The Shady Truth about Amazon Basics

Mrwhosetheboss

There's more going on on Amazon than you think... Check out the opera browser here: https://opr.as/09-Opera-browser-Mr-Wh...

Transcript

00:00So I noticed something strange about Amazon.

00:01If I search desktop microphone,

00:04Amazon's own basics microphone is the very first thing you see.

00:07Featured from Amazon brands, it says.

00:09Then there's a whole line of sponsored products,

00:11which most people will probably want to filter out.

00:13And all of that is ahead of the desktop microphone,

00:15which actually has about 10 times the number of reviews

00:18and a lower price tag than Amazon's.

00:20So I actually bought both.

00:21So this is how the $26.99 Amazon mic sounds.

00:24It's actually pretty fricking good, but it's simple.

00:26And then this is how the $19.99 one sounds.

00:29And it is every bit as good.

00:32Except this one also happens to have a pop filter,

00:34a fully adjustable sand and RGB lighting baked in.

00:37And it doesn't even look cheap.

00:38Uh, okay.

00:40How about gaming monitor?

00:42Amazon is top of the list, $147.99.

00:46Then you've got a sponsored post and a couple more items.

00:48But then it's this Asus monitor

00:50that feels like it completely outclasses the Amazon one.

00:53It's got about 30 times the number of reviews.

00:55And because it's on sale, it's also much cheaper.

00:58Again, I bought them just to be sure.

01:00And they're fairly similar.

01:02They've both got full adjustability.

01:03They can both go up and down.

01:05They can tilt, they can rotate 90 degrees,

01:07but the stand on the Asus does definitely feel heavier duty

01:10than this one on the Amazon.

01:11Oh yeah.

01:12And the screen is like noticeably brighter,

01:15but also just better color saturation too.

01:17You can tell the difference just looking at the wallpapers.

01:18Remember, the Asus is also the cheaper option here.

01:21You might think, as I thought a few weeks ago,

01:23that Amazon Basics was just 50 or so products

01:25that the company made to fill the gaps,

01:27just to make sure that there's always at least one product

01:30for any given search term.

01:32But that is not at all what is actually going on here.

01:36Basics has quietly become a massive operation.

01:39There are now thousands of Basics products,

01:41and it really feels like Amazon is abusing

01:44their unique position to allow them to take over.

01:46Like the first thing that becomes absolutely clear

01:48when you start looking into this is,

01:50from the moment that Amazon Basics began,

01:52they have always been right where they need to be.

01:54Anytime there's a product category

01:56which is frequently searched for,

01:57but doesn't have a lot of brand loyalty to other companies,

02:01you will find Amazon.

02:02How do they know which product categories to get into?

02:04Well, Amazon knows immediately

02:06when a product type starts to sell well.

02:08They know how often it's being returned.

02:10They know which version of the product people like the most.

02:12They know if there's already a leading brand

02:14that people are specifically searching for.

02:16And while the company has already been threatened

02:17with some very serious fines for using this data

02:20to decide what products they're gonna make,

02:23and have now agreed to not.

02:25According to more than 20 former Amazon employees,

02:28it's actually been described in the past

02:29as standard practice for them to have done so.

02:32Like in 2020, one of the best selling everyday slings

02:35on Amazon was by the company Peak Design.

02:37It was $100, clearly designed to be a premium product.

02:40But then Amazon, right out of nowhere,

02:42dropped their own version of this and spot the difference.

02:46It was such an egregious copy

02:47that the founders of Peak Design

02:49even made this entire video about it.

02:51How it looked the same,

02:52but didn't actually have any of the perks of their bag.

02:55How it swapped out the aluminum for plastic,

02:57how it didn't have all the recycled materials,

02:59the lifetime warranty,

03:00the fairly paid factory workers, et cetera, et cetera.

03:03Also, how sick is this?

03:04I can even carry on watching the video automatically

03:07when I leave that tab.

03:08It just floats around with me

03:10when you're using the Opera browser or sponsor.

03:12Amazon even went as far as to copy the name,

03:14calling their products

03:15the Amazon Basics Everyday Sling,

03:18until they saw that video

03:19and then changed it to the camera bag.

03:21Very smooth, guys.

03:22Point being, Amazon always finds a way to be there.

03:25And the other thing you'll notice

03:26is that anytime Amazon is there,

03:28as soon as they've decided

03:29that they're making a basics version of a product,

03:31whether or not it's the best selling

03:33or the top rated item in that category,

03:36they'll find a way to use the fact

03:37that it's their platform anyway

03:38to stick them right at the top.

03:40Look at this, Micro SD.

03:42There you go, Amazon.

03:43Slap bang, first position.

03:44And it's $17.99 for a 128 gigabyte card.

03:49That's actually not a very good deal.

03:50And you have to scroll past that

03:52and the sponsored listing,

03:53and then Amazon's one again to actually see that.

03:56Because only then do you find this one from SanDisk.

03:58Okay, let me split screen this

04:00because I want to make this super clear.

04:02SanDisk is 1.5 times the storage speed.

04:05It is two times the amount of storage

04:07and it comes with an SD card adapter

04:09for just $2 more.

04:11And Amazon's algorithm absolutely knows this data.

04:14So if Amazon was a purely objective search engine,

04:17solely designed to get you to the best product for you,

04:20this SanDisk should have been right at the top,

04:23but it isn't.

04:23And then there's the overall pick or Amazon choice badges,

04:27which Amazon awards to a high quality, well-priced

04:32and immediately available product,

04:33which, you know, that makes sense as far as criteria goes.

04:36Until you remember that they've designed the criteria

04:39and in many, many cases,

04:40it's their own products that are winning

04:42their own choice awards.

04:44Now, this has already been a big point of contention.

04:46Amazon has already been investigated

04:48to make sure they're being fair and transparent

04:50with how the badges are allocated.

04:51But here's the thing,

04:53it doesn't actually matter who they give the badges to.

04:55Like if we search, what's the new one?

04:57USB-C cable.

04:58Okay, so look, Anchor is the overall pick.

05:01They have the badge, which makes sense.

05:03You know, their product is at 104,000 reviews

05:06compared to the Amazon Basic one, which has 15,000.

05:09But even though Anchor is the overall pick,

05:11it is still sitting below the sponsor post,

05:14which sits below Amazon Basics' own brand listing.

05:18So even though Amazon's kind of telling you

05:20that Anchor is the product to get,

05:22to, I guess, comply with all the regulators,

05:24it's not showing you that product unless you scroll.

05:27Again, I bought both.

05:29And to be honest, the Amazon cable

05:30does feel like the cheaper product.

05:32It's very plasticky.

05:33It feels like the old Apple Lightning cables

05:35compared to the woven finish on the Anchor,

05:37which makes me feel like it's gonna last a lot longer.

05:40And just to be clear here,

05:41I wouldn't call Amazon Basics products bad.

05:43They're never the most expensive.

05:44They're not scams.

05:45Amazon's entire product takeover strategy,

05:48it wouldn't work if the product sucked.

05:50The problem is that they're also rarely

05:52the best value option,

05:53especially when you factor in other products being on sale,

05:56and that they're being shown to you

05:58instead of products that might be better value.

06:00Plus, this power that Amazon has is kind of self-fulfilling.

06:04Like, if they have the ability to just plant

06:06their not best-selling product

06:08above the actually best-selling product,

06:10which is exactly what happened when Amazon decided

06:11they wanted to make AA batteries,

06:13they just stuck theirs in front of Duracell and Energizer,

06:16then surely it's just a matter of time

06:18before more people start buying Amazon's product.

06:20Until Amazon actually becomes the best-seller option,

06:23at which point Amazon can happily hand themselves

06:25the best-seller badge,

06:26and no one can even complain that they're not.

06:28Trust me when I say I'm not cherry-picking examples here.

06:31Amazon Basics comes up first pretty consistently,

06:34whether you're searching for printer paper or cotton buds,

06:36pens, pencils, even fricking pants.

06:39Amazon is making them,

06:40and you can be sure they're putting them first.

06:42So what is going on here?

06:43Are Amazon trying to kill every seller?

06:46But then that doesn't seem like a good strategy.

06:48Aren't those sellers the reason that people go to Amazon?

06:50And doesn't Amazon make tons of money from them selling on Amazon?

06:54And then the other weird part of it is that,

06:55even though Basics is often not the very cheapest option,

06:59surely Amazon is still making basically no profit on these products.

07:03It seems like every Basics product is specifically chosen to be a

07:07very replaceable, low-cost commodity.

07:09You know, basically tools that are purchased solely for a simple purpose.

07:12That also means there's very little money in them.

07:15Like to set up the manufacturing for these 30 pencils,

07:18to create packaging, then to list them,

07:20then to send them by next day delivery, handle returns,

07:22to do all of that for like $4.

07:24Why would you bother?

07:25Why not just let another seller do all the hard work,

07:28and because you're Amazon and you own them,

07:30just take your cut from them?

07:31Well, that is what I've been trying to get to the bottom of.

07:34And I think their master plan is starting to become clear.

07:38So we've talked about how Amazon is not afraid to see what works,

07:41based on what other companies are doing, and then just do it themselves.

07:44Like how back in the day the company Rain Design,

07:46who had the best-selling laptop stand,

07:49found that their product had been almost one-to-one copied by Amazon,

07:52with pretty much the only thing changing being the logo.

07:55But there's one vital piece of information that makes this a whole lot more threatening.

08:00That Amazon can undercut everyone.

08:03See, you might know that Amazon charges every single seller on their platform fees.

08:07There's a monthly subscription fee, about $40 a month if you want to be a professional seller,

08:11but also a referral fee for every sale.

08:14So this is a percentage cost of the item's sale price,

08:17anywhere between 8% and 45% if you're selling accessories

08:21for a product that Amazon themselves make, like a Kindle.

08:24But overall, these fees average around 15%.

08:27Amazon, obviously, doesn't have to pay their own fees.

08:30So no company can actually price themselves as low as Amazon can when selling on Amazon,

08:35unless they either decide to make much less or zero profit,

08:39or they find a way to source their items at a significantly lower cost than Amazon.

08:44But it won't be the latter.

08:46If you're a seller and Amazon decides they're making the same product as you,

08:49Amazon's bigger than you.

08:50They've got the power and frankly the clout to place orders

08:53in much bigger quantities from suppliers,

08:55and actually be the one getting even better rates

08:57than companies who've been selling these products for years.

08:59So their costs are going to be lower than yours.

09:01But here's the extra little sprinkle on top.

09:04If you're a seller on Amazon,

09:06your entire objective from your sales is to make profit, right?

09:10You have to add a bit of extra markup to your goods to even make the whole thing worth it.

09:14Otherwise, what are you even doing there?

09:16But Amazon doesn't even have that restriction.

09:19Amazon doesn't need to make a penny of profit on these basic products

09:22because they're not in the business of product sales.

09:26I mean, Bezos himself once said,

09:27we want to make money when people use our devices, not when people buy our devices.

09:32So Amazon wins just by people being on Amazon.

09:36Because the more people there are,

09:37the more people will pay them monthly for their Amazon Prime subscription,

09:40and then the more they will start to buy into Amazon's other services.

09:43Because paying for Prime puts you essentially in the heart of Amazon's ecosystem.

09:47It's almost designed to lead buyers towards Amazon Prime Video,

09:51and signing up for Amazon Music, and Kindle,

09:53and even adopting Amazon as your main grocery store thanks to Amazon Fresh.

09:57All of which to say, as a seller on Amazon, you're competing against a company

10:01who isn't playing the same game as you.

10:03There is a positive that comes from this.

10:04Like, let's be honest, Amazon's logistics are pretty unmatched.

10:08At least here in the UK, it's the only company who I found I can actually trust

10:12to deliver next day when they say they're going to deliver next day.

10:15And so to be able to buy a still fairly affordable product that's made by Amazon

10:19does give me reassurance that it will just work as it says it will.

10:23It will get to me on time, and it will be returnable very easily if I then decide I don't want it.

10:28Like, this is the $28 Amazon Basics ultra-premium keyboard and mouse.

10:33And I'm very satisfied with it.

10:34The chassis is made of metal, the keys feel really satisfying.

10:38It arrived at my doorstep 18 hours after having placed the order.

10:41But this still doesn't fully answer the question.

10:43It's clear how Amazon Basics gets such a leg up compared to third-party sellers.

10:47How Amazon basically forces other companies to be more expensive

10:50so that they can stay affordable compared to them.

10:53But it still doesn't explain what is Amazon actually gaining by becoming a seller themselves.

10:58Well, I think this is the very crux of it.

11:00See, Amazon.com, the website, actually has two main revenue streams from sellers.

11:05We've talked about the obvious one, which is the percentage fee that they take from every sale.

11:09And this is the bigger part of their business.

11:11But the other one has been right under our noses this whole time.

11:15Sellers paying Amazon to appear higher in searches.

11:18Let's say, you know, hypothetically, Amazon wanted to grow how much they make from this.

11:22How would they do that?

11:23Well, by making it harder to compete if you're not paying that fee.

11:27So let's just go back to batteries for a second because I find this so strange.

11:30So Amazon Basics has the best seller badge.

11:33We already talked about how they got that.

11:35And then over here, also the overall pick badge.

11:38Then the only products you see from their key competitors, Duracell and Energizer,

11:43the ones that used to be at the top before Amazon Basics got involved,

11:46are only there because they paid Amazon extra, on top of their monthly set of fees,

11:50and on top of their per product referral fees.

11:53And even then, they don't have any badges.

11:55They have to have this sponsored label, which makes them seem like ads,

11:59and therefore not as good as the Amazon products, which are just allowed to organically be there.

12:03And also, they still come after Amazon's own product.

12:06So I think the primary purpose of Amazon Basics is not to generate piles of cash in direct sales.

12:13They are good enough products, sold at good enough prices.

12:16And they leverage Amazon's unique position to essentially create a frenzy,

12:20in which sellers have two choices.

12:22A, to either start offering something that's exceptionally good

12:25and take almost zero profit for themselves,

12:27which, you know, that's going to boost the number of buyers

12:29who want to keep paying Amazon's monthly Prime subscription.

12:32Or B, to essentially enter a bidding war,

12:36trying to outpay each other to compete for the only remaining visible area up for grabs,

12:41those sacred sponsored slots.

12:43I was actually reading a guide for sellers the other day by Expando,

12:46and it literally spells out,

12:48third-party sellers must invest in sponsored ads and promoted listings

12:51to get their products seen by customers.

12:53It's not an additional extra, it's a requirement.

12:56And in both of these instances, Amazon makes a ton of money.

13:00And Basics is actually just the start of it.

13:02You search for coffee pods, you see Happy Belly, owned by Amazon.

13:06You search for dog food, you see Wag, owned by Amazon.

13:08Amazon even has 206 Collective for shoes, which, funnily enough,

13:12has also been accused of blatantly copying the design of the Allbirds wool runners

13:16and then selling them at less than half the price.

13:17These brands are the same thing, using all the same strategies,

13:20like Salimo in India, for whom a leaked internal document literally spelled out

13:24that their objective was to replicate products based on data from Amazon marketplace sellers.

13:29So next time you shop on Amazon, just scroll a little further,

13:33because there's a pretty decent chance you'll find a better deal.

13:35It's so cool that I can pause and then carry on playing my music from the sidebar,

13:40no matter what page I'm on.

13:41Link below to get the Opera Browser for free.

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