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>machines bring lower prices Do you have any source about this? If the costumer is already willing to pay a price there would be no point in lowering the price
by o_p 7y ago
>machines bring lower prices
Do you have any source about this? If the costumer is already willing to pay a price there would be no point in lowering the price just because you automated the process. Or better said, theres no point in investing in machines if your profit margin is not going to get wider.
- edanm 7y agoSure there is. If they don't do it, someone else will be able to outcompete on price, eventually at least. And yes, most of our history is full of examples of newer technologies lowering cost, that's kind of the whole reason that or civilization is more advanced (materially) than it was in the past.
- lostphilosopher 7y agoThere's also the "number of purchases * purchase price" equation which means you can make more money by reducing price if it means (enough) more people by the product, or buy more of them.
- nerdponx 7y agoRight now they have no need to lower prices. They can hold their lower production costs as a threat to any competitor who might be tempted to enter a price war, without ever needing to actually lower their prices.
- zwily 7y agoYeah, one of Bezos’ oldest mantras is “Your margin is my opportunity”.
- benatkin 7y agoAmazon has been quite the monopolistic company lately. Just because a company started winning by outdoing the competition doesn't mean that will continue to be their only way of succeeding. Even the most principled companies will adopt a few anticompetitive practices here and there when they get big. I think with Amazon building out their delivery and subscription options, they can hold back a lot of pressure to share the savings from automation with consumers.
- elamje 7y agoBezos also said his top 3 priorities are lower prices, faster delivery, and wider selection.
- nerdponx 7y agoIt's worth expanding on this. Because I think it gets lost in the rhetoric, whether deliberately or by accident. A profit-maximizing firm sets prices that maximize its expected profit. This seems tautological, but it's important and I think it's implications aren't appreciated. If your prices are already beating the competition, and you already have a solid reputation for low prices, there is no incentive to continue lowering prices, even as you cut costs. This is why monopolies are considered "bad", because they eliminate incentives for firms to care at all about the welfare of consumers. In undergrad economics classes, you might learn that prices are set equal to marginal cost (including opportunity cost). But that is only true under specific and relatively strong equilibrium conditions, which I don't believe apply to Amazon.
- elamje 7y agoI agree with the general idea. In your experience, when has Amazon acted negatively towards the welfare of the consumer? The point I was talking about has to do with the internal labor publicity at Amazon which rarely affects the consumer.
- andrewmutz 7y agoThe reason that this tends to lower prices for consumers is that these innovations rarely stay confined to the companies that invent them. If this lowers costs for amazon to fulfill orders, then these techniques tend to get adopted by their competitors. And once adopted by competitors, when everyone's margins have increased, these companies do compete on price. This process doesn't happen immediately but it does happen.
- skybrian 7y agoLowering costs gives a business the possibility of cutting prices, for example to try to increase market share. Whether they take it or not depends on the situation. But Amazon often does.
- elamje 7y agoI don’t think you need an academic paper for everything
- ksec 7y ago>If the costumer is already willing to pay a price there would be no point in lowering the price just because you automated the process. Your margins is someone else opportunity. I believe Jeff said something similar along the line. By having a economy of scale in Warehouses, Automation, Transportation and consistently lower margin Amazon achieve a moat that can not be easily replicated even with billions of dollars.
- illtakemychaces 7y agoCustomers are always willing to pay the lowest possible price if they are not paying that already.
- TrackerFF 7y agoIf you have number of competitors, then the ones that automate things can lower their prices due to decreased costs - they will gain a competitive edge, when all else is equal - as things tend to be in this industry (price and shipping are really the only variables, for the consumer) But, on the other hand, if there are little to no competition, like a monopoly, then Amazon is obviously free to just keep their prices and increase their margins.