The Amazon tax

The market will fix this right? RIGHT?

Maybe we need ad blockers for Amazon ads.

Last week I searched for a "Eufy S350" security camera on Amazon. Instead of search results, Alexa for Shopping took over the entire screen, proceeded to tell me that the Eufy S350 doesn't exist, and then recommended a Eufy vacuum cleaner.

This feels comical to me today, but I can imagine a near future where paid AI ads gaslit you into believing that the product you searched for is vastly inferior to the product AI "recommends".

Long time Amazon seller/brand here (and ex-academic/game theorist) -- it's a little more complicated if you think about the various parties' incentives, but yeah we have a half-assed market equilibrium that sucks for everyone.

Amazon as the marketplace facilitator has an interesting job to run:

1) It wants customers to get exactly what they want (as measured by the minimal amount of clicking/scrolling/time it takes for a customer to hit the landing page -> complete shopping). This is mostly customer-centric.

2) It wants to promote as much competition as it can between products and brands so that no seller dominates the market. This is... mildly customer-centric so big sellers can't rest on their laurels, and mostly self-serving (so no single seller/brand can gain enough power to threaten Amazon).

3) Amazon has to strike a balance of #1 and #2 so that there's some opportunity for new entrants to enter any product space. Back in the days they structured search so that some percentage of results would be new sellers and products, and new products would get some amount of sessions to prove they convert within a certain statistical distribution to land a certain rank (BSR). Note the rise of alphabet soup Amazon brands is partially because they allowed for disposable brands that could be black-hatted, and partially because for a few years these sellers were just generating tons of new brands to share new SKU real estate on search results (so when you searched for "small kitchen colander" or what not, you'd find the same product being sold by 10 sockpuppet sellers occupying 10 search spaces, taking result space away from the other sellers).

But what if they can get everyone to partially pay for #3? Enter ads, where basically new and old brands pay to play for eyeballs on Amazon.

So if you think about it, Amazon is a search problem where you wanna push results such that the expected value of the results pushed yield the highest expected value, something along the lines of: Expected Value (EV) of your product = [your sales price] x [your product's conversion rate in the past X days] x [some confidence level of said conversion rate] - [returns] + [whatever other Amz secret sauce] + [Amazon PPC]

Amazon can get people to pay for their eyeballs, swap some seller blackhat tactics for others, and more or less keep OK results. So that's Amazon's end.

As an established seller -- I know my product converts at X%, so as long as the math works out where I spend $Y/click, expect it to convert at X%, and my profit Z > Y * X it's what I do (and the tax I pay), and I move that up and down depending on my inventory situation. If possible, yes, I would pass some of that down to price raises as long as the market's willing to bear it, so I can make a minimum margin requirement off my Amazon channel (which is the lowest, compared to my D2C website or through offline B&M channels, but I do so because my biggest volume is on-Amazon).

As a customer... yeah the default search results are "good enough" for the 80-20 crowd; the convenience, ease-to-checkout, and 1-2 day shipping wins them over. As a "nerdy" customer who likes researching products to get the best one, I used to research via online reviews and reddit (most of which are gamified in their own ways)... but now I use AI (ChatGPT, *not* Amazon's Alexa Shopping because it's not great) and mostly call it a day.

Enshittification for everyone that comes into contact with a corporation run with only profit (and profit growth) in mind.

One would be tempted to think that doing things different and actually providing a good service for consumers, sellers, etc would be a multibillion dollar business, but somehow it seems like it isn't.

Prime is a waste of money. I find most stuff arrives in 2-3 days and its easy to spend the minimum to get free shipping.

This seems generally like the US corporate playbook. Create a product, monopolize it and milk the monopoly. SpaceX, Uber, Amazon, Stripe, Facebook, Google…

The amazon tax holds nothing to the credit card tax. Credit cards have been driving prices up for decades with their behind the scenes fees that are passed onto the customer. All for "convenience" of the right to buy something because now they have created a near mandatory purchasing system duopoly.

Whats going to be hilarious is if brick and mortar companies become popular again because of the painful U.I., scammy companies, and broken search of Amazon.

This is sad, but true. And true for other giant companies, not just for Amazon - Meta/Facebook is another good example.

What can we do about it? Not much. This is something that happens when in a "free" market you have a near monopoly, and the antitrust is too weak to even try to fine these companies.

One might think that there's a "conspiracy" of a few powerful people / billionaires, but I don't believe it it the case. Individuals are driven by results, profits, targets, metrics, etc... The company as a whole responds to shareholders, not the small retail one but large funds and such that own a significant stake in these companies. They want to make money. They lobby the government to make sure that quasi-monopolies like this one can go on undisturbed.

I don't blame Amazon. I think this is a limitation of the (supposedly) free-market society in which we live. By the way, it is not a free market when antitrust does not work, or when you need to bail-out banks, etc.

I admire and respect Seth Godin (I even met him once, years ago), and I would love to see if he had any idea of how to solve this.

Bravo!

See also: ads for apps in app stores.

These companies effectively monopolize app distribution on their platforms and then make discovery so poor that developers who try to sell apps in their stores must pay for ads in those same stores.

If you know the exact product you want, Amazon is great.

If you don't, it's absolutely horrible.

Is this different than the decades-only practice of grocery stores auctioning off all the eye-level shelf space to brands willing to pay for it?

> It leads to two perverse side effects. First, producers realize that if brand reputation matters less than a budget for clicks, they will shift to shoddy and cheap versions of their products so they have a bigger budget for clicks.

This assertion lacks evidence. An alternate hypothesis: if you tried to sell literal garbage on Amazon, poor reviews and a high return rate will be visible in the product itself. The ad will earn you a click-through to the product, but buyers will begin to back out instead of following through with a purchase. Ad purchases cannot overcome insufficient revenue - it won't be profitable long-term.

Yes, Amazon has a problem with vendors buying good reviews as well. It doesn't overcome a high number of poor reviews, or a high number of returns.

> And second, Amazon (and Google before it) have an incentive to make their organic search results worse–giving producers more incentive to buy more ads.

Reeks of a conspiracy theory. Most customers simply don't have the time or energy to research any more than the top handful of results. Only a rare person goes 10 pages deep into the search results. Organic search results will produce less traffic when people don't even look at them. But that's not evidence in and of itself that the organic search results were nerfed in some way.

I hate to remind people of the basic truth about modern Amazon, but here goes: the vast majority of the inventory is made in China and the exact same product can be found at a tiny, tiny fraction of the Amazon price on AliExpress and similar sites. The value that Amazon adds is their logistic network that can deliver to domestic US addresses in a day or two, compared to weeks. The difference in price between Amazon and AliExpress justifies sellers spending enormous sums on ads and review purchases, because even if they do sell garbage on Amazon, enough people bought it at such ridiculous margins that the seller can tear down the product with the bad reviews and high return rate and re-offer it under a new brand with the same ad and review purchase strategy and still make a profit. But the person to blame for that is not Amazon, and it's not the seller, it's the fool who decides to pay the ridiculous price compared to the AliExpress price.

Books are one of the categories where they aren't printed in China, they're not sold on AliExpress, and searching for "seth godin the knot" returns the actual correct listing as the first organic search result. So I'm not sure why the author brings his book up as evidence. He might do better by reminding his publisher that "selling on Amazon" is not a homogenous experience and they ought to reconsider flushing money down the drain on advertisements they don't need.

Amazon has the most useless search I know. Also, idk who clicks those 'Sponsored' results, but for me they are an automatic pass. But then again Amazon is such a scumbag company that uses its own brands as a weapon to make sellers pay to be visible.

cancelled our Prime membership a year ago (after nearly 10 years) and went from buying most non-food things on Amazon to occasionally buying small random items. We broke our addiction to 1 or 2-day shipping, and we're just fine.

It's gotten ridiculous in the last month with behavior I've never seen before. If I want to buy a specific book I type <author name> <title> into the search bar. The search bar even helps me complete the entry, and then a page shows with a choice of several books with my chosen book at the top.

Fine. Except now after one second, the whole page changes and then there's only one book on the page and it has nothing to do with the book I actually searched for.

So obviously they know about the book I want because they just showed it to me but then they make it disappear in favor of one I don't want but which I presume is one the publisher paid them to show me.

My workaround is to search on Amazon in a private tab so they don't know who I am. In that case the book I want shows up and I can click on it and get its URL and then paste it into the original Amazon window where I'm already logged in, and I can order it. Except I don't, because I'm so disgusted by this I go directly to the publisher's website and order it there.

This is ridiculous.

Amazon is throwing money on the floor with this behavior and they're probably just begging for a restraint of trade class-action lawsuit.

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> They know the best-reviewed, least-returned, best-priced model. The only purpose of the ads is to get you to pick an air fryer that isn’t that one

Thoughtless take. Say you've just invented a better looking, better functioning, cheaper air fryer. How do you expect to reach your first customers if not through ads? Sell it to your friends? That's even more invasive and annoying.

People's urge to rid the world of ads is similar to our urge to rid the world of "middlemen".

It's natural, and I get it (ads are annoying), but this is a forum where I expect people to think a little more deeply about the economics and second order effects of things.

Counterpoint: Amazon among the most favorable institutions in the US

https://harvardharrispoll.com/wp-content/uploads/2023/05/HHP...

Is this not the direct result of consumers being too lazy to price match and price discover? Amazon still has the ability to sort price: low to high. You also still have the ability to ask your friends and family what air fryer they purchased. If the average consumer just implicitly trusts Amazon such that they buy whatever shows up first, that’s not Amazon’s fault, that’s the consumer’s fault.

I am worried that we have become so bubble wrapped that even our shopping will need to be done by regulators.

Having small mini-pcs in my basement and a couple of Cloudflare tunnels and Tailscale has been awesome. Made me realize that I've gotten used to paying for software that is free because someone else was hosting. But now I host it and it's a way better experience. I'm not crazy about using Cloudflare, but so far it's been great. Having Postgres, rabbitMQ and Redis all running locally (and then realizing my traffic doesn't need a cache or a queue and just doing it all in Postgres) has been awesome.

> Amazon makes enough in search ad revenue to give every single one of their employees a $35,000 cash bonus and still have change left over.

As much as I'd like to agree with the article's point and am critical of Amazon etc etc, you lost me here. $35k cash bonus for every employee does not pass the smell test. I'm sure the delivery driver who famously needs to pee into a bottle because they can't afford a toilet break would love such a bonus, but they don't get one.

This makes me doubt everything in the article. Which is really a shame because such articles are necessary. But you need to keep your facts straight, otherwise you are completely disqualifying yourself from any serious discourse. At least for me.

There is enough to criticise with Amazon. Just keep to the things that are true.