Monday, April 29, 2019

eBay v. Amazon



Amazon's business model is predicated on addiction.


The auction for the camper is going along as predicted.  There are still a couple of days left, and the pattern of previous vehicle auctions is repeated.   I had a lot of people who were eager early on, some coming to see it in person.   Others peppered me with questions, most of which could have been answered if they bothered to read the extensive listing or watch the nearly hour of videos I linked to.   No one can say I didn't disclose the condition of the camper!

Most of the tire-kickers were outbid by this point, however.  And the highest bidders are people who never contacted me or came to see it.   This is typical of what happens.  One person who came to see it revealed himself to be a car dealer.  He asked me to "end the auction early" and said, "I could get you the cash right now!" (as if somehow that was better than a check three days from now) and when I said I wasn't going to end the auction early, he quickly got into his car and left.

That is the way a lot of the world works, it seems.    Some people try to sell things and be deceptive about the condition of them and try to snooker buyers.    Some buyers try to play upon the fears of the seller ("you'll never get a better price than this!") and snag things on the cheap, often for resale.

But, believe it or not, there are a host of people out there who make a decent living just by being straightforward and direct - by being honest, or at least as honest as human beings can be.   You find these sort of folks and you hold them close to your breast.

They exist, you just have to take the time to look for them.  Like low-mileage late-model used cars from the original owner, they are there, but you have to make the effort to find them.   Most people can't be bothered - or they think the loud ads, slick marketing, and shiny plastic fascia of a "successful business" are the signs of trustworthiness.   Why eat in some "cafe" run by some sketchy foreigners, when you know what to expect at T.G.I. McTchotchke's?  Based upon appearances alone, it would appear that McDonald's is the best restaurant on the planet.   Appearances can be deceiving.

But getting back to eBay, a reader writes that they don't even go there anymore because the auction format is confusing.  They shop exclusively on Amazon.   Ding!  Another Amazon victim.    Way back in the day, when I started this blog, I was quite enamored of Amazon, as their prices were indeed the best on the Internet.   Why bother looking elsewhere?    eBay's auction format was indeed tiresome and confusing.  Who wants to wait seven days to find out if they bought a box of light bulbs or not?

Of course, back then, Amazon was hemorrhaging cash - the business model of silicon valley, which is more software than silicon today (and companies like Amazon are not even headquartered there!).  You "burn" though capital to establish a critical mass of users - who then become uncritical about pricing.    Once they are in the habit - a term of addiction - you can then slowly raise prices and they won't notice.

Uber is hoping to do this - put the taxi companies (and Lyft) out of business and acquire a critical mass of users.   Once they are established as the dominate taxi service (and that is all it is - an unlicensed and unregulated taxi service - why is that a good thing again?  Why is it "tech"?) they can then raise prices with a near-monopoly market share.   That's their hope, anyway.  History has shown that monopolies rarely last more than a few years, a decade or two at most, before they collapse.

I stopped shopping on Amazon a year or so ago.   Oh, sure, I still buy things there occasionally, but I also shop the rest of the Internet, and most of the time I find what I want at a better price or the same price as Amazon.    I tried their "Prime" service, but didn't think it was all that great (and I didn't pay for it, either).    Free shipping is the new norm, and I don't mind waiting a day or two for a lawnmower part or a fiberglass rock to cover my sewer cleanout (on order from Lowe's).  And Prime TV was just a bust.

But others are addicted to Amazon - they sign up for Prime and they compulsively shop online for electronic trinkets and do-dads, only to have them swiped off their front porch by "Porch Pirates".   When you have a stack of three or four Amazon boxes on your front porch every week, well, you probably deserve and need "porch pirates" to keep you from becoming a hoarder.   Seriously, these are the same people living "paycheck to paycheck" but yet have a smart thermostat, smart doorbell, and an "Alexa" or whatever smart speaker - and cameras galore all over their house to upload surveillance video to the Internet to catch the thieves who are stealing all their precious electronic collectibles.

But I digress.

Since I started this blog, eBay has changed dramatically.   Oh, sure, they still do auctions, and for things like a car or a collectible, these are not bad formats.   But I think the majority of stuff sold on eBay these days is just sold at a fixed price.   eBay has morphed into more of a platform for retailers to sell, much as Amazon is also a platform for retailers (other than Amazon) to sell things.   The difference is, of course, eBay isn't competing with its own retailers, but rather just a platform.

Amazon's prices have slowly ratcheted up over the years, and despite their reputation as having "everything" I find their selection less than optimal.  Things like car parts and camper parts are there, but the selection and variety is limited.   For specialty items like that, car and camper parts sites are still the best option in terms of getting the right stuff and the best price.  Amazon is more of a place to buy crappy junk you don't really need or want - but are compulsively addicted to "Buy Now" with one-click ordering.

Setting up an eCommerce site isn't hard, and it is often easier for the user to just go to the manufacturer's site to buy things - at the same price as reseller sites.   I recently bought some accessories for the truck from Weathertech (floor mats, sun shades, and crap like that).   It was far easier to buy these on their own site than it was to try to buy them on Amazon.

Of course, there is price-fixing.  I noted years ago that when you try to find Merrill sneakers online, the prices are remarkably the same across all the different sales platforms.  Similarly, when we bought our truck tonneau cover, the price was the same from online retailers, the factory website, Amazon, and the local truck accessory store - who would install it for the same price the others would charge for shipping it in a box to my house.   So it made sense to use the local truck accessory store.

Companies are doing this - forcing resellers to stick to manufacturer's suggested retail prices - as a means of protecting their retail network.   If people could cut prices on the truck tonneau cover, for example, customers would go to the local brick-and-mortar store to see a demonstration and "feel the goods" and then go home and order online.   Brick and mortar isn't dead, when wholesalers demand that retailers stick to price agreements, and retailers are not loaded up with debt from "Private Equity" firms who take them private, load them up with debt, and then sell the companies back to the unsuspecting public.  Whether such price-fixing agreements are legal or not, remains to be seen.

Ordering from the manufacturer has its advantages.  I recently ordered new awning canvas for the camper and it arrived 5" too narrow.   They agreed to make a new canvas and ship it to me (I have yet to receive it, but it is scheduled for delivery tomorrow).   I am not sure how that would have worked out buying from an eBay or Amazon middleman who wasn't even familiar with the product or its use.

Low-cost resellers can be a great place to buy things, but a lousy place for service.   Years ago we bought a Toshiba laptop at a law firm I worked at, for litigation.   We bought from one of these "Crazy Eddie" kind of places in New York City.   Back then, they had these full-page black-and-white ads with lots of tiny boxes listing items for sale - the Internet was in its infancy.  The place was run by Hasidic Jews, who I guess had some religious objection to using computers.  When I called to ask about an order, he had to go to a card file catalog to look it up.  "I just sell these things, I don't use them!" he said.  He had the best prices, but I could not ask him question one about features or operability of the product. 

Sometimes the lowest price isn't always the best deal - which is something you notice when shopping at Wal-Mart or the wholesale club.   Yes, maybe they have cheap computers and televisions, but you had better know what you want and what the features mean, because the kids working there usually have no clue.

But getting back to eBay, it would appear that eBay has a far lower overhead charge to retailers, as the really low-price retailers advertise there, and not on Amazon.   I've bought a number of things from China on eBay - not made in China, from China as well.   They are shipped from Hong Kong, and arrive in odd-shaped packages stamped "China Post" and often take a week or two to arrive (Donald Trump has promised to cancel the postal deal with China to put a stop to this - Thanks Donald!).

So for example, I need some new air filters for the lawnmower.   They clog easily with all the dust and pollen stirred up while mowing.   New ones from Lowe's or Home Depot - if they have them in stock - are like $10 apiece.  This, after spending $5 in car costs to get there and back.   Amazon has them for $5.99 apiece with "free shipping" if you buy two.   eBay has Chinese knock-offs for about a buck-and-a-half apiece, with free shipping from China, if you don't mind waiting a week or two for "China Post" to deliver.   Maybe they aren't as nice as the ones from Lowe's, but I can change them more often when they clog up with leaf clippings and pollen.

Funny thing, too.  I have bought dozens of things from China this way and I have yet to be stiffed by them.   It is a leap of faith to send money there (although usually it is only a few dollars or so) and wait weeks for delivery.   But they realize that if they don't deliver the goods, word would get around America that buying things this way is just a rip-off and people would stop buying.  Perhaps also, there is this Chinese philosophy of "loss of face" - if you provide poor service, it reflects badly not only on you, but your company, your family, your country, and your race.  Sadly, this idea has yet to take hold in America.

I bought a 12V fan once from China, and when it arrived, it was a piece of crap.  It was noisy and didn't blow much air (the fan blades were nearly flat, so there was no air being pushed).  I contacted them and they said they were sorry about it and refunded my money and told me to keep the fan. They also admitted the fan was a piece of crap and they decided to stop making it and re-design it to a higher quality standard.  They realized that, like the Japanese, they are reliant on a foreign market to buy their products. And if their products have a reputation as crap, (as Japan did in the early post-war era) people will stop buying.

Folks like to beat up on China and claim their products are junk.   And some are - and in the recent past, most were.   But like Japan and Korea before it, they keep trying and going back to the drawing board and improving their products.   And today, the quality of much of Chinese stuff is as good as or better than "Made in America" products, particularly products made by union members. As I predicted nearly a decade ago, it won't be long before the Chinese are exporting cars to America.  Today they are, and your "American" car likely has a lot of Chinese components in it anyway.   A good thing, too, because otherwise, your Chevy Malibu would cost more than a Mercedes S-class.

There was a point to this essay - but I tend to wander off.   The point is, shop around and be a retail agnostic.  "Brand Loyalty" or retailer loyalty is meaningless and stupid today.  Saying you "only" shop on Amazon makes no sense, if there are better prices, better products, and better service elsewhere.   And you won't know unless you actually bother to look.  If enough people stop looking, then Amazon wins - and they can raise prices all they want, because they depend on their customers not cross-shopping.

This is nothing new, of course.  Companies have used "loyalty" programs to prevent customers from cross-shopping for ages.  Airlines use the "frequent flyer" miles to keep you in their ecosystem - and so long as your company is paying the airfare and you are cashing in the miles, maybe that makes sense.  But for the ordinary vacation consumer, who doesn't accumulate enough miles in a year even for an upgrade, chasing such programs makes no financial sense.

Similarly, going to a grocery store because they give you a nickle off on gas (if you buy $100 worth of groceries) makes no sense at all - particularly when the gas station they partnered with sells gas for ten cents more than the discount place.

Of course, in this modern smart-phone era, marketing has gone creepy high-tech.  I've written Patent applications on some of this stuff, and it is indeed scary.   Today, retailers can tell when you are in the store or even near it, and entice you to enter or buy based on your location, your shopping history, and your demographic data. Worse yet, competing retailers can try to steer you to their store, while you are in the competition's domain.   Amazon does weird things like change prices in real time, based on your purchase or search history - which is another reason why I shy away from Amazon.

I suspect also that Amazon uses its social media platform (its review pages) to promote some products and demote others (products sold by retailers who refuse to play ball with Amazon, for example) although this would be difficult to prove.   Online reviews, of course, are always suspect, even the ones I leave.

Does this mean I will never shop on Amazon again?   Don't be extremist, I hate that.   No, it only means that I have bought far fewer things on Amazon as of late, and by shopping around, I have found better prices, better products and better service.

And sometimes, if you shop around enough online, you come to the conclusion that the "must have" piece of retail consumer crap you were pining for is really unnecessary to your daily living, and you make the best and most economical purchase choice of all - to not consume.

That, in short, is the real threat to Amazon.   If people stop buying so much crap, the whole business model falls apart.