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"Amazon spends more than $90 a year for each Prime customer, losing $11 annually for each subscriber." "Losing"? If the other stat of purchase volume increasi
by ShabbyDoo 15y ago
"Amazon spends more than $90 a year for each Prime customer, losing $11 annually for each subscriber."
"Losing"? If the other stat of purchase volume increasing from $400 to $900 is true, Amazon is buying volume business for just a 1% discount. I wonder how the profit margins skew between average purchases and those which only happened because a customer had signed-up for prime? I recently ordered some collar stays and had them overnighted for $4. Their cost was $20 for what amounted to some little pieces of stainless steel (exactly what I wanted). The margin on these has to be much better than a DVD player.
- jrockway 15y agoYeah, the article is very poorly written. What they meant to say was that Amazon invests $11 in each customer, and the result is a doubling of purchases. I am sure Amazon makes more than $11 out of every $900 in sales, which makes this a good deal for them.
- beagle3 15y agoThe amazon profit margin is something like 3%, which some people consider unsustainable; 3% over the god-knows-how-many billions that flow through them is excellent business. The potential sustainability problem comes from having no margin for error or non-trivial change in structural costs. I don't know enough about it to have an opinion. Regardless, 3% of $400 == $12, so with these numbers, Amazon breaks even on a new $400/year client, and makes money on any client that spends more than that.
- polshaw 15y agoAs a point of comparison, Tesco, one of the UK's largest companies, also has a 3% profit margin. They do take £1 in every 7 spent in the UK high street, so it obviously works quite nicely for them. So at volume, it is very sustainable.