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I’ve worked for Amazon. The thing you have to remember on the retail side is much of the focus is on CP (contribution profit) and much of analysis has to do wit

I’ve worked for Amazon. The thing you have to remember on the retail side is much of the focus is on CP (contribution profit) and much of analysis has to do with finding the largest negative CP products in different marketplaces and pulling levers to make them less negative. There’s a large number of negative CP items carried just because it improves customer selection which helps drive larger cart orders. I never heard of squeezing more profits out of already profitable products probably because positive CP is an indicator of a competitive price point.

throwawayor624 7y ago
Grocery stores have been doing this for decades. "Our milk supply expires at the end of the week? 50% off!" And then they raise the price of eggs, bread, peanut butter, and other frequently purchased items by 5 cents each.
- angstrom 7y ago
  That's not the same. This is more along the lines of examining what is causing the negative CP. The margin is impacted by several factors that determine the cost, but then you can go a step further and look at the net impact on profit based on the items it was purchased with. Much of what is sold on Amazon is not stocked by Amazon. Therefore the symbiotic relationship that is best is to maximize vendor profit AND Amazon profit. This means being competitive on the Amazon marketplace as well as against other retailers and that can be best achieved by Amazon lowering the net margins to be profitable, but not uncompetitive. These are things from the quality of images and detail about the product to the shipping options, to the damage incurred during storage/shipping. The end goal is to optimize for the customer propensity to checkout and not return the items which is also a good sign of customer satisfaction. Most people who walk into a grocery are going to walk out with whatever they put in their cart. Cart abandonment is much higher in e-commerce and so there's a good deal of effort understanding what lowers the propensity to complete the order.

throwawayor624 7y ago

Grocery stores have been doing this for decades. "Our milk supply expires at the end of the week? 50% off!" And then they raise the price of eggs, bread, peanut butter, and other frequently purchased items by 5 cents each.

angstrom 7y ago
That's not the same. This is more along the lines of examining what is causing the negative CP. The margin is impacted by several factors that determine the cost, but then you can go a step further and look at the net impact on profit based on the items it was purchased with. Much of what is sold on Amazon is not stocked by Amazon. Therefore the symbiotic relationship that is best is to maximize vendor profit AND Amazon profit. This means being competitive on the Amazon marketplace as well as against other retailers and that can be best achieved by Amazon lowering the net margins to be profitable, but not uncompetitive. These are things from the quality of images and detail about the product to the shipping options, to the damage incurred during storage/shipping. The end goal is to optimize for the customer propensity to checkout and not return the items which is also a good sign of customer satisfaction. Most people who walk into a grocery are going to walk out with whatever they put in their cart. Cart abandonment is much higher in e-commerce and so there's a good deal of effort understanding what lowers the propensity to complete the order.