WEBVTT - As Amazon Gets Bigger, Sellers Feel the Squeeze 0:00:00.880 --> 0:00:03.280 I wake up every morning thinking about that, should I 0:00:03.279 --> 0:00:06.800 sell on Amazon? But the reality is Amazon owns fifty 0:00:07.200 --> 0:00:09.080 of the online market share in the the United States. The 0:00:09.160 --> 0:00:12.799 customers are on Amazon. That's where they're at, And so 0:00:13.360 --> 0:00:15.520 was it a fantasy? Yeah? We just leave Amazon and 0:00:15.640 --> 0:00:19.239 be able to survive, But in reality we basically is 0:00:19.239 --> 0:00:24.040 a business. Jason Boys is an online retailer with nearly 0:00:24.040 --> 0:00:27.480 twenty years of experience. He runs a multimillion dollar business 0:00:27.560 --> 0:00:31.400 called Dasity, Inc. What he's describing here is the fundamental 0:00:31.440 --> 0:00:34.920 dilemma facing business owners who sell through Amazon. Most of 0:00:35.000 --> 0:00:37.640 us have used Amazon to buy something at some point, 0:00:37.960 --> 0:00:41.320 a book, a phone charger, a pair of socks, so 0:00:41.360 --> 0:00:44.280 we know it's fast and cheap and can be unbelievably 0:00:44.360 --> 0:00:48.199 convenient if you're the customer. What we don't realize is 0:00:48.240 --> 0:00:51.440 the extent to which Amazon uses access to its hundreds 0:00:51.479 --> 0:00:54.160 of millions of customers as leverage to raise the bar 0:00:54.240 --> 0:00:57.040 on people like Jason, pushing them to lower their prices, 0:00:57.240 --> 0:01:00.600 speed up delivery times, compete harder against other sellers for 0:01:00.640 --> 0:01:03.520 each and every sale. Amazon is projected to sell two 0:01:04.120 --> 0:01:07.679 eighty three billion dollars in merchandise this year. That's nearly 0:01:07.720 --> 0:01:10.640 half of all online spending in the US over the 0:01:10.680 --> 0:01:13.240 last few years. It took things a step further by 0:01:13.319 --> 0:01:17.680 launching its own line of Amazon branded products. Now, lawmakers 0:01:17.720 --> 0:01:21.640 like Senator Elizabeth Warren are calling out Amazon for this behavior, 0:01:21.720 --> 0:01:25.800 saying it's anti competitive. My view on this is it's 0:01:25.800 --> 0:01:30.959 a little like baseball. You can be an umpire a platform, 0:01:31.120 --> 0:01:35.119 or you can own teams. That's fine, but you can't 0:01:35.160 --> 0:01:38.560 be an umpire and own one of the teams that's 0:01:38.680 --> 0:01:41.880 in the game. So the principle here is break those 0:01:41.920 --> 0:01:45.399 apart and you can work for the platform part. You 0:01:45.440 --> 0:01:47.360 can work for one of the teams. That's a lot 0:01:47.400 --> 0:01:49.760 of fun. But if you work for one of the teams, 0:01:49.840 --> 0:01:56.360 you compete like every other team in America. By and large, 0:01:56.400 --> 0:01:59.800 businesses have scrambled to jump higher every time Amazon raised 0:01:59.840 --> 0:02:03.440 the are but privately, some sellers say they're being pushed 0:02:03.440 --> 0:02:06.400 to their limits. Not only is it insanely competitive to 0:02:06.400 --> 0:02:10.000 reach customers, but Jason and others like him are facing 0:02:10.040 --> 0:02:14.560 a competitor who's potentially unbeatable, and that's Amazon itself. That's 0:02:14.560 --> 0:02:17.280 a star. Contrast to what CEO Jeff Bezos wrote in 0:02:17.360 --> 0:02:20.280 an annual letter to shareholders just two weeks ago, where 0:02:20.320 --> 0:02:24.400 he boasted about how well these businesses are doing. Perhaps 0:02:24.400 --> 0:02:26.920 it's a sign that Amazon knows it might be seen 0:02:27.120 --> 0:02:30.200 as pushing the limits of its power. I'm brad Stone 0:02:30.560 --> 0:02:38.720 and I'm Spencer Soaper, and you're listening to decrypt it. Okay, Spencer, 0:02:38.720 --> 0:02:41.200 why don't you take it from here? A few weeks ago, 0:02:41.240 --> 0:02:43.400 I flew to Las Vegas for a convention called the 0:02:43.440 --> 0:02:50.160 prosper Show Time of Assistance Down. It's organized independently from Amazon, 0:02:50.240 --> 0:02:53.120 but the whole point of this event is about selling 0:02:53.200 --> 0:02:57.160 things on Amazon. It attracts about people. It's held at 0:02:57.200 --> 0:03:00.480 the Westgate Hotel, and even though these folks compete with 0:03:00.480 --> 0:03:03.680 each other on the platform, the vibe is really upbeaten friendly. 0:03:04.080 --> 0:03:06.960 Everyone's kind of sharing ideas and tricks of the trade. 0:03:07.320 --> 0:03:09.280 They want to know the best way to ship goods 0:03:09.280 --> 0:03:11.760 from China and what's the latest software to keep track 0:03:11.840 --> 0:03:20.280 of sales, tax obligations law. Just through I find this 0:03:20.320 --> 0:03:23.000 is a great place for talking to people in Amazon Land. 0:03:23.360 --> 0:03:25.480 It's where I connected with Jason Boyce, who you heard 0:03:25.480 --> 0:03:28.640 from at the start. He's a Marine Corps officer who 0:03:28.680 --> 0:03:32.120 turned an online entrepreneur. He recently moved to New Jersey. 0:03:32.280 --> 0:03:35.120 He's a pretty unassuming and relaxed guy. Kind of reminds 0:03:35.160 --> 0:03:37.480 me of a high school principle. We sat down at 0:03:37.480 --> 0:03:40.280 a table outside the hotel, which just happened to be 0:03:40.360 --> 0:03:45.760 right beneath the airport's white pages, right under the air airport. Yeah, 0:03:46.400 --> 0:03:50.200 should should be okay. Jason's in business with his brothers. 0:03:50.280 --> 0:03:52.840 They've been selling online since two thousand two. This is 0:03:52.960 --> 0:03:55.440 before Amazon was the big player it is today, so 0:03:55.560 --> 0:03:58.000 he's really seen this space evolved from its early days. 0:03:58.360 --> 0:04:00.960 They started out selling basketball hoops. This is a tough 0:04:01.040 --> 0:04:03.880 thing for online sales. You know, big heavy outdoor equipment. 0:04:03.920 --> 0:04:07.080 You see him backyards and driveways. Their website was called 0:04:07.160 --> 0:04:10.520 super Duper Hoops dot com and Jason's business was really 0:04:10.520 --> 0:04:12.520 starting to take off when he did a hundred thousand 0:04:12.560 --> 0:04:14.360 in the first year, a million the next year, two million. 0:04:14.400 --> 0:04:16.840 The next year of life was good. That was all basketballs, 0:04:16.920 --> 0:04:19.240 all basketball hoops, basketball hoops, and then we started selling 0:04:19.279 --> 0:04:23.200 home wreck equipment like foosball, billiard tables, air hockey tables, 0:04:23.279 --> 0:04:28.560 those kinds of products as well. In the early days, 0:04:28.640 --> 0:04:31.359 Jason would buy add space on search engines that directed 0:04:31.360 --> 0:04:34.240 people to his website. Then once someone made a purchase, 0:04:34.400 --> 0:04:37.240 he used a method called drop shipping. This means that 0:04:37.480 --> 0:04:39.960 he doesn't buy any inventory in advance. He waits for 0:04:40.000 --> 0:04:42.720 a customer order to come in, and then the manufacturer 0:04:42.800 --> 0:04:45.560 sends the basketball hoops straight to the customer. This is 0:04:45.600 --> 0:04:47.720 a low cost way to start a business because you 0:04:47.800 --> 0:04:50.640 don't have to buy a lot of inventory upfront. Then 0:04:50.640 --> 0:04:53.240 a couple of years later, around two thousand four, one 0:04:53.279 --> 0:04:58.400 of Jason's brothers got a call from Amazon. People are 0:04:58.400 --> 0:05:00.000 always floored when I tell them, we actually got a 0:05:00.000 --> 0:05:02.320 phone call from Amazon asking us to sell our products 0:05:02.360 --> 0:05:05.560 on their website. And uh, we immediately jumped at the 0:05:05.640 --> 0:05:09.400 opportunity and we are hoops were selling on Amazon before 0:05:09.400 --> 0:05:12.320 Amazon themselves were selling basketball hoops, so it was right 0:05:12.320 --> 0:05:14.520 at their very early days of the sports and outdoors category. 0:05:14.960 --> 0:05:17.800 So Jason's brother didn't think much of the call from Amazon. 0:05:18.200 --> 0:05:20.080 He even waited until the end of the day to 0:05:20.240 --> 0:05:22.880 tell the others. But when Jason heard, he thought, what 0:05:23.360 --> 0:05:26.600 Amazon called, we have to do this, and so they did. 0:05:26.880 --> 0:05:29.600 Business was good. There was like no competition. We were 0:05:29.680 --> 0:05:32.680 making really good margins. We didn't have to carry any inventory. 0:05:32.760 --> 0:05:35.520 It was all being drop shipped, and uh, life was 0:05:35.600 --> 0:05:38.920 really good. It was great. We loved Amazon back then. 0:05:40.200 --> 0:05:43.159 Jason's laughing because selling on Amazon has changed a lot 0:05:43.360 --> 0:05:46.360 in the past fifteen years. We have to remember that 0:05:46.400 --> 0:05:48.320 he started the dot com boom when they were all 0:05:48.440 --> 0:05:51.599 kinds of generic domain names like drug store dot com, 0:05:51.760 --> 0:05:54.960 soap dot com, diapers dot com. At this time, Amazon 0:05:55.080 --> 0:05:58.119 was trying to expand beyond books and movies. It needed 0:05:58.160 --> 0:06:00.760 sellers like Jason too, lore more show operas because it 0:06:00.839 --> 0:06:02.920 wanted to be an online version of a big box 0:06:02.960 --> 0:06:05.880 store like Walmarter Target. But the honeymoon of those early 0:06:05.960 --> 0:06:08.680 years didn't last forever. We were lucky to be one 0:06:08.680 --> 0:06:10.480 of the first on there because we had a nice 0:06:10.560 --> 0:06:12.960 run of sales, But then because it was so easy, 0:06:13.400 --> 0:06:15.960 especially compared to eBay, folks from me By started coming 0:06:16.000 --> 0:06:19.159 over in droves and started listing, and really, at that time, 0:06:19.320 --> 0:06:21.800 their algorithm was very basic. One of the only ways 0:06:21.800 --> 0:06:23.400 you could get the sales if you had the lowest price. 0:06:23.839 --> 0:06:26.560 So what happens when there's ten sellers selling the same 0:06:26.640 --> 0:06:28.360 thing and the only way you can get the sales 0:06:28.400 --> 0:06:32.000 if you lower the price, the margins disappear. What Jason's 0:06:32.040 --> 0:06:34.599 describing here was a big learning curve for a lot 0:06:34.680 --> 0:06:37.880 of Amazon sellers. If you're selling a generic product that 0:06:37.920 --> 0:06:40.360 a lot of other people can also get, you're gonna 0:06:40.400 --> 0:06:44.279 face extreme price competition on Amazon. It's the point where 0:06:44.320 --> 0:06:48.040 your business could be unsustainable, especially because within a few 0:06:48.160 --> 0:06:51.000 years Amazon had millions of businesses selling on the platform. 0:06:51.240 --> 0:06:53.520 So in order to survive, Jason and a lot of 0:06:53.560 --> 0:06:56.440 other sellers they started designing their own unique products that 0:06:56.520 --> 0:06:58.560 no one else had. Folks in the business called this 0:06:58.640 --> 0:07:01.719 private label, and Jason's private label brand is called Harville. 0:07:02.160 --> 0:07:03.880 Is the brand all basketball hoops? Or do you have 0:07:03.920 --> 0:07:06.240 a variety of products? Actually, we don't even sell basketballs 0:07:06.279 --> 0:07:08.200 anymore because they have you become so commoditized. It's hard 0:07:08.200 --> 0:07:10.920 to make money. But we we sell mostly home fitness 0:07:10.960 --> 0:07:15.000 and home rec equipment. Now they started making bacchi ball sets, 0:07:15.240 --> 0:07:19.040 foosball tables, air hockey tables. The business continue to grow. 0:07:19.960 --> 0:07:22.800 Jason said his Marine Corps training actually came in pretty handy, 0:07:22.960 --> 0:07:25.360 since the Marines teach you to adapt and adjust and 0:07:25.480 --> 0:07:29.000 use resources wisely. Today they have about ten people who 0:07:29.040 --> 0:07:31.840 work from home in the US and another eighteen people 0:07:31.880 --> 0:07:35.160 in an office in Manila. Those people mostly do data 0:07:35.360 --> 0:07:38.200 entry graphic design. They work a lot with the images. 0:07:38.680 --> 0:07:40.960 Images are a really important part of selling on Amazon, 0:07:41.080 --> 0:07:42.960 since you know people aren't standing in front of the 0:07:43.000 --> 0:07:45.800 product before they buy it. Every year, Jason sells tens 0:07:45.840 --> 0:07:48.840 of millions of dollars in inventory on Amazon, but that 0:07:48.960 --> 0:07:51.920 success has a price. A big hazard of doing business 0:07:51.960 --> 0:07:54.920 on Amazon is that changes can come quickly without warning, 0:07:55.160 --> 0:07:58.360 meaning what worked yesterday suddenly doesn't work today. That gives 0:07:58.360 --> 0:08:02.200 sellers a lot of indigestion. What always makes me crazy 0:08:02.240 --> 0:08:04.880 about Amazon is I know that they're making these changes 0:08:04.960 --> 0:08:07.160 because they're doing what is best for their customer. This 0:08:07.400 --> 0:08:10.160 change made the customer experience for an Amazon customer better. 0:08:10.480 --> 0:08:12.880 I don't dispute that, but what would have been nice 0:08:13.440 --> 0:08:16.080 is an email six months earlier saying, Hey, we're gonna 0:08:16.120 --> 0:08:18.480 make this change you guys. Metrics are kind of in 0:08:18.520 --> 0:08:20.600 the gray area. You might want to change a business model. 0:08:21.400 --> 0:08:24.600 It's really there's no communication. They just make these changes, 0:08:25.520 --> 0:08:27.800 and it could it can put people out of business. 0:08:28.360 --> 0:08:30.120 I asked Jason to give me an example of what 0:08:30.240 --> 0:08:33.000 he meant by that. He said, several years ago, Amazon 0:08:33.120 --> 0:08:36.319 started pushing sellers to deliver their goods more quickly. So 0:08:36.679 --> 0:08:39.200 it was rewarding sellers who could manage two days shipment 0:08:39.600 --> 0:08:42.800 and punishing sellers for delays or mistakes on orders. And 0:08:42.880 --> 0:08:46.520 this at Jason really hard, mainly because he's selling basketball hoops, 0:08:46.520 --> 0:08:49.000 which are so large and heavy. It's not like, you know, 0:08:49.080 --> 0:08:51.200 you can just put in a mailbox like a phone charger. 0:08:52.280 --> 0:08:54.880 As a result, he ended up changing his entire business model. 0:08:55.240 --> 0:08:57.640 My life got infinitely more complicated when I had to 0:08:57.679 --> 0:09:00.839 start inventoring these things. Myself was like a big That 0:09:00.920 --> 0:09:03.160 was like the biggest change that affected us. We had 0:09:03.200 --> 0:09:05.079 to cut millions of dollars in revenue from our drop 0:09:05.120 --> 0:09:08.880 shippers at that moment. That was in that And so 0:09:09.000 --> 0:09:10.720 did you have to shift from a drop ship model 0:09:10.760 --> 0:09:12.160 to a different new model. We did. We had to 0:09:12.160 --> 0:09:14.520 ship to an all inventory model. Up to this point, 0:09:14.840 --> 0:09:17.960 every time Amazon made a change, sellers like Jason would 0:09:18.000 --> 0:09:21.199 race to adjust. Sellers understood that even though it's tough 0:09:21.240 --> 0:09:23.320 for them to meet the new standards, the changes were 0:09:23.400 --> 0:09:26.199 good for customers, which is good for Amazon and in 0:09:26.280 --> 0:09:28.920 turn good for their businesses. But some of Amazon's more 0:09:28.960 --> 0:09:32.040 recent changes have made sellers doubt that idea, since the 0:09:32.120 --> 0:09:35.000 costs primarily fall to them and the gains go to Amazon. 0:09:35.440 --> 0:09:38.640 One change that Jason still struggles with is Amazon's decision 0:09:38.720 --> 0:09:42.160 to introduce advertising. The day that they launched sponsored ads, 0:09:42.480 --> 0:09:47.199 I cried in my pillow that night, I should explain here. 0:09:47.679 --> 0:09:51.080 Jason so upset because he's seen this movie before. Google 0:09:51.200 --> 0:09:53.959 changed its system before Amazon did and started charging for 0:09:54.080 --> 0:09:56.640 results to appear at the top of the results page. 0:09:57.280 --> 0:09:59.600 What this means is this, if you go to Google 0:09:59.679 --> 0:10:02.920 and works for something like weather or traffic conditions, you'll 0:10:02.920 --> 0:10:06.439 get mostly what's called organic results, sites like weather dot 0:10:06.480 --> 0:10:09.560 com that are visited frequently and provide the information you want. 0:10:09.880 --> 0:10:13.040 But if you search for a product like black dress socks, 0:10:13.440 --> 0:10:16.319 the top of the page will be sponsored results businesses 0:10:16.360 --> 0:10:19.240 that paid to be there rather than business is known 0:10:19.320 --> 0:10:21.719 to have what you're looking for. Then when people see 0:10:21.760 --> 0:10:24.080 your ads and click to your site, that improves your 0:10:24.160 --> 0:10:27.360 organic ranking, So the two are intertwined. When Google did this, 0:10:27.559 --> 0:10:30.920 the price for keyword searches got bit up higher and higher, because, 0:10:31.000 --> 0:10:33.040 let's face it, nobody looks at page seven of the 0:10:33.080 --> 0:10:35.800 search results, so it is essential to have high search 0:10:35.880 --> 0:10:38.480 placement to get noticed. And that's what started happening on 0:10:38.559 --> 0:10:41.160 Amazon too. Initially, the costs were cheap, and we're like, 0:10:41.200 --> 0:10:43.199 we're not doing that. We're not going to pay them 0:10:43.559 --> 0:10:46.320 expercent for every sale, and on top of that drive 0:10:46.400 --> 0:10:49.439 traffic because we've got these great organic listings. But then 0:10:50.640 --> 0:10:53.080 they started to move the top two thirds the above 0:10:53.200 --> 0:10:55.240 the fold section. When you go on a desktop or 0:10:55.280 --> 0:10:58.080 your mobile, the whole top of the page is all 0:10:58.160 --> 0:11:00.719 ads now, so you're organic rank is you have to 0:11:00.760 --> 0:11:03.520 scroll to get to the organic rank product. And so 0:11:04.559 --> 0:11:06.560 that's something I have a real problem with. Now paying 0:11:06.600 --> 0:11:10.000 for ads can significantly eat into a seller's margins. All this, 0:11:10.200 --> 0:11:12.719 Jason says, means it's now a lot more expensive to 0:11:12.800 --> 0:11:16.720 be a seller on Amazon. So I think that there's 0:11:17.160 --> 0:11:20.720 one of the side effects of this sponsored ads program 0:11:21.480 --> 0:11:24.080 is the prices eventually will have to increase on Amazon. 0:11:24.160 --> 0:11:26.800 And if there's one thing that keeps Mr Bezos up 0:11:26.840 --> 0:11:28.920 at night is that he wakes up one day and 0:11:28.960 --> 0:11:31.599 he's not the lowest price anymore. That's that's gonna be 0:11:31.640 --> 0:11:33.920 a problem for them. I think it's because of that 0:11:34.000 --> 0:11:36.319 bidding process, because of the way that it works. I 0:11:36.440 --> 0:11:38.280 think that prices are going to have to go up 0:11:38.280 --> 0:11:40.959 to accommodate those extra fees. Have you had to raise 0:11:41.000 --> 0:11:44.800 prices on anything we have, We've had to. We've had to. 0:11:47.760 --> 0:11:49.880 The big thing about the AD program is it means 0:11:50.040 --> 0:11:53.280 Amazon makes more money from every sale. But this isn't 0:11:53.320 --> 0:11:56.400 the only change Amazon has made like that. It's also 0:11:56.480 --> 0:12:00.480 been developing hundreds of its own Amazon branded products. You 0:12:00.520 --> 0:12:05.040 can get Amazon batteries, Amazon baby wipes, Amazon genes, Amazon 0:12:05.160 --> 0:12:08.559 dining room tables, and even an Amazon Basics Botchy ball 0:12:08.640 --> 0:12:11.400 set that costs fifteen dollars less than the one Jason sells. 0:12:11.880 --> 0:12:15.040 Amazon can see all the data about what's popular, what sells, 0:12:15.360 --> 0:12:18.120 which kinds of listings do best. The company gathers an 0:12:18.120 --> 0:12:21.839 incredible amount of detailed information about customer behavior, and it 0:12:21.960 --> 0:12:24.520 uses that data when making decisions about how it designs 0:12:24.559 --> 0:12:27.880 and prices its products. Sellers like Jason can see some, 0:12:28.320 --> 0:12:31.000 but definitely not all, of that data, and that's why 0:12:31.120 --> 0:12:34.040 this change is what frustrates Jason the most. Look, I 0:12:34.160 --> 0:12:36.400 understand that they're a retailer, but I've always had sort 0:12:36.440 --> 0:12:40.280 of problem with them having a marketplace with all that 0:12:40.440 --> 0:12:44.280 data that that I'm dependent on for my business to sell, 0:12:44.640 --> 0:12:46.240 and that they can then take that data and launch 0:12:46.240 --> 0:12:49.800 their own products. I have kind of have kind of 0:12:49.800 --> 0:12:52.320 an issue with that. This question is at the heart 0:12:52.440 --> 0:12:55.599 of the debate over regulating big tech platforms. Is it 0:12:55.760 --> 0:12:58.480 fair for companies like Amazon to own and control the 0:12:58.559 --> 0:13:01.920 marketplace where merchants like Jason sell products and then turn 0:13:02.000 --> 0:13:04.800 around and sell the very same things, oftentimes giving the 0:13:04.840 --> 0:13:08.360 Amazon brands more visibility. Here's what Jason said, Do I 0:13:08.400 --> 0:13:10.040 think they should be broken up? I don't know. That's 0:13:10.160 --> 0:13:12.400 that's a question for the lawyers, But I sure makes 0:13:12.400 --> 0:13:15.400 a lot of common sense for me that if you're 0:13:15.400 --> 0:13:17.719 going to have a marketplace, that your purpose is to 0:13:17.760 --> 0:13:20.959 help your sellers and your customers, and you shouldn't be 0:13:20.960 --> 0:13:22.719 able to piggyback off the hard work and labor of 0:13:22.800 --> 0:13:27.120 your sellers to beat them. I think just a general 0:13:27.640 --> 0:13:30.599 part of fairness in my mind. Maybe that's unrealistic, but 0:13:31.240 --> 0:13:34.199 they just have so much control of power and data 0:13:34.559 --> 0:13:37.599 and or or I got another alternative, share with me 0:13:37.679 --> 0:13:39.800 all the data you have so that I can also 0:13:40.480 --> 0:13:42.680 use that to my advantage so that I can compete 0:13:42.679 --> 0:13:46.160 better with you. UM So, if you're gonna use my data, 0:13:46.360 --> 0:13:50.000 I want to see it, all of it. After almost 0:13:50.040 --> 0:13:53.280 twenty years and online retail, Jason is in the process 0:13:53.320 --> 0:13:56.280 of selling his Amazon business. It still makes tens of 0:13:56.320 --> 0:13:59.280 millions of dollars each year in sales, but he's decided 0:13:59.320 --> 0:14:02.520 he'd rather are a consulting business called Avenue seven Media. 0:14:03.240 --> 0:14:06.160 He's going to focus on helping other people selling Amazon. 0:14:12.880 --> 0:14:14.960 So Spencer, it sounds like there's at least to one 0:14:15.000 --> 0:14:17.480 Amazon merchant out there that's ready to donate to the 0:14:17.520 --> 0:14:21.200 Elizabeth Warren presidential campaign. On the other hand, a couple 0:14:21.280 --> 0:14:24.600 of weeks ago, after Elizabeth warren't unveiled her plans to 0:14:24.680 --> 0:14:27.040 break up Big Tech, Jeff Bezos wrote a letter to 0:14:27.080 --> 0:14:29.680 shareholders in which he essentially gave us his rebuttal to 0:14:29.720 --> 0:14:33.200 her plan. According to Bezos, he said that third party 0:14:33.280 --> 0:14:36.280 businesses who sell in the platform are doing really well. 0:14:36.920 --> 0:14:39.240 Do you think he's taking into account some of the 0:14:39.360 --> 0:14:42.080 grievances of folks like Jason. Yeah. And I don't think 0:14:42.160 --> 0:14:44.720 that any of the merchants are disagreeing with anything that 0:14:44.800 --> 0:14:47.640 he said in that shareholder letter. They freely acknowledge that, 0:14:47.960 --> 0:14:49.480 you know, many of them have been able to build 0:14:49.600 --> 0:14:53.720 multimillion dollar businesses, you know, virtually overnight thanks to access 0:14:53.760 --> 0:14:56.520 to Amazon and its customers. The main point they're making 0:14:56.640 --> 0:14:59.160 is at over the years, as Amazon has grown and 0:14:59.240 --> 0:15:01.840 its power has grown, it can really exercise its leverage 0:15:01.920 --> 0:15:04.160 over them, and that when we look at that, you know, 0:15:04.240 --> 0:15:07.240 fifty eight percent of all the sales coming from these merchants, 0:15:07.640 --> 0:15:09.640 Amazon is taking a bigger and bigger bite out of 0:15:09.680 --> 0:15:11.920 each and every one of those sales. You know. What 0:15:12.040 --> 0:15:14.520 Amazon will always say, though, of course, is that it's 0:15:14.680 --> 0:15:17.840 very customer focused. And your profile of Jason I thought 0:15:18.000 --> 0:15:20.400 was interesting. You know, the business that he and his 0:15:20.520 --> 0:15:24.600 brothers run started almost as retail arbitrage right there, drop 0:15:24.800 --> 0:15:28.960 shipping from a factory probably in China. Eventually they're slapping 0:15:29.000 --> 0:15:32.160 their brand on it. Um they're basically inserting a margin 0:15:32.320 --> 0:15:36.720 between the factory and the customer and the Amazon private 0:15:36.840 --> 0:15:38.800 label business. I mean, in some ways you can look 0:15:38.840 --> 0:15:41.320 at it as a sort of you know, increasing the 0:15:41.400 --> 0:15:44.480 efficiency of the supply chain. They're going to the factories 0:15:44.520 --> 0:15:46.920 in China, maybe even the same factories that Jason and 0:15:47.040 --> 0:15:49.960 his brothers used, and saying you could basically sell directly 0:15:50.000 --> 0:15:51.840 to the customer and we're just going to put an 0:15:51.920 --> 0:15:55.280 Amazon brand on it. And of course Amazon would call 0:15:55.320 --> 0:15:58.520 that being customer focused and helping to to lower the price, 0:15:58.920 --> 0:16:00.440 and so I guess you know, in some of these 0:16:00.560 --> 0:16:02.880 changes to its business model, some of the things that 0:16:02.920 --> 0:16:05.960 have made Jason and his brother's lives really hard. I mean, 0:16:06.040 --> 0:16:08.120 can we honestly say that that is in the service 0:16:08.160 --> 0:16:12.240 of a better customer experience? Yeah, the private label is 0:16:12.280 --> 0:16:14.840 a good point, and it's something that other retailers have 0:16:14.920 --> 0:16:17.640 been doing for decades. Right. You see private label products 0:16:17.680 --> 0:16:19.560 in Walmart, you see them in Target, you see them 0:16:19.600 --> 0:16:23.040 in supermarkets. And probably the most recent change that the 0:16:23.240 --> 0:16:26.280 sellers have a beef with is the advertising, because that's 0:16:26.320 --> 0:16:29.480 the one where Okay, it's costing me more to sell 0:16:29.560 --> 0:16:31.880 on Amazon. Amazon is getting more of the money from 0:16:31.920 --> 0:16:35.440 each sale. But where is the consumer benefit in having 0:16:35.600 --> 0:16:38.320 the prominence go to the highest bidder as opposed to 0:16:38.360 --> 0:16:41.240 the best product at the best price. Amazon did give 0:16:41.360 --> 0:16:43.800 us a statement responding to that point. It said the 0:16:43.840 --> 0:16:47.360 company's first priority with advertising is for the experience to 0:16:47.400 --> 0:16:50.360 be useful and relevant to the customer. It also said 0:16:50.440 --> 0:16:55.200 advertiser and customer interests are inherently aligned. Now, Spencer, you 0:16:55.320 --> 0:16:57.160 talked to a lot of sellers of that conference, in 0:16:57.200 --> 0:17:00.120 addition to Jason. What was the general feel and did 0:17:00.200 --> 0:17:02.400 they agree with Jason, and did it seem like sellers 0:17:02.480 --> 0:17:04.640 were reaching a turning point as it relates to Amazon. 0:17:05.040 --> 0:17:08.560 You know, sellers are still very devoted to Amazon. They 0:17:08.640 --> 0:17:10.600 kind of have an attitude of you know that which 0:17:10.640 --> 0:17:13.560 does not kill us, makes us stronger. But the frustration 0:17:13.680 --> 0:17:16.000 is real that Amazon is taking more and more of 0:17:16.040 --> 0:17:18.560 their money on every sale. So let's talk about that. 0:17:18.960 --> 0:17:21.679 Did you get into it with any sellers about how 0:17:21.720 --> 0:17:24.480 their costs have gone up? Like? How much does Amazon 0:17:24.560 --> 0:17:26.920 take out of every sale? I asked one seller to 0:17:26.960 --> 0:17:29.119 break that down for me. His name is Chad Ruben. 0:17:29.200 --> 0:17:31.480 He does about twelve million dollars in sales a year, 0:17:31.800 --> 0:17:34.560 mostly vacuum cleaner parts and accessories, and he does most 0:17:34.600 --> 0:17:37.639 of his business on Amazon. Can you can you tell 0:17:37.760 --> 0:17:40.720 us at all or even roughly what the erosion was 0:17:40.800 --> 0:17:42.760 in in your in your margins, or even like a 0:17:43.520 --> 0:17:45.720 percentage you used to give Amazon, you know, when you 0:17:45.800 --> 0:17:48.920 first got started in what you give them now? Yeah, 0:17:48.960 --> 0:17:52.080 I mean if you look at FBA in itself, that 0:17:52.440 --> 0:17:55.280 you're looking at seven percent, then you tack on the 0:17:55.440 --> 0:17:59.800 fifteen percent commission fee, and then you tack on uh 0:18:00.640 --> 0:18:05.480 let cost back in the envelope. Math that a purchase 0:18:05.560 --> 0:18:08.240 through Amazon, and that's not even including the cost of 0:18:08.280 --> 0:18:11.119 the good soul. So that clip is full of acronyms, 0:18:11.200 --> 0:18:14.000 So let's try to translate it to English. If you 0:18:14.080 --> 0:18:17.200 sell something simply on Amazon's site, and you know that's 0:18:17.240 --> 0:18:19.680 all that Amazon does is put your product on their site, 0:18:19.720 --> 0:18:22.520 you pay them a fifteen percent commission. The seven percent 0:18:22.680 --> 0:18:25.640 for f B A is what's called fulfillment by Amazon. 0:18:25.760 --> 0:18:29.600 That's where you're actually sending inventory to Amazon warehouses. They 0:18:29.720 --> 0:18:32.280 store it for you, they pack it and ship it 0:18:32.440 --> 0:18:36.200 when an order comes in. In the headline number Chad 0:18:36.240 --> 0:18:41.400 spends on advertising, so that all adds up to to Amazon, 0:18:41.960 --> 0:18:43.480 and then you have to consider the cost of the 0:18:43.520 --> 0:18:46.440 product itself, which the merchant bears along with the cost 0:18:46.520 --> 0:18:49.119 of their own business. So we can compare that to 0:18:49.280 --> 0:18:52.119 other tech platforms. Apple of course takes a thirty percent 0:18:52.200 --> 0:18:54.359 commission for all sales made through the app store, and 0:18:54.600 --> 0:18:57.560 companies like Spotify have complained about that because they think 0:18:57.600 --> 0:19:00.879 it's too high. Uber takes around twenty sent to be tried, 0:19:01.240 --> 0:19:04.400 and we know how rocky that their relationship is with drivers. These, 0:19:04.480 --> 0:19:06.760 of course are an apples to Apples comparisons, but it 0:19:06.840 --> 0:19:10.280 does show that Amazon's fort take great is really high. 0:19:10.320 --> 0:19:13.960 As the spencer, how does that compare to other relationships 0:19:14.040 --> 0:19:18.000 between retailers and their suppliers. Yet, it's hard to compare, 0:19:18.080 --> 0:19:20.280 like you said, the the apples to apples, because if 0:19:20.280 --> 0:19:22.199 you think of a site like eBay where they're more 0:19:22.320 --> 0:19:25.480 hands off in terms of their you know, logistics, where 0:19:25.520 --> 0:19:28.800 Amazon will actually store the products for you. But the 0:19:29.119 --> 0:19:32.240 main thing is that there's really no alternative that these 0:19:32.280 --> 0:19:34.880 sellers have to pay what Amazon charges because there's there's 0:19:34.880 --> 0:19:37.840 really nowhere else to go. They already sell on these 0:19:37.880 --> 0:19:40.920 sites like eBay and Walmart and you know Jet before 0:19:40.960 --> 0:19:43.920 Walmart purchased it. They thought this would be helpful initially 0:19:44.000 --> 0:19:46.560 and make them less rely ont on Amazon, but they're 0:19:46.680 --> 0:19:49.280 they're learning the opposite is happening right and in large 0:19:49.320 --> 0:19:52.320 parts of the world, Amazon is the best option for 0:19:52.440 --> 0:19:56.320 selling online. So is Amazon reaching the limit of how 0:19:56.400 --> 0:19:59.320 far they can push sellers? It's a good question. I 0:19:59.400 --> 0:20:01.840 talked to another a seller named Brat Howard. He's also 0:20:01.920 --> 0:20:04.400 been selling on Amazon for about twenty years. He told 0:20:04.400 --> 0:20:07.399 me about a time when sellers revolted against Amazon. So 0:20:07.600 --> 0:20:11.240 Amazon invited a bunch of brands to Seattle and Apple 0:20:11.359 --> 0:20:13.280 and Disney were there, and there were hundreds of them 0:20:13.320 --> 0:20:16.119 gathered in a in a big conference room, and what 0:20:16.560 --> 0:20:18.640 was meant to be kind of a make nice meeting 0:20:18.720 --> 0:20:20.920 turned out to this big venting session with all of 0:20:20.960 --> 0:20:24.439 these brands complaining about fake things on Amazon with their 0:20:24.520 --> 0:20:26.920 names on it. And when Amazon tried to talk to 0:20:27.000 --> 0:20:29.959 the sellers about the problem, things really escalated. I mean, 0:20:30.000 --> 0:20:32.080 I've never seen anything like it. Everyone in the room 0:20:32.160 --> 0:20:33.960 was raising their hands, screaming at the guy and saying, 0:20:34.000 --> 0:20:36.800 are listening to the hijacked brands are getting crushed? Your 0:20:36.800 --> 0:20:40.359