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Maybe someone can explain the unit economics of how Amazon makes a profit. Identify the product category (outside of the marketplace business and AWS) where Ama

Maybe someone can explain the unit economics of how Amazon makes a profit. Identify the product category (outside of the marketplace business and AWS) where Amazon has a cost advantage versus the most direct competitor - Best Buy, Petsmart, Netflix, Costco, etc. It's hard to do.

petra 9y ago
Most people don't buy at Amazon because it is the cheapest.
- reaperducer 9y ago
  People on the internet tend to ignore the value of a quality item, and of one-day Prime shipping. And even within Amazon, I'll buy something marked "sold and shipped by Amazon" before I'll be a similar product from "ReallyGoodOverSeasNumberOneCo." And I've had incredible luck with the Amazon Basics line of goods. So far, just batteries and headphones and other miscellany, but the quality is far superior to any of the Eastern drop-shippers. Then again, it was AT&T that ran commercials in the 80's saying "You get what you pay for" and "Be the best and you'll never go out of business." AT&T is now out of business, with its name bought by Southwestern Bell after its death in order to cash in on the brand.
  - kevin_b_er 9y ago
    I'll warn you right now that even if you buy something "sold and shipped by Amazon" you can get one of the items sold by 3rd party as new. Amazon dumps them all in the same box. I believe they call it "co-mingling". You may still get junk/counterfeit for all your work. The only things actually protected properly are direct Amazon brands. So you are already fully deceived by "sold and shipped by Amazon". It may not be.
    - reaperducer 9y ago
      I've heard about co-mingling, but taking a chance with "sold and shipped by Amazon" is about the best I can do.
- sharemywin 9y ago
  cost not price. You be the lowest price and have higher costs for a while, but eventually something has to change. My assumption is the Cloud market is much smaller than the everything market. If the cloud market becomes mature and profits shrink, their growth stalls. If they divert too much cloud money to big physical infrastructure then are they able to stay ahead of the feature curve against competitors? Then again as both a customer and vendor of cloud maybe their ability to determine new use cases and customer needs is more in-tune.
  - petra 9y ago
    But Amazon only competes with Google and Microsoft. Both have high margins in their non-cloud products, and are probably not interested in reducing those margins.
mr_luc 9y ago
But why would you exclude of marketplace and AWS? That's where rivers of money come from to help them enter into new categories! Setting any of the major parts aside would disregard the benefits Amazon reaps from being so integrated. For instance, do we credit the market with Prime membership? Well, now that Amazon originals and prime video exist, there are people who are Prime members because of video. And for others, it may be the various benefits in combination. And, in turn, Amazon is able to use Prime membership money to outspend Netflix. Etc.
- soniman 9y ago
  We can estimate the value of AWS and marketplace by comparing to Azure, eBay, etc. So it's not that hard to put a number on those businesses. That leaves the legacy business, selling stuff on the internet. The history of "integrated" businesses is generally poor. Has your bank tried to get you to invest in a mutual fund or buy life insurance? It's natural adjacency and yet no bank has managed to make it work. Here is the former head of Amazon programming basically admitting that Netflix is impossible to compete with. Multiply across every other product category. https://twitter.com/ballmatthew/status/973382126992175104 https://twitter.com/ballmatthew/status/973382126992175104
jes5199 9y ago
yeah maybe I pay twice as much dollars, but my _time_ is so much more scarce than my disposable income. I get an Amazon package delivered right to my door, almost every day. If I was gonna drive to Petsmart, that would take a several hour commitment. And the selection would be limited by their pbysical space - there’s no guarantee they’d even have what I’m looking for! It’s pretty rare that I’m going to think that’s a good idea, even if it saves me twenty bucks.

petra 9y ago

Most people don't buy at Amazon because it is the cheapest.

reaperducer 9y ago
People on the internet tend to ignore the value of a quality item, and of one-day Prime shipping. And even within Amazon, I'll buy something marked "sold and shipped by Amazon" before I'll be a similar product from "ReallyGoodOverSeasNumberOneCo." And I've had incredible luck with the Amazon Basics line of goods. So far, just batteries and headphones and other miscellany, but the quality is far superior to any of the Eastern drop-shippers. Then again, it was AT&T that ran commercials in the 80's saying "You get what you pay for" and "Be the best and you'll never go out of business." AT&T is now out of business, with its name bought by Southwestern Bell after its death in order to cash in on the brand.
- kevin_b_er 9y ago
  I'll warn you right now that even if you buy something "sold and shipped by Amazon" you can get one of the items sold by 3rd party as new. Amazon dumps them all in the same box. I believe they call it "co-mingling". You may still get junk/counterfeit for all your work. The only things actually protected properly are direct Amazon brands. So you are already fully deceived by "sold and shipped by Amazon". It may not be.
  - reaperducer 9y ago
    I've heard about co-mingling, but taking a chance with "sold and shipped by Amazon" is about the best I can do.
sharemywin 9y ago
cost not price. You be the lowest price and have higher costs for a while, but eventually something has to change. My assumption is the Cloud market is much smaller than the everything market. If the cloud market becomes mature and profits shrink, their growth stalls. If they divert too much cloud money to big physical infrastructure then are they able to stay ahead of the feature curve against competitors? Then again as both a customer and vendor of cloud maybe their ability to determine new use cases and customer needs is more in-tune.
- petra 9y ago
  But Amazon only competes with Google and Microsoft. Both have high margins in their non-cloud products, and are probably not interested in reducing those margins.

mr_luc 9y ago

But why would you exclude of marketplace and AWS? That's where rivers of money come from to help them enter into new categories! Setting any of the major parts aside would disregard the benefits Amazon reaps from being so integrated. For instance, do we credit the market with Prime membership? Well, now that Amazon originals and prime video exist, there are people who are Prime members because of video. And for others, it may be the various benefits in combination. And, in turn, Amazon is able to use Prime membership money to outspend Netflix. Etc.

soniman 9y ago
We can estimate the value of AWS and marketplace by comparing to Azure, eBay, etc. So it's not that hard to put a number on those businesses. That leaves the legacy business, selling stuff on the internet. The history of "integrated" businesses is generally poor. Has your bank tried to get you to invest in a mutual fund or buy life insurance? It's natural adjacency and yet no bank has managed to make it work. Here is the former head of Amazon programming basically admitting that Netflix is impossible to compete with. Multiply across every other product category. https://twitter.com/ballmatthew/status/973382126992175104 https://twitter.com/ballmatthew/status/973382126992175104

jes5199 9y ago

yeah maybe I pay twice as much dollars, but my _time_ is so much more scarce than my disposable income. I get an Amazon package delivered right to my door, almost every day. If I was gonna drive to Petsmart, that would take a several hour commitment. And the selection would be limited by their pbysical space - there’s no guarantee they’d even have what I’m looking for! It’s pretty rare that I’m going to think that’s a good idea, even if it saves me twenty bucks.