Randy Miller

Former Director of Merchandise Pricing and Product Management, Amazon

Randy Miller worked at Amazon from 2001 to 2006. He served as director of retail finance and later as general manager of E.U. Vendor Management and Buying. He is currently the CEO of Jockalytics, a startup focused on fantasy sports and sports betting.

Following are excerpts of an interview with Randy Miller conducted by James Jacoby on May 13, 2019.

This interview appears in:

Amazon Empire

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Amazon Marketplace

A lot of sellers will complain, third-party sellers on Amazon, that Amazon studied what they did, they went to their suppliers, and they basically undercut them and kind of finished them off.

No.Well, they undercut them because they can get more volume.I mean, I suppose you could call that undercutting, but if you’re a little seller and you only sell 10 units a week and Amazon can sell 1,000 units a week, I’m not really certain that’s undercutting you.I think it’s Amazon has a bigger customer base.You have 50,000 customers; Amazon has 100 million-plus customers.And so now Amazon is going to show that product to a much larger base.And so—and yeah, they’re probably going to get a better cost than you because they have a bigger customer base than you, and they’re going to sell more.I mean, any retailer can get the cost of goods that Amazon gets as long as they have the volume.It’s all on volume.And they have volume discounts.You hit that volume level, you’ll get that discount.

But do you not see anything problematic about that?

Well, I guess you have to ultimately ask yourself—and I think that’s the rub—do we really want to start making customers pay more?Consumers complain now that prices are too high.I mean, the only thing that would solve that problem is if we take these categories and ultimately raise the price, because that’s the only way these other sellers are going to be able to stand.And I guess the question really becomes, do we choose the sellers over the—but what if they’re really bad sellers?What if they really aren’t that competitive?What if they’re really not that smart?I mean, to me, businesses fail usually because they need to.They are using important resources that could go to other businesses, and by getting them out, those resources can now be sent to a company that is probably more effective in its use of those resources.I mean, you know, that’s basic economics, right?And so, you know, a company who can’t compete probably shouldn’t compete.I mean, it probably shouldn’t be.But the other choice—and this is where it stops—the other choice is you charge consumers more and you make them pay for—more for products.I mean, that would be the only way that Amazon could step back and let these other companies survive is by taking the price up.Somebody’s going to pay.

But with Amazon’s scale and its sort of godlike view with all its data of what’s happening on its Marketplace, doesn’t it have an unfair advantage if it wants to get into a particular business that it sees doing well on its Marketplace and then to basically use its leverage, use its power, use its capital, use its scale?

Well, use the money it invested over all those years to get to that point.That’s what—that’s probably what Jeff would say, is like—I know what it’s like to be that way.I was that company back in ’98, right? The stupid little geeky bookstore that sold only computer books, right?You know, but I—we busted it, and we built it, and customers come, and they like it, and they continue to come.And again, I guess it’s sort of, do you stop customers from coming?Do we have to close after so many—I mean, I don’t know how Amazon would actually work that.And would that not hurt the consumer more than it would hurt Amazon, just to save these small bookstores?You know, it’s a moral issue, and I don’t know economics or business models address it, to be honest with you.I mean, it would have to be a moral choice, because it probably would not be a financial choice by anyone, either Amazon or consumers, I don’t think.

You think Amazon’s good for America?

I think it’s good to have low prices, yeah.I mean, I think prices—I think low prices are good, and a lot of companies don’t like low prices.They don’t have low prices because they don’t want to be seen as a low-price provider.And that was one of the challenges we had with Nordstrom, was “I don’t want to be surfaced on a browse page next to some crappy little thong maker who, you know, has $8.98 product, and I’m over here with a $125 men’s shirt.”And so Amazon wants to service both of those customers, right, and some of them are going to need lower prices.Not everybody is an Amazon millionaire.And so I guess the choice really does come down to who’s going to pay, because someone is always going to pay.There’s a price that’s got to be paid, and it will be either the consumer, or it will be Amazon and other big retailers, too, because they’ll be forced to modify their activities to I guess save, or I’m not sure they can save them, but to help these other businesses, and I don’t know if that’s—I mean, morally there might be an argument for it, but I just don’t think that businesswise there is.

Cheetahs and Gazelles

… Cheetahs and gazelles.

Oh, cheetahs and gazelles!Well, it was basically cheetahs was what it was; it was the cheetah model.And—so what happens is when you when you go out to a vendor, you originally go out, and you try to have this complementary relationship where you cooperate and they give you good costs; you sell their products really well, and everybody’s happy, and everybody loves it, right?But you run into people, vendors who are not going to do their fair share, like their competitors are.So you go at them with what we called “pay to play” in those days, or vendor realignment, where you may take some action, such as taking them out of merchandising or raising their prices or whatever to get their attention and get them to be a little more forthcoming with some terms.But it was so funny, because Jeff—this came up, and I wasn’t in this meeting, but Lynn Blake, who ran books, came back and just recounted the whole thing to me, and it was Jeff said, “Well, you don’t go after the strongest.”He’s like: “The cheetah.The cheetah looks for the weak, looks for the sick; looks for the small.That’s what you go for, so don’t start with, you know, number one publisher.Start with number seven publisher and then number six publisher, and by the time you get to number three, two and one, the noise has gotten back to them.They’re going to know this is coming, and chances are you may be able to settle that without a full-on war.And most of those arrangements never came to us cutting or raising prices on a vendor or cutting them out of merchandising.It was only on a few occasions that we actually had to go that far, so—

I mean, were you—I mean, tell me, because—Were you uncomfortable with that sort of ruthlessness ever?

Well, no, because I’ve done retail.People think that’s ruthless.You know, I’ve looked at it—some people at Amazon were like, “Wow, that’s kind of mean,” and I’m like: “A retailer and a supplier having a disagreement?Stop the presses.It happens all the time.”I mean, you talk to any vendor and you talk to any retailer, and they will tell you, their best friend and their worst enemy is the other, you know, because, you know, look, you’ve got a finite margin, and somebody’s going to have to give, and, you know—a lot of the time, Amazon wasn’t the one giving.But we did in the beginning, so I guess you could say we have it better because we’re big and because we’re powerful, but in those—in the early days we weren’t, and we were the one that people were saying isn’t going to make it.So I don’t know.It’s a hard question.It’s a moral question.And again, I don’t think it’s a question that can be solved by a business or businesses.I think it’s something that would have to be government and people and—and the American citizens, too, because they’ll have this, and their prices will go up.They will have to, you know, perhaps pay more for things they pay less now for because we want to do this, but I think it’s interesting.It’s an interesting issue.

Amazon and Taxes

… AWS [Amazon Web Services], for instance, right now is going after large federal contracts and state contracts, local government contracts.That’s taxpayer-funded contracts.

With a cheaper price, too, by the way.Just make sure you check that out.AWS, I mean, we pay thousands of dollars a month in startup costs, so, you know, it’s a big deal for them.I’ll probably fall back on cheaper.

One question, though, about that.Is there not something ironic about the fact that Amazon is seeking taxpayer-funded contracts while at the same time playing the tax game, whether it comes to state sales tax or federal tax?

Well, we’re done with the tax game, right?I mean, Amazon now pays sales tax.There’s no—and Amazon.com pays income tax, so there’s no—there’s no issue in America with tax anymore.Amazon kind of let that go.The real issue probably is still the Luxembourg issue, because I do not think that has been settled, because there are a lot of companies who bought the same plan that Amazon did and are now getting—Apple, Starbucks you name it, they’re all getting pointed at.

But in terms of kind of taking losses and posting kind of zero—

Well, I mean, we took those losses.We pay for those losses out of our pocket.Those losses were tax-deductible from earnings.The IRS gives you the ability to carry those over so that when you do have earnings, you can—you can take those losses against those earnings.So that’s—most companies would tell you that’s fair.Most companies in this city do that.There are certain capital costs that you can take off your taxes, and so you should do that—so, you know.And if you’re losing and you have no taxes to take them off of, then you get to carry them over.Now, you can’t take them over forever.I’m not a tax person, but I mean, most people I think would say that’s legitimate, because you did incur the losses.It’s when you get tax breaks that you put nothing in—and I would argue that AWS is the cheapest supplier of cloud services now.I mean, everybody will tell you that; that’s why they’ve got most of the people.And if I were a governor, I would say that I’m doing the right thing for my people.Yeah, I’m saving tax money by taking the lowest-cost provider.But, you know, I would say that’s probably not going to last for long, because a lot of them are getting smart.Amazon prices are going to come up, and others will come down.I think we’ll see a real battle in that.And I think what will be interesting is you can’t just offer storage and some, you know, munching of data.You’ve got to be a full-on—you have to be my data muncher.You have to be the one that processes my data, takes my inputs, gives me my outputs, and sends them to me.And I think that’s going to be an interesting—an interesting role for AWS to exist in.But a lot of others are just offering storage now and not any of the kind of computing that—so Amazon, again, is a little ahead in that.But, you know, there’s some good companies out there.Microsoft’s not—and Google.Neither of them are, you know, shuffs.They’re real pretty good.I’d be scared.

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