doing this to consumer products as well. Doing things like being unafraid to lose $100M in a quarter is why people get paid shit wages, and why I as a taxpayer am required to support these mega companies whether I like it or not (full disclosure, I do buy from Amazon from time to time; don't buy from Wal-Mart for any reason). These companies have the luxury of knowing that they can do shit like this, because the employees they have to squeeze to make it all work are going to qualify for WIC, Medicaid, Free Lunch, Welfare, etc, all things that are totally avoidable if a living wage is guaranteed. The opposite end of a living wage is that we don't get diapers (or food, or shitty plastic toys) at prices that are below cost. I don't see Bezos as a business genius. I see him as a pervert who has figured out a way to beat a corruptible system. I'll continue to use Amazon for the good things they offer (for example, just this week I bought a product called Apoxie Sculpt, which is an epoxy-based modeling clay, for an art project I'm working on; I just can't get that shit elsewhere; same goes for a lot of small edition books I buy). They offer me access, so for that I am grateful. Wal-Mart, on the other hand, offers me nothing, so I have no reason to go there. Ever. Amazon has a great thing going, but they need some serious regulation to tamp down their empire.Quidsi could now taste its own blood. At one point, Quidsi executives took what they knew about shipping rates, factored in Procter & Gamble’s (PG) wholesale prices, and calculated that Amazon was on track to lose $100 million over three months in the diaper category alone.
Isn't "kill" too strong a word? The acquisition was approved in part because "Costco Wholesale, Target, and plenty of other companies sold diapers online and off."When huge retailers can kill competition by selling at a massive loss, we eventually pay for that loss.
Can you elaborate on this? If the $100M in losses is due to selling cheap diapers, that's a big win for new parents. Who are "we" and how do we eventually pay?
Sure. Amazon does the math, and determines that 100M isn't a loss if they can eliminate their competitor. As a result they can then charge less competitive prices, and more than make up the difference. The consumers pay more in the end because the market is prevented from becoming a competitive one. That's Amazon's incentive. As for Target, etc, I have to pay taxes on those diapers. Btw, I'll fix that best of link. Sorry, I've been buried.
We agree that the $100 million loss is due to Amazon’s plan to sell diapers below cost, presumably to gain market share and pressure Quidsi. So your thesis is that diaper customers, who have already banked $100 million in savings by shopping smart and buying from the cheapest guy in town, will in the future continue to buy diapers from Amazon even though Amazon has jacked prices up beyond those of Costco, Target, and plenty of other companies. And the overage from these careless future purchases will be greater than $100 million. That could happen, I guess.... Do you think diaper customers would be better off if Quidsi had never been founded, giving Amazon the opportunity to make this play? I don’t see why Amazon’s strategy or your position would be different if Amazon collected sales tax in every state. (By the way, you were probably supposed to pay tax on those purchases.)
No, I don't assume that Amazon's prices need to be higher than Target, Costco, etc. Importantly this is more about diapers. Amazon started as a bookstore. Amazon wanted to undermine Quidsi's growth as an online retailer, not just a seller of diapers. By killing their advantage, they could hobble their ability to get a foothold in the space. Before selling the diapers at a loss, Bezos made an offer to buy diapers.com. They refused, so Amazon undercut their prices at a loss. A year later, Amazon bought Quidsi. By using this tactic, Quidsi became part of Amazon's portfolio, rather than a competitor. BTW, I own stock in Amazon. I think they have a lot more competition to devour. Perhaps, but we don't, and that's what matters to Amazon. -I'm just saying that Amazon has an advantage (6% in Michigan) over brick-and-mortar retailers. But as I said, I don't think this was just a matter of where customers get diapers. Amazon is protecting a much bigger space. I'm not sure the judge saw that clearly.So your thesis is that diaper customers, who have already banked $100 million in savings by shopping smart and buying from the cheapest guy in town, will in the future continue to buy diapers from Amazon even though Amazon has jacked prices up beyond those of Costco, Target, and plenty of other companies.
By the way, you were probably supposed to pay tax on those purchases.
When you say "we eventually pay for that loss" it sounds like something bad is going to happen. But I don't see it. The outcome was good for Amazon. By playing hardball they absorbed a growing threat to one of their spaces. The outcome was good for Quidsi. Maybe their dream was to grow into a successful independent online retailer, but getting a good chunk of a billion dollars instead is a pretty decent second place. You shareholders might be in a position to complain, seeing Amazon throwing cash and diapers out the door, but I see no tears. That leaves just us, online retail customers, as potential victims. But many customers already benefitted from Amazon's scorched-earth price war. We are already ahead. I don't see how Amazon or anyone else can make us "eventually pay." Amazon didn't get to be a juggernaut by making customers pay more. What if Amazon gobbles up Wal-Mart and Costco and Target and the rest (a big quidsi indeed) -- so they can finally raise prices and profits? All we need is a couple of guys and a goofy Latin d.b.a. name to rescue us.
While the lack of regulation helped Amazon grow and be successful, they are now so big they can't be competed with and are taking part in horrid business practices. There will be further regulation in the online environment - we already see it taking place in terms of sales tax - but with that comes a lack of innovation. Amazon could have never survived or become what it has become with regulation. Safe to say, there will probably never be another company like Amazon.Amazon has a great thing going, but they need some serious regulation to tamp down their empire.
What I don't understand is how this isn't illegal. Every economics class I've taken has described selling at a loss to bankrupt your competition as anti-compeitive and monopolistic behavior. I get that the real world is different and a more nuanced landscape, but I have to admit that I don't understand it, -I was always under the impression that this was against the rules.
They did the same thing with e-books, and it was Apple that got hit with anti-competitive sanctions for advancing a business model that was sustainable. Did it raise prices for consumers? Yes...because Amazon was selling books at a loss...of course it did.Quidsi could now taste its own blood. At one point, Quidsi executives took what they knew about shipping rates, factored in Procter & Gamble’s (PG) wholesale prices, and calculated that Amazon was on track to lose $100 million over three months in the diaper category alone.
I don't really understand the details of the law either but the FTC went though the deal between Quidsi and Amazon very closely and took over 4 months to approve the deal. They decided it was okay because it wasn't creating a monopolistic environment because places like Cosco, Target and Walmart were similarly selling diapers - online and off. IMO, this shows how far behind the FTC and all government is with dealing with internet things. The way I see it, it absolutely created a monopoly in the world on online retail. Target and Walmart and Cosco aren't even close - especially when you consider the automatic / monthly repeating nature of what Diapers.com and Amazon Mom were doing. However, because the government was/is so far behind is why we have such huge innovations and pretty amazing online companies today. This is in part to the lack of regulations I think: Amazon avoided paying sales tax for 10+ years which allowed it to lower prices, grow faster and compete toe to toe with established retail spaces even though, when Amazon started, people had never put their CC information into a computer before. The reason Apple got hit with it is also explained in detail in the book. Here's a short version: Amazon decided independently to price their ebooks for Kindle at $9.99 (following Apple's success with the 99 cent song - remember this was only a couple years after itunes/ipod masterpiece happened.) Apple got together WITH THE BIG 6 PUBLISHERS and decided TOGETHER that they would all raise the prices. It had less to do with pricing and more to do with collusion. Jobs further dug himself a bit of a hole because he bragged about this move to press and it was published in his biography, which made them an easy target. If you want to read more in depth about it, I'll pm you the 5 page excerpt from the book about the whole mess. It's pretty interesting.
My guess is it probably is illegal, but that it was also just a theoretical press release. If the other execs in the room can quickly calculate how much money Amazon would lose, they can probably also do the math on how much in legal fees they'd be out trying to sue a company that has unlimited resources. Sure, maybe they'd win in the end, but by that point they would be bankrupt and left with nothing instead of an offer to sell. You're probably too young to remember the antitrust lawsuit against Microsoft. It took something like 8 years to settle. That's a long time to wait out your competition.
I mean, like, are we trying to say Amazon is going to crush Snapchat now? You commented in the other thread that Amazon is unusual as a company. I'm inclined to think Facebook isn't, or at least not in the way that Amazon is; that Facebook's not as good at revolutionizing the way they do things and also probably aren't willing to take the insane losses that Amazon does in the face of long-term goals. On a side note, I totally name-dropped kb00 on Snapchat last night. Turns out, the person I was snapping knows him in person. If only I lived closer to the west coast. I'd go over for dinner.
I don't think Amazon is going to crush Snapchat - I doubt they have interest in them as a company. Rather, I was just pointing out that crazy style takeovers and playing hardball aren't unusual in this industry lately. Apple took part in similar practices as well. In this article (and others) Snapchat founders say they were turned off my Facebook playing hardball. My response to that is, "that isn't abnormal. Get used to it if you want to play in this field." I agree with you that Facebook doesn't have the same level of revolutionary thinking or long term thinking or a multitude of personality traits that Bezos/Amazon have so perhaps the comparison was less appropriate that I thought at the time. But just because you don't have that level of power or skill or whatever it is, doesn't mean you won't try. Obviously Facebook did attempt to act like this - even if they failed. Alsoooooo - come to LA. You can sleep at my place and we can go to the beach and stalk...I mean meet up with KB.