By now, you’ve surely seen that the Federal Trade Commission and 17 state attorneys general filed suit against Amazon on Tuesday, alleging that it used its market position to “inflate prices, degrade quality and stifle innovation for consumers and business.” The FreightWaves article is here.
For additional detail I turned to one of the most insightful guests I’ve had on The Stockout show — Chris Moe, CEO of Cartograph (that interview can be seen here) and someone who knows all about how consumer goods companies are treated by the largest online retailer. Cartograph assists clients that sell consumer products on Amazon with their sales and marketing strategies, including how to get products to the top of search results and how to earn adequate returns while marketing on the site. The brief Q&A below has been edited for clarity.
FREIGHTWAVES: The FTC alleges that Amazon uses anti-discounting measures that punish other online retailers when they set prices below Amazon’s, thus giving Amazon the power to set prices for e-commerce as a whole. According to the FTC, Amazon then retaliates against sellers that offer lower prices elsewhere by burying their pages in search results. Do you agree that Amazon buries results if a seller offers a lower price elsewhere?
MOE: Bury search is a bit of an oversimplification. Amazon has a “most favored nation” pricing policy, which says [sellers] should have a price competitive with other superimage competitor e-tailers, such as Walmart, Target, Kroger properties, etc. Notably this does not include direct-to-consumer (DTC) sites. Naturally, some of those stores mirror in-store prices and operate their e-commerce at a loss or don’t include shipping. If you don’t match that price, Amazon will suppress your buy box — meaning, there won’t be a price displayed and the “add to cart” button becomes hidden. Naturally, this makes performance drop a lot — usually at least by two-thirds.
So yes, I agree. This is a very difficult, and in our opinion, problematic policy, particularly for CPG categories. But it’s not without merit in many cases: In theory, it protects customers from price gouging (recall crazy prices for medical supplies during COVID, for example) and prevents opportunistic resellers on brands who elect not to sell on Amazon.
FREIGHTWAVES: In the suit, the FTC also takes issue with eligibility requirements for inclusion in Amazon Prime, which is contingent upon using Amazon’s fulfillment service. Do you think the Prime eligibility requirements are fair?
MOE: In terms of Prime eligibility … I think it’s mostly fair. It’s true that without the Prime badge it is very difficult to compete on Amazon. But my understanding of the system is that Amazon mostly reacts to consumer performance, and consumers click on Prime badges a lot more. It’s not that you’re “penalized” for other slower shipping, it’s that consumers vote with their clicks. Amazon has constructed the fastest and most vast supply chain in human history, and they understandably protect the Prime badge closely.
Target is closing stores in 4 cities — I bet you can guess at least 3
In addition to closing one store in New York City, Target is closing stores in — you guessed it — Portland, Oregon (three), Seattle (two) and San Francisco/Oakland (three).
Based on this Reddit post, the Portland locals don’t seem surprised by the closures.
Reddit: r/news
Interestingly, on its earnings call earlier this week, Costco’s management said that it has not had a significant increase in theft like so many other retailers have. I always found the receipt checking on the way out to be annoying but that practice now seems prescient. Costco’s response to a question on whether it would offer Scan & Go like some other retailers was: “You can scan but not go.”
Poor growing conditions drive surges in sugar, cocoa and olive oil
(Chart: Barchart.com. Inc.)
The National Retail Federation expects total Halloween spending to increase 15% from last year’s record of $10.6 billion to $12.2 billion this year. While that is partially due to a record number of people participating in Halloween-related activities, surges in ingredient prices are driving up prices of candy. As shown in the chart above, sugar has risen steadily since the start of the pandemic and has reached a 12-year high. In addition, cocoa prices are at a 46-year high, driven by extreme weather, including torrential rains, flooding and black pod fungal disease in the Ivory Coast and Ghana — 75% of cocoa is grown in West Africa. Meanwhile, in the Mediterranean, droughts have led to a surge in olive oil prices of roughly $9,000 per ton; the prior record was $6,242 per ton in 1996. That has led to a bizarre story of olive oil theft in Spain.
Cannabis hardware maker Bold Carts uses airfreight, CNY planning to avoid supply chain disruptions
(Image: FWTV)
On Monday’s The Stockout show, Grace Sharkey and I interviewed Bill Rinehart, CEO of Bold Carts, a B2B hardware manufacturer in the cannabis vaping industry. The company stands to benefit from overall growth in the cannabis vaping segment, which seems to me to be a more enviable approach than consumer-facing companies that are more vulnerable to swings in market share. What also struck me is how quickly those products have changed and how effectively the company managed its supply chain during the pandemic. Here are a few highlights.
- The company opts to use airfreight rather than ocean freight to import its manufactured products from China. The reliability and speed of airfreight is worth the premium over ocean and enabled the company to avoid supply chain disruptions during the pandemic.
- Bold Carts uses centralized warehousing near its headquarters in Arizona. The company has not experienced any major transportation service disruptions domestically.
- The company uses its scale to strike a balance between providing hardware solutions that are customized to their customers’ specific needs and keeping manufacturing costs low so their customers can maintain healthy margins.
- Bold Carts revised its logo in response to a complaint from Monster Beverage, which thought that three green vertical lines was too close to its own logo.
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