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Amazon Seeks Divorce, $750M from Toys R Us
theodp writes "Responding to a Toys R Us lawsuit accusing Amazon of breaching exclusivity provisions of its $50M-a- year tenancy agreement, Amazon has countersued the giant toy retailer, asking the Court to terminate its Toysrus.com partnership and award it damages of more than $750M, arguing that Toysrus.com's failure to effectively choose top toys and baby products and to keep products in stock leaves Amazon with no other choice but to enable more sellers to sell these products."
plenty of people across the world will tell you, the only people to benefit from divorce are the lawyers..but i guess, if the bedfellows can't see each other eye to eye, then there is no choice but to go different ways
how much does amazon claim it lost because of this partnership though? $750 M sounds a bit too high to me, even for this "exclusivity" partnership..
http://efil.blogspot.com/
A deal is a deal - at least it used to be back when we knew the definition of "is."
There is a winner: the consumer. The breakup of such an anticompetitive relationship is an example of the "invisible hand" of the marketplace restoring free-market capitalism to where it belongs. The end result is that prices and amount of items sold both move toward an equilibrium established by what people are willing to pay and what suppliers and stores are willing to charge.
That's the big picture. It's nice to see a market that isn't so dominated by monopolies (yet: Wal-Mart is scary) acting in jerky but understandable ways.
We recently had heard in the office over one of the Yellow Machine that's made by Anthology Solutions.
But wouldn't you think that Toys R Us had a certain obligation to Amazon to perform? I mean, keeping popular items in stock and being innovative in its offerings to Amazon shouldn't have to be written into an agreement, should it?
I know personally that the selection at Toys R Us is lacking at holiday time (last 2 years), this 'divorce' doesn't surpise me in any way.
Exclusive is just one part of the contract. If Toys-R-US is required to maintain stock and avoid out of stock percentages above a certain figure, they violated the contract first. The linked article states that Toys-R-Us kept out of stock levels at above 10% on many popular toys.
Since I haven't seen the contract, I don't know for sure, but this is what it is sounding like.
And by relying on multiple vendors Amazon gives the appearance of being able to always keep toys in stock.
Here's the thing though, Target can't keep toys in stock either, nor can Wal-Mart. No single vendor can. Amazon had every reason to realize this up front. Amazon can't keep all of its own product in stock. The issue is that Amazon was payed for an exclusive relationship, which has nothing to do with keeping things in stock for Amazon's benefit. Amazon's benefit is in receiving the $50 mil a year without having to sell a damned thing from Toys (the symbol formerly knows as "R") Us.
Amazon has decided that it was a bad deal after the fact, they've learned the perils of vendor lock in, but they want to keep the money anyway and break the deal to deal with it, what's more, when their vendor objects to this they ask for even more money for "compensation" for themselves having violated the contract.
Having made a bad deal is not grounds for breaking a contract. Thousands of companies have been forced into bankruptcy by the courts enforcing bad deals. It happens to building contractors all the time. You submitted the bid Sparky. Now you have to live up to it. It isn't the contractee's fault that you cut your margins unrealisticly.
SCO obviously has enough legal crack to share.
BAD Amazon. No cassava meal donut.
KFG
If Amazon wins, then it could mean that Amazon will have better supplies of their stocks, and that will be terrible because..
erm... I mean, if Toys R Us wins, then it could mean that Amazon will keep running out of stuff, and thre will be no option for the toy buying public but to go to one of the many other online retailers
No. Sorry... Why do I care?
...shouldn't have to be written into an agreement, should it?
I would say that it should indeed. Things run out of stock and not every product offered will fly off of the shelf. Therefore, to disolve the contract there needs to be meaningful criteria set out in the contract to do this. Cummon, its not like we are talking about Garage Toys Inc and Joe Webshingle Co! These are huge companies with lots o cash tied up in this agreement. Amazon can't just arbitrarily say "I don't like the job you are doing, bye bye".
I would expect that this kind of information is in the contract somewhere though. Then it becomes a case of proving Toys R Us has failed to live up to its obligations set out re: stocking levels and product sales.
Think of the corporate landscape as an enormous singles bar, with an all-night wedding chapel on one side and an all-night divorce lawyer on the other. Companies frequently get together, pop on over to the wedding chapel to start a harmonious relationship, then after they've tried making it work for a while they pop on over to the divorce lawyer because they had no idea what a gold-digging tramp/slut/cheapskate/moron the other one was. Then they go back into the singles bar to cruise for another sugar-incorporated.
Lather, rinse, repeat. Now, if only on the honeymoon they didn't screw their customers...
You cannot truly appreciate Dilbert until you read it in the original Klingon.