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Amazon does not make money shipping products. they are trying to destroy competition by the service equivalent of illegal dumping, using their AWS profits to e

Amazon does not make money shipping products. they are trying to destroy competition by the service equivalent of illegal dumping, using their AWS profits to eliminate competition by taking a loss on every single other part of their business. thats not really what is meant by a free market.

eru 4y ago
> they are trying to destroy competition by the service equivalent of illegal dumping, using their AWS profits to eliminate competition by taking a loss on every single other part of their business. That kind of subsidy of the average American would be very nice of Amazon. Alas, it's highly unlikely. See https://www.econlib.org/library/Columns/y2017/Hendersonpredatory.html https://www.econlib.org/library/Columns/y2017/Hendersonpreda...
- TheCoelacanth 4y ago
  You can't refute something that is actually happening based on economic principles. Your theory has to match the data, not the other way around. This is the equivalent of saying "that plane isn't flying because gravity holds things down".
- nerdponx 4y ago
  > But Firm A now has a tough problem. If it sells for anything more than $5, another competitor might enter. There is no reason to think that another competitor couldn’t match the $5 average cost. And there is some reason to think that its cost could be lower than $5. Why? The new competitor could buy Firm B’s assets at fire-sale prices, thus reducing average cost. Ah yes, the mythical world where the assets of an enormous but deteriorating corporation are just sitting around on a shelf for purchase by any plucky entrepreneur with enough vision, bootstraps, and good old American sack, who will of course be able to restart the whole enterprise immediately, and, having purchased the whole thing on the cheap, will have so greatly reduced average cost that they can immediately call the predator's bluff and restart the same price war, this time with the upper hand and victory in sight. Of course this argument makes no sense except in a world of spherical cows and perfectly rational actors. The more plausible argument against Amazon operating their logistics business at a loss is the obvious fact that they have invested enormous resources into squeezing efficiency out of their logistics business, to the point of being now-infamously abusive of their delivery drivers and warehouse staff. Keeping marginal cost as low as possible clearly matters a lot to Amazon management. What's more likely is that they have invested in keeping marginal cost down specifically in order to run their logistics business at a very small but positive margin and still compete on price in order to establish and maintain dominance and high volume. Don't forget that they are also skimming value off of several points in the e-commerce lifecycle, basically at every point except actually charging customers for shipping, but that's probably more than offset by all the Prime accounts that people renew every year but never get their money's worth out of. Then again, this is just speculation. I haven't actually looked at their financial statements, and maybe someone with more finance expertise can weigh in on whether there's anything more to be learned there.
  - eru 4y ago
    > The more plausible argument against Amazon operating their logistics business at a loss is the obvious fact that they have invested enormous resources into squeezing efficiency out of their logistics business, [...] Seems like a good thing! > Ah yes, the mythical world where the assets of an enormous but deteriorating corporation are just sitting around on a shelf for purchase by any plucky entrepreneur [...] Well, blame all the laws and regulation that make 'hostile' takeovers so hard.
    - nerdponx 4y ago
      > Seems like a good thing! I think it is. However they're engaged in plenty of other sketchy and unethical practices, so let's maybe hold off on the ticker tape parade hailing our great Job Creator Bezos as a national hero and success story for laissez-faire "free" market economics.
      - eru 4y ago
        Jobs automated away would be a more useful metric to hail someone as a hero than jobs created. (Otherwise, war and destruction of any kind would be the best thing ever..)
benced 4y ago
This is generally false. Amazon has lost money in North America every quarter this year as part of a pandemic hangover (they over invested in warehouses). Prior to Q4 2021, their North American segment was profitable.
- deathanatos 4y ago
  If I Google "how much does amazon make on shipping", of the results on the first page that contain the statistic we're looking for, all of them indicate Amazon is losing money on shipping. [1]: https://www.statista.com/statistics/236503/amazons-annual-shipping-revenue-and-outbound-shipping-costs/ https://www.statista.com/statistics/236503/amazons-annual-sh... [2]: https://www.geekwire.com/2017/true-cost-convenience-amazons-annual-shipping-losses-top-7b-first-time/ https://www.geekwire.com/2017/true-cost-convenience-amazons-... [3]: https://www.practicalecommerce.com/will-amazon-convert-shipping-expense-into-profit https://www.practicalecommerce.com/will-amazon-convert-shipp... although it notes that you can change what numbers one uses and lie with statistics
HDThoreaun 4y ago
Amazon retail makes all their money selling ads. So sure, you can say they don't make money shipping products, but it's because they're using "free" shipping to build a platform that sells extremely profitable ads.

eru 4y ago

> they are trying to destroy competition by the service equivalent of illegal dumping, using their AWS profits to eliminate competition by taking a loss on every single other part of their business. That kind of subsidy of the average American would be very nice of Amazon. Alas, it's highly unlikely. See https://www.econlib.org/library/Columns/y2017/Hendersonpredatory.html https://www.econlib.org/library/Columns/y2017/Hendersonpreda...

TheCoelacanth 4y ago
You can't refute something that is actually happening based on economic principles. Your theory has to match the data, not the other way around. This is the equivalent of saying "that plane isn't flying because gravity holds things down".
nerdponx 4y ago
> But Firm A now has a tough problem. If it sells for anything more than $5, another competitor might enter. There is no reason to think that another competitor couldn’t match the $5 average cost. And there is some reason to think that its cost could be lower than $5. Why? The new competitor could buy Firm B’s assets at fire-sale prices, thus reducing average cost. Ah yes, the mythical world where the assets of an enormous but deteriorating corporation are just sitting around on a shelf for purchase by any plucky entrepreneur with enough vision, bootstraps, and good old American sack, who will of course be able to restart the whole enterprise immediately, and, having purchased the whole thing on the cheap, will have so greatly reduced average cost that they can immediately call the predator's bluff and restart the same price war, this time with the upper hand and victory in sight. Of course this argument makes no sense except in a world of spherical cows and perfectly rational actors. The more plausible argument against Amazon operating their logistics business at a loss is the obvious fact that they have invested enormous resources into squeezing efficiency out of their logistics business, to the point of being now-infamously abusive of their delivery drivers and warehouse staff. Keeping marginal cost as low as possible clearly matters a lot to Amazon management. What's more likely is that they have invested in keeping marginal cost down specifically in order to run their logistics business at a very small but positive margin and still compete on price in order to establish and maintain dominance and high volume. Don't forget that they are also skimming value off of several points in the e-commerce lifecycle, basically at every point except actually charging customers for shipping, but that's probably more than offset by all the Prime accounts that people renew every year but never get their money's worth out of. Then again, this is just speculation. I haven't actually looked at their financial statements, and maybe someone with more finance expertise can weigh in on whether there's anything more to be learned there.
- eru 4y ago
  > The more plausible argument against Amazon operating their logistics business at a loss is the obvious fact that they have invested enormous resources into squeezing efficiency out of their logistics business, [...] Seems like a good thing! > Ah yes, the mythical world where the assets of an enormous but deteriorating corporation are just sitting around on a shelf for purchase by any plucky entrepreneur [...] Well, blame all the laws and regulation that make 'hostile' takeovers so hard.
  - nerdponx 4y ago
    > Seems like a good thing! I think it is. However they're engaged in plenty of other sketchy and unethical practices, so let's maybe hold off on the ticker tape parade hailing our great Job Creator Bezos as a national hero and success story for laissez-faire "free" market economics.
    - eru 4y ago
      Jobs automated away would be a more useful metric to hail someone as a hero than jobs created. (Otherwise, war and destruction of any kind would be the best thing ever..)

benced 4y ago

This is generally false. Amazon has lost money in North America every quarter this year as part of a pandemic hangover (they over invested in warehouses). Prior to Q4 2021, their North American segment was profitable.

deathanatos 4y ago
If I Google "how much does amazon make on shipping", of the results on the first page that contain the statistic we're looking for, all of them indicate Amazon is losing money on shipping. [1]: https://www.statista.com/statistics/236503/amazons-annual-shipping-revenue-and-outbound-shipping-costs/ https://www.statista.com/statistics/236503/amazons-annual-sh... [2]: https://www.geekwire.com/2017/true-cost-convenience-amazons-annual-shipping-losses-top-7b-first-time/ https://www.geekwire.com/2017/true-cost-convenience-amazons-... [3]: https://www.practicalecommerce.com/will-amazon-convert-shipping-expense-into-profit https://www.practicalecommerce.com/will-amazon-convert-shipp... although it notes that you can change what numbers one uses and lie with statistics

HDThoreaun 4y ago

Amazon retail makes all their money selling ads. So sure, you can say they don't make money shipping products, but it's because they're using "free" shipping to build a platform that sells extremely profitable ads.