What “Amazon Supply Chain Services” tells us about what Amazon is

https://gadallon.substack.com/p/the-third-time-amazon-did-this-what

by JumpCrisscross • 2 months ago

39 67 2 months ago

gadallon.substack.com

nhance• 2 months ago

These types of services almost seem squarely in the space of what governments should/could do with intelligent leadership.

It is probably not too late for a state-driven type of service layer like this from some rationally led government somewhere in the world.

JumpCrisscross3• 2 months ago

not too late for a state-driven type of service layer like this

We call it the postal service.

gruez2• 2 months ago

USPS should get into the business of running whitelabel warehouses?

varispeed2• 2 months ago

It has nothing to do with intelligent leadership, but departments founded to prevent such things from happening are not doing their jobs. Basically civil servants prefer to not rock the boat and sail through to retirement.

SoftTalker4• 2 months ago

The pattern is quite simple.

Build infrastructure to serve internal operations at a scale no rational external buyer would justify. Optimize it to a level that drives marginal cost below the buyer’s internal alternative. When the surplus capacity is too large to write off, open the API and sell it.

Forgot the last part: when you have eliminated all the competition and have all your customers locked in with no other options, raise the price.

We need to get back to preventing (or breaking up) monopolies.

voakbasda• 2 months ago

I don’t think it will ever happen. The corruption is so widespread and now openly practiced. The powers that be all have their hands in those cookie jars. Their sweet tooth is insatiable, and they will never relinquish those treats until they get severe spankings.

varispeed2• 2 months ago

Isn't that already illegal in many countries (dumping)?

The issue is that AWS is embedded in many governments and there is no appetite to do anything about it.

If a country started proceedings against AWS they'd risk their country infrastructure going down, so it is a no go.

I wonder why this has not been considered as national security risk and frankly negligence.

s1artibartfast11• 2 months ago

Dumping is selling at a loss. The quote clearly describes selling for a profit.

Aws marginal cost is below the internal production price of the buyer

steveBK123• 2 months ago

Forgot the last part: when you have eliminated all the competition and have all your customers locked in with no other options, raise the price.

AND don't forget to degrade services as well

NickC254• 2 months ago

break. up. Amazon.

break up Apple, Meta, MSFT, etc... while we're at it.

Or, keep it simpler - if a company passes a market cap of 1 trillion dollars, they must forgo lobbying and "government relations". if you're worth a trillion dollars or more, you don't need the government to hold your hand.

kennywinker7• 2 months ago

A trillion? Why wouldn’t we set the bar at $0 - companies are not people, and allowing them to influence politics, at any size, corrupts democracy

twoodfin2• 2 months ago

Unfortunately for this project, the First Amendment puts the right to “petition the Government for a redress of grievances” alongside freedoms of speech, the press, and religious exercise.

s1artibartfast11• 2 months ago

It isnt just "hand holding", but legitimate information as well. X law will have y consequences. I think people seriously missunderstand what lobbying is.

clearstack• 2 months ago

The 10-K makes this concrete. AWS is 17% of Amazon revenue but ~60% of operating income (FY2024). The retail arm runs on thin margins — the infrastructure arm subsidizes everything.

thayne• 2 months ago

Also worth pointing out the "Optimize it to a level that drives marginal cost below the buyer’s internal alternative" includes reducing labor costs by underpaying and overworking workers.

treis2• 2 months ago

This gets the story of AWS wrong and it should be fundamentally suspect because of that.

JumpCrisscross3• 2 months ago

This gets the story of AWS wrong

How?

kikoreis2• 2 months ago

It's not completely wrong, but overly simplistic:

In 2006, Amazon launched what is now AWS, exposing the internal compute, storage, and database services its retail group had built. The internal pitch was identical to Marketplace seven years earlier.

These were not internal services, and it wasn't exactly the retail group that built them (Chris and Ben were dedicated to EC2 and the team ran remote from Seattle). Nor was Marketplace run on the 1P Amazon platform, so it would have been a strange analogy to use for a pitch.

In the end, though, the point is the same as I made elsewhere in the thread — once you are big enough you can try and bootstrap pretty much anything adjacent to your business and have a good shot at success.

kikoreis2• 2 months ago

This read was mildly interesting, but I'm left thinking that the study of any sprawling monopoly will come up with similar mildly interesting and irrelevant rationalizations of success. Once you get as as big as Amazon was in the early 2010s, provided your culture doesn't melt down (by itself no small feat), you are well positioned to expand and flatten adjacent parts of the economy.

So the question is whether you read this to be inspired by it and attempt to create your own monopoly, or to be afraid of it and start thinking about regulation. Or both :-)

JumpCrisscross3• 2 months ago

you are well positioned to expand and flatten adjacent parts of the economy

Yet others with Amazon’s scale have tried and failed at this sort of horizontal integration.

kennywinker7• 2 months ago

I think it’s just cherry picking. Amazon has failed in plenty of businesses they’ve tried to enter. Tablets, phones, app stores, their streaming boxes aren’t exactly market dominant.

nmcfarl3• 2 months ago

What this mainly says to me is that my life is going to get much worse - as Amazon logistics cannot deliver to my house.

I used to be a big user of Amazon prime, but they recently swapped over to logistics for my rural area which has no cell service and huge distances between houses and that apparently means they can’t deliver. They try and packages sit at the local warehouse for a couple of weeks before being sent back to Amazon.

Originally, some drivers would be foolish enough to try to come up here without cell, but by and large, they were unable to find the property- mainly because the house is not visible from the road, even if the mailbox is on the road, and mapping apps do a bad job. So I’m assuming the drivers don’t get paid or in some other way get punished and this means that a bunch of Christmas presents didn’t show up, and we stopped using Amazon entirely.

Since that we’ve already had a problem with one vendor we purchased from directly that tried to send something to us via Amazon logistics, and it got returned to them. This was not mentioned on the webpage, and when we contacted them, they got really angry with us for giving them an “undeliverable address” – they literally did not want to give us a refund. They really didn’t like: It’s deliverable by USPS, UPS, and FedEx as a response. But eventually, we got a refund.

I’m assuming this is going to be my future more and more now.

thewebguyd• 2 months ago

It's really unfortunate. I used to order from Amazon a lot when they mostly handed off to USPS.

I can get Amazon logistics to deliver where I live, but it's pretty unreliable. Usually delayed, or it doesn't arrive until 8pm and given how Amazon treats their drivers, I hate being part of that problem no one should have to be out making home deliveries that late.

I'd much prefer if they just kept using USPS. Public service and reliable, and usually here by noon.

gdulli• 2 months ago

I thought the main benefit of Prime was guaranteed fast shipping, since free shipping can still be had without Prime. So the shipping has gotten worse while the price gets raised to subsidize the production of Citadel?

humangoogle• 2 months ago

it's a convoluted path to get there, but you can put in delivery instructions into your profile that get surfaced to AMZN delivery folk. I had a similar issue where the AMZN maps would send drivers to a non-existent intersection.

After putting in step-by-step instructions, it's been much less of an issue.

nmcfarl3• 2 months ago

I did do that. And I think that most of the drivers are not local and the comments just made it more likely they would skip on doing what was going to be clearly a difficult delivery.

However, even after my third revision of the notes – to just remove them entirely – deliveries didn’t pick up again, so I don’t know. It’s opaque to me.

plumeria• 2 months ago

Do you have an Amazon Locker nearby that you could use as an alternative?

nmcfarl3• 2 months ago

I knew the answer was no - but I was curious, the nearest locker is a 2h10m drive each way. Which is about an hour closer than I thought it would be.

dan_sbl• 2 months ago

I wanted to find this interesting, but it has AI/LLM signs of writing all over it.

The dig in the middle - "you can skip the next part, but if you do skip, are you even a real reader? Not judging. Just saying" - ugh. Why would I bother reading every word if you likely didn't write every word?

gadallon• 2 months ago

I can assure you that every word was written (or dictated) by a human. At least you read up to that point in the article. But did you read beyond that.

entropicdrifter• 2 months ago

A gargantuan "everything company" like Amazon is the very definition of a monopoly. In any functional society this beast would have long since been broken up before becoming dominant in multiple industries. At this point, they're pretty much emblematic of the rot at the core of western society.

logicchains• 2 months ago

A gargantuan "everything company" like Amazon is the very definition of a monopoly

No it's not, the definition of a monopoly is a seller without any competitors. Stop spreading lies. Amazon has plenty of competitors for what it sells, but it has a large market share because its products and services are generally cheapest.

arielcostas• 2 months ago

We can call it "abuse of market position" then. The United States' Federal Trade Commission[^1] sued Amazon in 2023 with this pretext.

In Germany, the Federal Cartel Office fined Amazon[^2] 59 million euro (68.7 millions US dollars) because of "abuse of market power" with anti-competitive practices.

The European Commission[^3] also opened an investigation regarding Amazon's practices regarding Prime and the "Buy Box" (I had to look this up, apparently it means being picked as the default seller for a product where multiple sellers are offering it), since you need to pay extra for FBA to have your products marked as Prime (appearing before on the search results, and being the "buy box") and Amazon itself competes with you sometimes, being both a marketplace and a seller.

[1] https://www.ftc.gov/news-events/news/press-releases/2023/09/... [2]: https://www.politico.eu/article/german-regulator-fines-amazo... [3]: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_...

scottyah• 2 months ago

The word you're thinking of is "Conglomerate"

eykanal2• 2 months ago

<sarcasm> Time to investigate Apple again for monopolistic practices in their ebooks store! </sarcasm>

More seriously, it's somewhat mind-boggling that Amazon is allowed to keep it's "everything store" business, it's logistics business, and it's internet business all under one roof. The P&G discussion here highlights how insane it is that this isn't being investigated and prosecuted.

eykanal2• 2 months ago

It's kind of fascinating how well Amazon can repeat this. Google has attempted this literally dozens of times with various sub-businesses and failed almost every time. Amazon has a real skill in doing this well that many other large tech companies simply don't have.

cmiles82• 2 months ago

Amazon in a logistics and infrastructure company. It tries to be a lot more than that but isn’t very competitive outside the core skills.

Logistics = Getting stuff to your door super fast… Amazing, nobody is better.

Other stuff = An app and website that doesn’t suck and lets you find what you want amidst a sea of junk. Not great here.

Infrastructure = AWS core services which are quite good.

Other stuff = Nearly everything AWS tries to do on top of base commodity infrastructure, which is a hot mess.

Other stuff = Alexa, which is a has-been also-ran now that’s struggling to compete in the GenAI era. Rando also-ran businesses like Amazon Music. Various sports things that seem to be more Andy Jassy’s pet projects than anything. Physical retail with some keeping the lights on via Whole Foods but nearly everything else here has been shut down as a failure.

iririririr• 2 months ago

this explains all the lobby money that was trying to crush USPS lately.

it's a volume game to provide a service.

What “Amazon Supply Chain Services” tells us about what Amazon is

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