Absolutely. When huge retailers can kill competition by selling at a massive loss, we eventually pay for that loss. That is why they are willing to take it.
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.