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I continue to be bearish on Amazon long-term. The notion that shoppers will one day buy things simply with the push of a button or saying "Alexa, get me some pa

by dkrich 9y ago

I continue to be bearish on Amazon long-term. The notion that shoppers will one day buy things simply with the push of a button or saying "Alexa, get me some paper towels" seems extremely far-fetched to me. Most shoppers are extremely price-sensitive and won't buy things before researching the price, save possibly for a few low-price staples like toilet paper or soap. So this idea that Amazon keeps suggesting where people are shopping with just their voices, seems DOA. But even if people do prefer convenience over price, there's no money in delivering groceries to people. Groceries are notoriously low-margin, one of the lowest margin businesses there is, so delivering groceries to people doesn't seem like it's going to make Amazon the trillion-dollar company some people think it will eventually become. Looking forward, 10-20 years, maybe the delivery cost issue will be solved with self-driving vehicles and robotic deliveries. But then, why would Amazon be the sole beneficiary of that development and not every grocery store? Sure, they have distribution facilities, but so does every major grocery and retail chain. As for AWS, I'm not real high on that side of the business, either. Despite being the runaway leader in cloud service, they make very little money in it so I'm not very confident that their margins will increase as competition from Microsoft and Google only intensifies. I'm not at all suggesting that Amazon is going away, and what they've done to this point is nothing short of extraordinary. I just think long term that they will settle in as a large American retailer that reshaped the retail landscape for other stores that will eventually catch up.

dkarl 9y ago
Looking forward, 10-20 years, maybe the delivery cost issue will be solved with self-driving vehicles and robotic deliveries. But then, why would Amazon be the sole beneficiary of that development and not every grocery store? 10-20 years, sure, but that's a big spread. What if it takes twenty years for grocery stores to get that stuff and Amazon has it in ten? Given the fragmentation of grocery stores and their focus on actual stores I imagine they will have a hard time catching up technologically, plus businesses with brick and mortar roots don't have a great track record at building ways for customers to bypass the brick and mortar. Imagine the time they'll waste on marketing, astroturf, and lobbying to try to stave off automated home delivery before they give up and actually try to make the technology work. That gives Amazon even more time make money and draw further ahead.
- dkrich 9y ago
  My thought is that the cost of delivery will eventually drop so much from technological shifts (self-driving vehicles, robotics, etc.) that all retailers will enjoy the same cost savings that people are predicting for Amazon. In other words, I don't think the last-mile delivery problem is going to be solved by Amazon and then enjoyed by them exclusively. It seems far more likely to me that the entire segment of local transportation will be reinvented by independent companies and utilized by all retailers. Think people owning their own self-driving vehicles that can stop and pick up their groceries, or independent local delivery services that utilize self-driving vehicles instead of Amazon-branded delivery vans. At current cost levels, there's no way that delivering goods can ever be more profitable than selling them in-store. Last mile delivery is simply too complicated and costly. It's pretty much the entire reason that the USPS loses so much money while UPS and FedEx make enormous profits. So the only way that the costs could be made similar is if the costs for last mile delivery dropped to an incremental cost of nearly zero.
  - dkarl 9y ago
    There's more than last-mile delivery, though. Amazon is automating its warehouses right now. Managing fragile and perishable goods will be an extra twist for them, but grocery stories will be starting from scratch (unless they're already working on the problem, which would be the right thing but seems unlikely.) Automated hand-off between an automated warehouse and an automated delivery platform is going to be a hard standard for grocery stores to compete with, especially on timeliness.
  - ladzoppelin 9y ago
    I thought this "last mile problem" is what Amazon is trying to solve and why they never made a profit for all those years. They are the ones building the "robots" and reinvesting is all this tech to solve such a hard problem.
    - dkrich 9y ago
      From what I've seen they've done two things. First, yes, they've basically spent huge amounts of what would otherwise be profits on subsidizing two day delivery. They have dabbled in various methods of last mile delivery, like using their own drivers or drones, but to this day 90+% of my Prime deliveries are delivered by UPS or FedEx. The rest are either Lasership or Amazon delivery both of which have a noticeable drop off in reliability. The last mile cost is extremely complex and I see no evidence that Amazon will figure out zero cost two or single day deliveries. FedEx nor UPS has been able to, and that's their core business! I do think that it will be solved one day, but it won't be by Amazon. It'll be due to an advancement of lots of outside technologies that will be enjoyed by all retailers. And if we're being honest, isn't that outcome better for consumers? The second thing that Amazon has done is subsidize things like free Video, books, and now Thursday night NFL in addition to free two day shipping to create an overall value package that draws people into Prime.
celim307 9y ago
I don't have an Alexa, so maybe this feature already exists, but will it tell you how much something is if u ask it? "Alexa how much is toothpaste". Also, I would buy in if I could set a price threshold for previously ordered items (aka, it would automatically warn me if toothpaste rose > 5% since my last purchase)
- cookiecaper 9y ago
  Voice purchasing is a major PITA. I've tried one or two times to order something through Echo and never really felt comfortable with it. It takes a long time to read the whole product name and description, it repeats elements (e.g. "Colgate SuperFresh Sparkling White-Blue Toothpaste Now Without Microbeads Per FDA Mandate is available for 5.55, would you like to buy it?" / "No" / "Crest MediumFresh Shiny Blue-White Toothpaste...") and to "compare", you have to remember multiple long strings like that, and know the difference between MediumFresh and SuperFresh without looking, etc. It's not a pleasant or desirable experience. You don't just say "Get me some Colgate for no more than $3" and be done with it. The Echo is also much worse at voice recognition than people make it out to be here on HN, and it responds to a very limited set of questions/tasks. Android's voice recognition (and presumably Google Home) is much better and it will provide useful answers to a lot of questions/tasks automatically. Despite Amazon's fancy overtures, the Echo seems to be mostly valued for its properties as a Bluetooth speaker. That's definitely the main value I get out of it. Streaming audio by a voice command is a nice convenience over tapping buttons on my phone to hook up the Bluetooth, but the core value is still in being a speaker.
  - rajathagasthya 9y ago
    I haven't had any problems with Alexa's voice recognition (and I have an accent), but I completely agree that voice purchasing is not a smooth experience at all. I tried to do that yesterday with Alexa, but it just gives you very limited options and it's optimized if you want to mostly reorder the same items over and over again. Also, it doesn't remember your cart if you interrupt the shopping conversation, go to an app and come back to order again. So you have repeat the whole process. Alexa is handy if you want news, weather or sports update, but it really needs to step up its UX for voice purchasing.
xapata 9y ago
> Most shoppers are extremely price-sensitive I haven't observed this. In fact, even the poorest seem to be quite price-insensitive on occasion.
- kazinator 9y ago
  It depends on the specific product and its absolute cost and such. It is the "price elasticity of demand". https://en.wikipedia.org/wiki/Price_elasticity_of_demand https://en.wikipedia.org/wiki/Price_elasticity_of_demand If people buy something in about the same volume when its price fluctuates wildly, the price elasticity is low and vice versa.
- dkrich 9y ago
  Making poor purchasing decisions and being willing to spend more for something you could get for less are two different things though. The fact that most people buy flights based on price and time of the flight over the quality of the airline demonstrates this to an extent. The grocery store chain Aldi's entire value proposition is that they cut out every modern convenience that costs money and pass that savings on to consumers. For example, you have to pay 0.25 if you want a cart, but you get it back if you return your cart, thus drastically reducing the need to have extra workers to go get carts and bring them back in from the parking lot. Also, they don't have bags for your groceries, rather they have empty cardboard boxes you can use if you want (similar to Costco or Sam's Club). You'd think that that would turn people off, but actually people are very easily swayed at the prospect of saving a few bucks.
  - kcorbitt 9y ago
    Far from the spartan shopping experience turning me off, I preferentially shopped at Aldi and Lidl when living in the UK. I like that it's noticeably cheaper, but more than that, I like the feeling that I'm doing my small part to limit wasteful excess consumption by freeing up the resources that traditional grocers spend on pretty packaging and arranging cans and packages on shelves.
- lpcrealmadrid 9y ago
  From the horse's mouth, this is their big bet in the long run: > As our shareholders know, we have made a decision to continuously and significantly lower prices for customers year after year as our efficiency and scale make it possible. This is an example of a very important decision that cannot be made in a math-based way. In fact, when we lower prices, we go against the math that we can do, which always says that the smart move is to raise prices. We have significant data related to price elasticity. With fair accuracy, we can predict that a price reduction of a certain percentage will result in an increase in units sold of a certain percentage. With rare exceptions, the volume increase in the short term is never enough to pay for the price decrease. However, our quantitative understanding of elasticity is short-term. We can estimate what a price reduction will do this week and this quarter. But we cannot numerically estimate the effect that consistently lowering prices will have on our business over five years or ten years or more. > Our judgment is that relentlessly returning efficiency improvements and scale economies to customers in the form of lower prices creates a virtuous cycle that leads over the long term to a much larger dollar amount of free cash flow, and thereby to a much more valuable Amazon.com. We’ve made similar judgments around Free Super Saver Shipping and Amazon Prime, both of which are expensive in the short term and—we believe—important and valuable in the long term." From the 2005 Letter to Shareholders: https://www.sec.gov/Archives/edgar/data/1018724/000119312506084815/dex991.htm https://www.sec.gov/Archives/edgar/data/1018724/000119312506...
panarky 9y ago
> Despite being the runaway leader in cloud service, they make very little money in it From a year ago: "The biggest source of the company’s profits is Amazon Web Services, the cloud computing business that started just over a decade ago and is now on track to bring in more than $10 billion a year in revenue." "Cloud computing is also much more profitable than Amazon’s North American retail business, which runs on thinner margins, and its international retail business, which runs at a loss. The operating income for A.W.S. more than tripled in the quarter to $604 million." https://www.nytimes.com/2016/04/29/technology/amazon-q1-earnings.html https://www.nytimes.com/2016/04/29/technology/amazon-q1-earn...
- dkrich 9y ago
  Exactly- they made $604 million in profit in the quarter. Certainly nothing to sneeze at, but to put that into perspective, the company currently has a market cap of about $430 billion.
  - panarky 9y ago
    That's $604 million per quarter. Annualized that's $2.4 billion. In profit. On a $10 billion business. That's growing at a 59% annual rate. With no competitor anywhere close. And AWS is just 10% of Amazon's business. Your claim that Amazon makes "very little" on AWS makes no sense.
    - dkrich 9y ago
      Okay, no money was hyperbole. It makes some money. But in the large cap tech space, it's a pittance. Apple probably makes more money on sales of the iPhone 6S. It's 10% of their business and yet it makes them the more money than the other 90%. What does that say about the overall business? Any other company that operated with similar fundamentals would get skewered. But because it's Amazon, they get a pass.
      - robszumski 9y ago
        Keep in mind that they're putting up these numbers in the hosting space, which has traditionally been a "race to the bottom", low margin game. While they do cut prices, they still maintain healthy margins on the services up stack. Pretty impressive profit numbers when you take into account their hardware spend, which must be enormous.
stevenwoo 9y ago
re: Amazon and low cost Don't know how accurate this is, but this article claims that Amazon, and in a different way, Google are gaming your preferences to try and maximize their profit by offering different prices to everyone, at different times of the day. Or maybe a large percentage of people care about convenience more than price. Not able to tell from just this. Except people who are sensitive to price need to carefully shop with price comparisons. https://www.theatlantic.com/magazine/archive/2017/05/how-online-shopping-makes-suckers-of-us-all/521448/ https://www.theatlantic.com/magazine/archive/2017/05/how-onl...
scholia 9y ago
> Most shoppers are extremely price-sensitive They are quite sensitive to the prices of things they buy regularly, but not as sensitive to the prices of things they buy rarely -- unless they are relatively expensive. Otherwise, price is only one factor. You also have to consider delivery times, convenience, support and other factors. I buy things from Amazon partly because I can reliably get them the next day, and they'll take them back if there's a problem, even if it's my mistake. > there's no money in delivering groceries to people. Groceries are notoriously low-margin, one of the lowest margin businesses there is, so delivering groceries to people doesn't seem like it's going to make Amazon the trillion-dollar company some people think it will eventually become. I agree about groceries. It's going to be particularly tough in areas where major supermarkets are already delivering groceries, which they do where I live.
ikeboy 9y ago
I don't know if you have much ecommerce experience. I can say I sell items every day on Amazon at twice the price they are going for at Walmart. Amazon customers are a lot less price sensitive on certain items than you think.
- dkrich 9y ago
  If that's true, why doesn't their e-commerce business make any money? I constantly hear this argument that they can turn on the profit spigot any time they want, they just haven't yet because, "strategy." But if what you are saying were true, they'd be making more money than Wal-Mart. But they aren't. In fact they aren't even close. They have essentially made a land-grab (very successfully) by subsidizing convenience, which is pretty much exactly what Uber did. The problem to me is that I don't see how they turn that into long term profitability. What got them to where they are is almost diametrically opposed to what will make them money.
  - ikeboy 9y ago
    I'm not saying they can do it on every or most items, I'm saying there are many items they can. They make large profits on some items, and lose large amounts on other items to keep customers coming back. If they stopped selling losing items (part of the reason they closed quidsi), they'd grow slower but make more. I can't find Walmart profit numbers for just the online part, or even revenue, but estimates I found say that Amazon is selling more than ten times as much than Walmart. (See http://www.cnbc.com/2016/12/23/amazon-grabbing-the-bulk-of-surging-online-sales-this-holiday.html http://www.cnbc.com/2016/12/23/amazon-grabbing-the-bulk-of-s...). Unless Walmart's margins are ten times better, Amazon made more from online.
  - thinkloop 9y ago
    Amazon's businesses are currently self sustaining and make tons of profit right now. Amazon then takes those profits and invests them in other businesses it thinks will make more profit later, removing their status as profit. That's why it's as easy as turning on the spigot, they can simply choose to stop expanding, everything else is proven.
paulcole 9y ago
> The notion that shoppers will one day buy things simply with the push of a button or saying "Alexa, get me some paper towels" seems extremely far-fetched to me. What year did you write this in?
- konschubert 9y ago
  I think he is aware of the fact that some people are doing this already. His point is they these people will be a very small minority, not enough to support Amazon's valuation.
hourislate 9y ago
I present to you an excellent analysis by Scott Galloway (NYU Prof) and owner of L2 that might change your mind. Scott Galloway - How Amazon is Dismantling Retail https://www.youtube.com/watch?v=3MOwRTTq1bY https://www.youtube.com/watch?v=3MOwRTTq1bY He is worth the watch.
- dkrich 9y ago
  Thanks, I'll check it out. I'm always open to opposing views and don't have any personal problem with Amazon or reason to want them to not succeed. I just see all the hoopla for Amazon and a lot of it seems based on ignoring market dynamics that people seem to consider very important for their competitors.
- specialist 9y ago
  I'm waiting for L2/Galloway/someone to assess the problem with fraud, counterfeits, etc. I'm having a hard time imagining how Amazon avoids the authenticity trap eBay and Alibaba have fallen into. Galloway observes that Amazon is destroying brands. Will Amazon side step counterfeiting by selling all their own stuff?
justicezyx 9y ago
I am surprised that this post was not downvoted. Several obviously wrong or weakly founded arguments: > The notion that shoppers will one day buy things simply with the push of a button or saying "Alexa, get me some paper towels" seems extremely far-fetched to me. This already happens. You probably means that most shoppers. But the problem or the concern is not if Amazon will provide such mechanism; rather, is if Amazon can continue to have strategic dominance over the primary portal to online shopping. If smart home becomes the primary portal, then Amazon is geared to achieve that. If it's some other form, Amazon has demonstrated necessary tech and business prowess to do that too. If online shopping is doomed, OK, then Amazon is doomed. > Most shoppers are extremely price-sensitive and won't buy things before researching the price, save possibly for a few low-price staples like toilet paper or soap. This is simply wrong. In reality, price sensitivity is not that important. Otherwise, Walmart should already become the "everything" store, and Amazon should have not been possible. > why would Amazon be the sole beneficiary of that development and not every grocery store? The answer is already here. Why Amazon becomes the single biggest winner of online shopping, while other players did not catch up. Whatever the answer is, it can be applied in the future. > Despite being the runaway leader in cloud service, they make very little money in it This is plain wrong. Check out their quarterly report. Cloud's margin is very good. Take a look at MSFT, GOOGLE, Oracle, and more. If this market is not going to produce high profit, there is no way everyone is joining in the competition. > I just think long term that they will settle in as a large American retailer that reshaped the retail landscape for other stores that will eventually catch up. If you are not impressed by a company reshape the retail industry, then I am not sure there will be anything that would impress you...
- dkrich 9y ago
  Do you typically down-vote posts that don't happen to agree with your world view? I don't see how your points are any more well-founded than mine as they are all based on conjecture and not facts. Arguments like "Cloud's margin is very good" may make sense to you, but typically a well-reasoned argument states a thesis followed by evidence supporting it and I'm not seeing that. You are also making all sorts of erroneous assumptions about what I said. I never said that I wasn't "impressed" by Amazon, in fact I think I actually said that what they've done is extraordinary. I also never said that online shopping, or Amazon for that matter, were "doomed." And to your point about Wal-Mart being the "everything" store- name all the retailers on Earth that are larger than Wal-Mart. I'd be interested to hear what you came up with because last time I checked, there weren't any. Wal-Mart is the everything store, and has been for a long time. Why do you suppose that is? Could it be that most shoppers are price-conscious? If your argument is simply that ecommerce hasn't overtaken brick-and-mortar yet, fine, but then why does Wal-Mart absolutely dominate every other brick-and-mortar? It's because they've always relentlessly focused on figuring out ways to lower prices for their customers. In fact despite what a lot of people think, Wal-Mart has one of the most sophisticated distribution and inventory management systems ever created. It wasn't so long ago that Wal-Mart was being cast as evil because of their tactics bullying product manufacturers, but now people are writing their eulogy. Sorry, but the idea that mass-market customers are highly price-sensitive is well-founded and beyond dispute. If you can't come up with a single potential threat to a business, you should probably take a step back and ask yourself if you're really looking at the situation objectively.
lowbloodsugar 9y ago
Please continue to tell everyone that Amazon stock is overvalued. Everyone else, please listen to this person.
graycat 9y ago
That's close to my view. The article makes a big deal out of Amazon's work with AI: Okay, they do some applied statistics like companies have been supposed to do, and some companies have done, going back more or less 100 years. A lot of their analytical, AI work will have to be classic operations research -- optimization including under uncertainty. E.g., operations research is just awash in work for shipping, inventory, optimizing a supply chain under uncertainty, etc. My view is that Amazon did well because of their Web site and there because of a biggie that came along just in time: Internet data rate that permitted sending lots and lots of nice pictures. So, apparently Amazon set up a nicely equipped group for taking good still images -- good in lighting and resolution -- that let customers do reasonably well informed shopping. Then IMHO, the Amazon Web site now should be easy enough to borrow from by Wal-Mart, Sears if they weren't going out of business, Macys, Target, ..., Tiffany's, etc. along with companies around the world. Then IMHO manufacturers in the US or anywhere in the world can also have such Web sites. E.g., want bed sheets, bath towels, shower curtains, bathroom looped rugs, etc., then just get these from the manufacturer, wherever. Then for shipping, Amazon is trying to replace FedEx and UPS -- I fail to see that they will be successful there. FedEx and UPS are doing well providing shipping services; the needs of Amazon are not that different from the needs of many other happy companies shipping via FedEx and UPS; FedEx and UPS have economies of scale, ship by plane or truck, ship internationally, likely ship via chartered plane if appropriate, etc. I don't see Amazon doing better. Then, net, each original supplier in the world that might sell via Amazon can have their own Web site and ship via FedEx or USP. But, what about a warehouse closer to the customer, do low cost trucking to the warehouse and then fast shipping to the customer once and order is placed? Gee, FedEx has been offering that variation for decades. For Amazon Web Services (AWS), what do they have that Google, Facebook, Microsoft, or other operators of big server farms have? My guess is very little. I'm failing to see that Amazon has any very significant long term advantages and, really, stands to be vulnerable to manufacturers running their own Web sites and shipping more or less directly to customers themselves. E.g., at Amazon can buy parts for a computer, e.g., case, motherboard, processor, graphics card, hard disk drives, video display, main memory, keyboard, mouse, etc. So the processor comes from, say, AMD or Intel. So, why should AMD/Intel not just sell direct? Kingston memory does that now -- can buy from Amazon or direct from Kingston. Brand? Well, the brands people want are Intel, Western Digital, Seagate, GE Force, Radeon, Asus, etc. Yes, now Amazon is starting to have house brands. Okay. In that case, the Amazon advantage is their house brands, but I don't see that as a major advantage. Amazon may deliver via self driving cars, drones, etc. Okay, but then so will others be able to do much the same. Indeed, as UPS discovered way back, there are biggie economies in one truck delivering in one area of customers packages from several sellers. Delivering groceries? Come ON guys: Now pizza and Chinese home deliveries are common, but they have not stopped people picking up their own pizza or Chinese carryout. Amazon has moved very quickly, much faster than Wal-Mart or Sears, but I fail to see that so far Amazon has a long term advantage.
tonyedgecombe 9y ago
I always bought from Amazon because they were one of the few e-commerce companies that took customer service seriously. Lately that seems to have lapsed so they tend not to be my first choice anymore.

by dkrich 9y ago

dkarl 9y ago

Looking forward, 10-20 years, maybe the delivery cost issue will be solved with self-driving vehicles and robotic deliveries. But then, why would Amazon be the sole beneficiary of that development and not every grocery store? 10-20 years, sure, but that's a big spread. What if it takes twenty years for grocery stores to get that stuff and Amazon has it in ten? Given the fragmentation of grocery stores and their focus on actual stores I imagine they will have a hard time catching up technologically, plus businesses with brick and mortar roots don't have a great track record at building ways for customers to bypass the brick and mortar. Imagine the time they'll waste on marketing, astroturf, and lobbying to try to stave off automated home delivery before they give up and actually try to make the technology work. That gives Amazon even more time make money and draw further ahead.

dkrich 9y ago
My thought is that the cost of delivery will eventually drop so much from technological shifts (self-driving vehicles, robotics, etc.) that all retailers will enjoy the same cost savings that people are predicting for Amazon. In other words, I don't think the last-mile delivery problem is going to be solved by Amazon and then enjoyed by them exclusively. It seems far more likely to me that the entire segment of local transportation will be reinvented by independent companies and utilized by all retailers. Think people owning their own self-driving vehicles that can stop and pick up their groceries, or independent local delivery services that utilize self-driving vehicles instead of Amazon-branded delivery vans. At current cost levels, there's no way that delivering goods can ever be more profitable than selling them in-store. Last mile delivery is simply too complicated and costly. It's pretty much the entire reason that the USPS loses so much money while UPS and FedEx make enormous profits. So the only way that the costs could be made similar is if the costs for last mile delivery dropped to an incremental cost of nearly zero.
- dkarl 9y ago
  There's more than last-mile delivery, though. Amazon is automating its warehouses right now. Managing fragile and perishable goods will be an extra twist for them, but grocery stories will be starting from scratch (unless they're already working on the problem, which would be the right thing but seems unlikely.) Automated hand-off between an automated warehouse and an automated delivery platform is going to be a hard standard for grocery stores to compete with, especially on timeliness.
- ladzoppelin 9y ago
  I thought this "last mile problem" is what Amazon is trying to solve and why they never made a profit for all those years. They are the ones building the "robots" and reinvesting is all this tech to solve such a hard problem.
  - dkrich 9y ago
    From what I've seen they've done two things. First, yes, they've basically spent huge amounts of what would otherwise be profits on subsidizing two day delivery. They have dabbled in various methods of last mile delivery, like using their own drivers or drones, but to this day 90+% of my Prime deliveries are delivered by UPS or FedEx. The rest are either Lasership or Amazon delivery both of which have a noticeable drop off in reliability. The last mile cost is extremely complex and I see no evidence that Amazon will figure out zero cost two or single day deliveries. FedEx nor UPS has been able to, and that's their core business! I do think that it will be solved one day, but it won't be by Amazon. It'll be due to an advancement of lots of outside technologies that will be enjoyed by all retailers. And if we're being honest, isn't that outcome better for consumers? The second thing that Amazon has done is subsidize things like free Video, books, and now Thursday night NFL in addition to free two day shipping to create an overall value package that draws people into Prime.

celim307 9y ago

I don't have an Alexa, so maybe this feature already exists, but will it tell you how much something is if u ask it? "Alexa how much is toothpaste". Also, I would buy in if I could set a price threshold for previously ordered items (aka, it would automatically warn me if toothpaste rose > 5% since my last purchase)

cookiecaper 9y ago
Voice purchasing is a major PITA. I've tried one or two times to order something through Echo and never really felt comfortable with it. It takes a long time to read the whole product name and description, it repeats elements (e.g. "Colgate SuperFresh Sparkling White-Blue Toothpaste Now Without Microbeads Per FDA Mandate is available for 5.55, would you like to buy it?" / "No" / "Crest MediumFresh Shiny Blue-White Toothpaste...") and to "compare", you have to remember multiple long strings like that, and know the difference between MediumFresh and SuperFresh without looking, etc. It's not a pleasant or desirable experience. You don't just say "Get me some Colgate for no more than $3" and be done with it. The Echo is also much worse at voice recognition than people make it out to be here on HN, and it responds to a very limited set of questions/tasks. Android's voice recognition (and presumably Google Home) is much better and it will provide useful answers to a lot of questions/tasks automatically. Despite Amazon's fancy overtures, the Echo seems to be mostly valued for its properties as a Bluetooth speaker. That's definitely the main value I get out of it. Streaming audio by a voice command is a nice convenience over tapping buttons on my phone to hook up the Bluetooth, but the core value is still in being a speaker.
- rajathagasthya 9y ago
  I haven't had any problems with Alexa's voice recognition (and I have an accent), but I completely agree that voice purchasing is not a smooth experience at all. I tried to do that yesterday with Alexa, but it just gives you very limited options and it's optimized if you want to mostly reorder the same items over and over again. Also, it doesn't remember your cart if you interrupt the shopping conversation, go to an app and come back to order again. So you have repeat the whole process. Alexa is handy if you want news, weather or sports update, but it really needs to step up its UX for voice purchasing.

xapata 9y ago

> Most shoppers are extremely price-sensitive I haven't observed this. In fact, even the poorest seem to be quite price-insensitive on occasion.

kazinator 9y ago
It depends on the specific product and its absolute cost and such. It is the "price elasticity of demand". https://en.wikipedia.org/wiki/Price_elasticity_of_demand https://en.wikipedia.org/wiki/Price_elasticity_of_demand If people buy something in about the same volume when its price fluctuates wildly, the price elasticity is low and vice versa.
dkrich 9y ago
Making poor purchasing decisions and being willing to spend more for something you could get for less are two different things though. The fact that most people buy flights based on price and time of the flight over the quality of the airline demonstrates this to an extent. The grocery store chain Aldi's entire value proposition is that they cut out every modern convenience that costs money and pass that savings on to consumers. For example, you have to pay 0.25 if you want a cart, but you get it back if you return your cart, thus drastically reducing the need to have extra workers to go get carts and bring them back in from the parking lot. Also, they don't have bags for your groceries, rather they have empty cardboard boxes you can use if you want (similar to Costco or Sam's Club). You'd think that that would turn people off, but actually people are very easily swayed at the prospect of saving a few bucks.
- kcorbitt 9y ago
  Far from the spartan shopping experience turning me off, I preferentially shopped at Aldi and Lidl when living in the UK. I like that it's noticeably cheaper, but more than that, I like the feeling that I'm doing my small part to limit wasteful excess consumption by freeing up the resources that traditional grocers spend on pretty packaging and arranging cans and packages on shelves.
lpcrealmadrid 9y ago
From the horse's mouth, this is their big bet in the long run: > As our shareholders know, we have made a decision to continuously and significantly lower prices for customers year after year as our efficiency and scale make it possible. This is an example of a very important decision that cannot be made in a math-based way. In fact, when we lower prices, we go against the math that we can do, which always says that the smart move is to raise prices. We have significant data related to price elasticity. With fair accuracy, we can predict that a price reduction of a certain percentage will result in an increase in units sold of a certain percentage. With rare exceptions, the volume increase in the short term is never enough to pay for the price decrease. However, our quantitative understanding of elasticity is short-term. We can estimate what a price reduction will do this week and this quarter. But we cannot numerically estimate the effect that consistently lowering prices will have on our business over five years or ten years or more. > Our judgment is that relentlessly returning efficiency improvements and scale economies to customers in the form of lower prices creates a virtuous cycle that leads over the long term to a much larger dollar amount of free cash flow, and thereby to a much more valuable Amazon.com. We’ve made similar judgments around Free Super Saver Shipping and Amazon Prime, both of which are expensive in the short term and—we believe—important and valuable in the long term." From the 2005 Letter to Shareholders: https://www.sec.gov/Archives/edgar/data/1018724/000119312506084815/dex991.htm https://www.sec.gov/Archives/edgar/data/1018724/000119312506...

panarky 9y ago

> Despite being the runaway leader in cloud service, they make very little money in it From a year ago: "The biggest source of the company’s profits is Amazon Web Services, the cloud computing business that started just over a decade ago and is now on track to bring in more than $10 billion a year in revenue." "Cloud computing is also much more profitable than Amazon’s North American retail business, which runs on thinner margins, and its international retail business, which runs at a loss. The operating income for A.W.S. more than tripled in the quarter to $604 million." https://www.nytimes.com/2016/04/29/technology/amazon-q1-earnings.html https://www.nytimes.com/2016/04/29/technology/amazon-q1-earn...

dkrich 9y ago
Exactly- they made $604 million in profit in the quarter. Certainly nothing to sneeze at, but to put that into perspective, the company currently has a market cap of about $430 billion.
- panarky 9y ago
  That's $604 million per quarter. Annualized that's $2.4 billion. In profit. On a $10 billion business. That's growing at a 59% annual rate. With no competitor anywhere close. And AWS is just 10% of Amazon's business. Your claim that Amazon makes "very little" on AWS makes no sense.
  - dkrich 9y ago
    Okay, no money was hyperbole. It makes some money. But in the large cap tech space, it's a pittance. Apple probably makes more money on sales of the iPhone 6S. It's 10% of their business and yet it makes them the more money than the other 90%. What does that say about the overall business? Any other company that operated with similar fundamentals would get skewered. But because it's Amazon, they get a pass.
    - robszumski 9y ago
      Keep in mind that they're putting up these numbers in the hosting space, which has traditionally been a "race to the bottom", low margin game. While they do cut prices, they still maintain healthy margins on the services up stack. Pretty impressive profit numbers when you take into account their hardware spend, which must be enormous.

stevenwoo 9y ago

re: Amazon and low cost Don't know how accurate this is, but this article claims that Amazon, and in a different way, Google are gaming your preferences to try and maximize their profit by offering different prices to everyone, at different times of the day. Or maybe a large percentage of people care about convenience more than price. Not able to tell from just this. Except people who are sensitive to price need to carefully shop with price comparisons. https://www.theatlantic.com/magazine/archive/2017/05/how-online-shopping-makes-suckers-of-us-all/521448/ https://www.theatlantic.com/magazine/archive/2017/05/how-onl...

scholia 9y ago

> Most shoppers are extremely price-sensitive They are quite sensitive to the prices of things they buy regularly, but not as sensitive to the prices of things they buy rarely -- unless they are relatively expensive. Otherwise, price is only one factor. You also have to consider delivery times, convenience, support and other factors. I buy things from Amazon partly because I can reliably get them the next day, and they'll take them back if there's a problem, even if it's my mistake. > there's no money in delivering groceries to people. Groceries are notoriously low-margin, one of the lowest margin businesses there is, so delivering groceries to people doesn't seem like it's going to make Amazon the trillion-dollar company some people think it will eventually become. I agree about groceries. It's going to be particularly tough in areas where major supermarkets are already delivering groceries, which they do where I live.

ikeboy 9y ago

I don't know if you have much ecommerce experience. I can say I sell items every day on Amazon at twice the price they are going for at Walmart. Amazon customers are a lot less price sensitive on certain items than you think.

dkrich 9y ago
If that's true, why doesn't their e-commerce business make any money? I constantly hear this argument that they can turn on the profit spigot any time they want, they just haven't yet because, "strategy." But if what you are saying were true, they'd be making more money than Wal-Mart. But they aren't. In fact they aren't even close. They have essentially made a land-grab (very successfully) by subsidizing convenience, which is pretty much exactly what Uber did. The problem to me is that I don't see how they turn that into long term profitability. What got them to where they are is almost diametrically opposed to what will make them money.
- ikeboy 9y ago
  I'm not saying they can do it on every or most items, I'm saying there are many items they can. They make large profits on some items, and lose large amounts on other items to keep customers coming back. If they stopped selling losing items (part of the reason they closed quidsi), they'd grow slower but make more. I can't find Walmart profit numbers for just the online part, or even revenue, but estimates I found say that Amazon is selling more than ten times as much than Walmart. (See http://www.cnbc.com/2016/12/23/amazon-grabbing-the-bulk-of-surging-online-sales-this-holiday.html http://www.cnbc.com/2016/12/23/amazon-grabbing-the-bulk-of-s...). Unless Walmart's margins are ten times better, Amazon made more from online.
- thinkloop 9y ago
  Amazon's businesses are currently self sustaining and make tons of profit right now. Amazon then takes those profits and invests them in other businesses it thinks will make more profit later, removing their status as profit. That's why it's as easy as turning on the spigot, they can simply choose to stop expanding, everything else is proven.

paulcole 9y ago

> The notion that shoppers will one day buy things simply with the push of a button or saying "Alexa, get me some paper towels" seems extremely far-fetched to me. What year did you write this in?

konschubert 9y ago
I think he is aware of the fact that some people are doing this already. His point is they these people will be a very small minority, not enough to support Amazon's valuation.

hourislate 9y ago

I present to you an excellent analysis by Scott Galloway (NYU Prof) and owner of L2 that might change your mind. Scott Galloway - How Amazon is Dismantling Retail https://www.youtube.com/watch?v=3MOwRTTq1bY https://www.youtube.com/watch?v=3MOwRTTq1bY He is worth the watch.

dkrich 9y ago
Thanks, I'll check it out. I'm always open to opposing views and don't have any personal problem with Amazon or reason to want them to not succeed. I just see all the hoopla for Amazon and a lot of it seems based on ignoring market dynamics that people seem to consider very important for their competitors.
specialist 9y ago
I'm waiting for L2/Galloway/someone to assess the problem with fraud, counterfeits, etc. I'm having a hard time imagining how Amazon avoids the authenticity trap eBay and Alibaba have fallen into. Galloway observes that Amazon is destroying brands. Will Amazon side step counterfeiting by selling all their own stuff?

justicezyx 9y ago

I am surprised that this post was not downvoted. Several obviously wrong or weakly founded arguments: > The notion that shoppers will one day buy things simply with the push of a button or saying "Alexa, get me some paper towels" seems extremely far-fetched to me. This already happens. You probably means that most shoppers. But the problem or the concern is not if Amazon will provide such mechanism; rather, is if Amazon can continue to have strategic dominance over the primary portal to online shopping. If smart home becomes the primary portal, then Amazon is geared to achieve that. If it's some other form, Amazon has demonstrated necessary tech and business prowess to do that too. If online shopping is doomed, OK, then Amazon is doomed. > Most shoppers are extremely price-sensitive and won't buy things before researching the price, save possibly for a few low-price staples like toilet paper or soap. This is simply wrong. In reality, price sensitivity is not that important. Otherwise, Walmart should already become the "everything" store, and Amazon should have not been possible. > why would Amazon be the sole beneficiary of that development and not every grocery store? The answer is already here. Why Amazon becomes the single biggest winner of online shopping, while other players did not catch up. Whatever the answer is, it can be applied in the future. > Despite being the runaway leader in cloud service, they make very little money in it This is plain wrong. Check out their quarterly report. Cloud's margin is very good. Take a look at MSFT, GOOGLE, Oracle, and more. If this market is not going to produce high profit, there is no way everyone is joining in the competition. > I just think long term that they will settle in as a large American retailer that reshaped the retail landscape for other stores that will eventually catch up. If you are not impressed by a company reshape the retail industry, then I am not sure there will be anything that would impress you...

dkrich 9y ago
Do you typically down-vote posts that don't happen to agree with your world view? I don't see how your points are any more well-founded than mine as they are all based on conjecture and not facts. Arguments like "Cloud's margin is very good" may make sense to you, but typically a well-reasoned argument states a thesis followed by evidence supporting it and I'm not seeing that. You are also making all sorts of erroneous assumptions about what I said. I never said that I wasn't "impressed" by Amazon, in fact I think I actually said that what they've done is extraordinary. I also never said that online shopping, or Amazon for that matter, were "doomed." And to your point about Wal-Mart being the "everything" store- name all the retailers on Earth that are larger than Wal-Mart. I'd be interested to hear what you came up with because last time I checked, there weren't any. Wal-Mart is the everything store, and has been for a long time. Why do you suppose that is? Could it be that most shoppers are price-conscious? If your argument is simply that ecommerce hasn't overtaken brick-and-mortar yet, fine, but then why does Wal-Mart absolutely dominate every other brick-and-mortar? It's because they've always relentlessly focused on figuring out ways to lower prices for their customers. In fact despite what a lot of people think, Wal-Mart has one of the most sophisticated distribution and inventory management systems ever created. It wasn't so long ago that Wal-Mart was being cast as evil because of their tactics bullying product manufacturers, but now people are writing their eulogy. Sorry, but the idea that mass-market customers are highly price-sensitive is well-founded and beyond dispute. If you can't come up with a single potential threat to a business, you should probably take a step back and ask yourself if you're really looking at the situation objectively.

lowbloodsugar 9y ago

Please continue to tell everyone that Amazon stock is overvalued. Everyone else, please listen to this person.

graycat 9y ago

That's close to my view. The article makes a big deal out of Amazon's work with AI: Okay, they do some applied statistics like companies have been supposed to do, and some companies have done, going back more or less 100 years. A lot of their analytical, AI work will have to be classic operations research -- optimization including under uncertainty. E.g., operations research is just awash in work for shipping, inventory, optimizing a supply chain under uncertainty, etc. My view is that Amazon did well because of their Web site and there because of a biggie that came along just in time: Internet data rate that permitted sending lots and lots of nice pictures. So, apparently Amazon set up a nicely equipped group for taking good still images -- good in lighting and resolution -- that let customers do reasonably well informed shopping. Then IMHO, the Amazon Web site now should be easy enough to borrow from by Wal-Mart, Sears if they weren't going out of business, Macys, Target, ..., Tiffany's, etc. along with companies around the world. Then IMHO manufacturers in the US or anywhere in the world can also have such Web sites. E.g., want bed sheets, bath towels, shower curtains, bathroom looped rugs, etc., then just get these from the manufacturer, wherever. Then for shipping, Amazon is trying to replace FedEx and UPS -- I fail to see that they will be successful there. FedEx and UPS are doing well providing shipping services; the needs of Amazon are not that different from the needs of many other happy companies shipping via FedEx and UPS; FedEx and UPS have economies of scale, ship by plane or truck, ship internationally, likely ship via chartered plane if appropriate, etc. I don't see Amazon doing better. Then, net, each original supplier in the world that might sell via Amazon can have their own Web site and ship via FedEx or USP. But, what about a warehouse closer to the customer, do low cost trucking to the warehouse and then fast shipping to the customer once and order is placed? Gee, FedEx has been offering that variation for decades. For Amazon Web Services (AWS), what do they have that Google, Facebook, Microsoft, or other operators of big server farms have? My guess is very little. I'm failing to see that Amazon has any very significant long term advantages and, really, stands to be vulnerable to manufacturers running their own Web sites and shipping more or less directly to customers themselves. E.g., at Amazon can buy parts for a computer, e.g., case, motherboard, processor, graphics card, hard disk drives, video display, main memory, keyboard, mouse, etc. So the processor comes from, say, AMD or Intel. So, why should AMD/Intel not just sell direct? Kingston memory does that now -- can buy from Amazon or direct from Kingston. Brand? Well, the brands people want are Intel, Western Digital, Seagate, GE Force, Radeon, Asus, etc. Yes, now Amazon is starting to have house brands. Okay. In that case, the Amazon advantage is their house brands, but I don't see that as a major advantage. Amazon may deliver via self driving cars, drones, etc. Okay, but then so will others be able to do much the same. Indeed, as UPS discovered way back, there are biggie economies in one truck delivering in one area of customers packages from several sellers. Delivering groceries? Come ON guys: Now pizza and Chinese home deliveries are common, but they have not stopped people picking up their own pizza or Chinese carryout. Amazon has moved very quickly, much faster than Wal-Mart or Sears, but I fail to see that so far Amazon has a long term advantage.

tonyedgecombe 9y ago

I always bought from Amazon because they were one of the few e-commerce companies that took customer service seriously. Lately that seems to have lapsed so they tend not to be my first choice anymore.