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I am amazed at how amazon remains doing business with so low margins or no profits. We love amazon at my house and being Prime members, we are almost ordering e

I am amazed at how amazon remains doing business with so low margins or no profits. We love amazon at my house and being Prime members, we are almost ordering everything under the sun from Amazon that we possibly can. Here is why we love it: - The reviews are actually useful. I just bought a 70 inch TV through amazon and the critical and helpful reviews really helped me get going with settings on the TV that would have taken hours to research on google otherwise. - Shipping is superfast. Most items are delivered within a day or two with prime. - Btw, if you are a parent of a baby, then check out Amazon Mom. It is free with Prime membership and gives you further discounts if you subscribe to ordering baby stuff like formula, diapers etc. on amazon. Also we compared the prices and it is almost impossible to beat amazon for these things as well. - No need to go drive to a store. Sometimes I need to buy $10 item for which I might end up spending $2 on gas. - Easiest returns if the need arises. - Not to mention that Amazon prime gives you access to lot of great videos, movies, shows etc as a bonus. One drawback with prime is that not all items are Prime eligible. Specially what they call "add on items"

gcb1 13y ago
but their inventory sucks. way too limited. unless you count in the other sellers. i.e. stuff not marked as sold by amazon, then all that you said stop to be true. reviews means little because when bad reviews pile up, they create a new listing. shipping is weird. some stuff may be shipped from china. arduino clones. oh and that, you get arduinos clones being sold as originals. at least the returns are usually still better than the alternatives.
- asdfologist 13y ago
  Also, a large portion of the reviews are fake.
  - enraged_camel 13y ago
    Not sure why you got downvoted, because you are absolutely right. Fake Amazon reviews is actually a huge PR business.
  - jessaustin 13y ago
    I doubt fake reviews could be eliminated without making everything suck. Don't believe everything you read. At least with popular items a sort of consensus emerges.
  - rubberband 13y ago
    You mean the 5-star reviews which state that Product X is amazing, and the reviewer would buy it again, recommend it to their friends and purchase all future products made by that company... Are fake? Kidding aside, it's horrible. I find myself going to other sites for reviews (NewEgg is a good one), then buying on Amazon. Crappy of me, I suppose. But they've hooked me with Prime.
    - jrs99 13y ago
      There are a lot of reviews i read that don't make any sense at all, like they were generated by some algorithm and the review fails to say anything even remotely meaningful. I always wonder where those reviews come from and they always have like 3 out of 3 people found this review helpful instantly the minute the review is written. I love and use Amazon all the time. but there are so many weird things about it. Sometimes I buy something thinking it's from Amazon, but it's not, it's from another seller, and sometimes the product is not "mint." It seems like it was opened before and put back in and there are finger prints all over it or something that is "slightly" off like a tiny dent. I feel like there's definitely room for something better.
  - chaz 13y ago
    Honestly, reviews everywhere run the risk of being fake. Amazon, Target, YouTube, App Store, Yelp, Zagat, etc. Caveat emptor. I do read the negative Amazon reviews, though. I'm also finding myself looking at their customer-submitted photos to get a better sense of size+function, and checking on YouTube for reviews as well. I'd rather get a review of a radiator thermostat from a guy that has reviewed a few of them (and posted videos of them all) than trust a bunch of 50-word reviews anywhere else.
- therobot24 13y ago
  - inventory is limited? which amazon website are you visiting? - anecdotal, but in the several years of using amazon, never had a problem with any of the 'non-amazon' sellers. There are ratings for a reason. That's like saying you didn't get what you wanted from one ebay listing so all of ebay is bad - reviews don't mean nothing..what's your problem with the current reviews. Like anything you read, take it with a grain of salt. Amazon also includes verified reviews, as in, people who actually purchased the product. Search google if amazon isn't enough for you - based on the rest of your post you ordered what you thought was an arduino from a non-amazon seller off of amazon, found out it was a clone, and was pissed cause you thought the reviews would have made that more clear
  - Pxtl 13y ago
    > - inventory is limited? which amazon website are you visiting? Idunno, maybe he's Canadian? Amazon.ca is a joke compared to the American inventory.
    - graeme 13y ago
      Fellow Canadian here. Check out amazon.ca again if you haven't looked in the past few months. It's still far from amazon.com, but they just added quite a few non-book items. I recently ordered three electronic items that normally I would have had to get shipped across the border.
    - Aldo_MX 13y ago
      If you believe Amazon.ca is a joke try Amazon.com.mx
  - lookingsideways 13y ago
    - inventory is limited? which amazon website are you visiting? The amazon.es selection is much more limited than amazon.co.uk's selection. I typically end up buying from the UK and having it shipped across as it will usually be cheaper despite the extra shipping charges.
  - gcb1 13y ago
    feel free to buy from any random seller. if you filter by products sold by amazon their inventory diminishes to the point that you cant choose more than one brand
- deleted 13y ago
  [deleted]
- toomuchtodo 13y ago
  Looking through the last several years of my Amazon account, I've purchased over ~$170K in product from them, ranging from Cisco switches/firewalls to jeans to phones/smartphone cases and even some more.....avant garde items for my wife. Inventory sucks? Reviews meaning nothing? Incorrect!
jon-wood 13y ago
There are things bought on Amazon which leave me wondering how they can possibly be making money on them. I recently bought 4kg of cat litter from Amazon, which was shipped to me next day for free - I may be utterly out of touch with how much they're paying for shipping, but I can't see the purchase price even covering that side, never mind the product itself.
- pallandt 13y ago
  They most likely make up for it (the small loss or lack of profit) by selling other items, at least that's what happens at other companies applying the same strategy. It evens out and they can boast about the huge number of SKUs they're able to offer.
  - milesskorpen 13y ago
    ... and they don't actually have to worry about actually making money. It's run as a charity for consumers paid for by investors.
    - MichaelGG 13y ago
      Can you elaborate? Google Finance shows a profit of $631M for 2011, and $1.1B for the year prior, while only a loss of $39M for 2012. Their IPO is $1.50 compared to $332 today. Did they really take on so much investment that they still haven't made it back?
      - 001sky 13y ago
        The thing is, companies don't pay tax on sales, but on profits. And Amazon is a company with a very strange attitude to profit: it doesn't seem to like it. In the year 2012, it made a worldwide loss of $39m, even as it had sales totalling $61bn. That year was an aberration, with a costly acquisition weighing the company down, but previous years have been similar. 2011 saw just $631m net income on worldwide sales of $48bn, and in 2010 – the company's most profitable year to date – it scraped $1.15bn of profit on revenue of $34bn. 631/48000=? 1,15/34=? Those are your margins. If they are less than T+400bps[1] you are "losing money" for investors. Unless, there are other investors looking to take the stock off your hands. It's hard to imagine where all those investors think the extra profits will come from. Do they expect Amazon to suddenly announce one day that it has finished trying to grow, and will be raising prices immediately? Or do they think that eventually, every single one of its competitors will have given up, and folded beneath the company's relentless expansion? Unless you have a real answer for this, you are betting on the greater fool theory. Of course, you may have a better answe than this. [Digging around a bit, it seems to (/may) be tax avoidance. Amazon is eating fulfillment costs in lock-step with its increasing gross profits on product sales]. [1] technically, multiplied by another factor of around 1.8, which is the sales/asset ratio. This number appears to be <6%. http://static.cdn-seekingalpha.com/uploads/2013/1/8/2164901-13576813760855193-Andr%C3%A9-Fernon_origin.png http://static.cdn-seekingalpha.com/uploads/2013/1/8/2164901-...
abirfrankel 13y ago
They are starting to limit the terms of service for Prime members, I think for this very reason but, I'm pretty unhappy about it.
- DennisP 13y ago
  In what ways?
  - marincounty 13y ago
    They make it difficult to return inexpensive items. It's happened two times when I have been a Prime Member. Once, they sent me the wrong model radio. It was only 10 dollars, but it's the principal of the blah. When I tried to return it was not just a click--I had to call, and the number was actually busy. Plus--that two day shipping--works great for their items, but it's hit, or miss with resellers.
    - chaz 13y ago
      I've only returned a few items over the years, and I've spent a lot of money with them. I tried to return an $11 product last year. They just refunded me the money and told me to keep it. I had a $35 product stolen off my doorstep once (empty box left behind). They shipped me a new one, no questions asked.
    - Lewisham 13y ago
      You can also do a web chat, which is a lot easier then telephoning.
BillyMaize 13y ago
Same here. My girlfriend and I both buy basically all non food items from Amazon because we live in a small town and we are a 20 minute interstate drive away from any stores other than krogers. This has saved us a ton of money on gas and lots of time that easily makes up for the prime cost each year. The one time I have had to return a package was very easy as well. I can't imagine ever going back to spending gas money and my free time driving to a store because they might have what I want, usually at a higher price, without a rating system to see what others who bought the same thing have experienced.
- dmix 13y ago
  Ugh, I have Amazon prime in Canada and use it constantly, but amazon.ca has an incredibly smaller selection of items than .com. Amazon seems to be slowly expanding it, but still only 25% of the inventory of it's American counterpart. So jealous. Border/customs tariffs from American websites ruins any cost savings (like paying $20 in fees for a shipping a $40 item [1]). That is the root problem, given the geographic nearity. http://www.ups.com/content/ca/en/shipping/cost/zones/customs_clearance.html http://www.ups.com/content/ca/en/shipping/cost/zones/customs...
  - scott_karana 13y ago
    I've been shipping to a US drop location at the border, and crossing by car. Paying duties and taxes that way still makes it worth me while. :-) (I use Ship Happens, but there are many more)
  - voltagex_ 13y ago
    Try living in Australia. It's a great country but Amazon won't ship many things to me.
    - ajtaylor 13y ago
      This is particularly true for electronics. However, I've noticed that if the fulfiller is Amazon then there's a better chance of shipping an item to Australia. I can't remember what it was now, but I remember one item where storage option A was fulfilled by Amazon and would ship to AU but storage option B was fulfilled by another company who would NOT ship to AU. There's also an option somewhere to restrict search results to only items that can be shipped to the chosen country. You'll be disappointed by the reduced selection though. In this case, I suggest Amazon UK who has reasonable shipping to Australia.
holri 13y ago
Reasons not to buy from amazon: https://stallman.org/amazon.html https://stallman.org/amazon.html
- VMG 13y ago
  tl;dr because it's not a commune I specifically find the argument funny that amazon "steals" from me because it doesn't pay "enough" taxes, even though they pass their savings to me more directly than the state ever will
  - Kototama 13y ago
    You are confusing state redistribution of income and wealth with competitive offers. If the state was only to satisfy particular interests then you would have clientelism.
  - unsigner 13y ago
    In the sufficiently left mind, you are unworthy to spend your own money, the state will spend them better; thus, passing savings to you is bad for you.
    - icebraining 13y ago
      The existence of the state is inseparable from the existence of slavery. -- Marx (who apparently was not "sufficiently left" - or maybe you're just ignorant of what the Left defends. Protip: the Democrats are not "left" by any reasonable standard)
      - mynewwork 13y ago
        Better tip - 99% of America would without hesitation agree with a statement like "The Democrat party is the main left-wing party in America". (Similar with 'right' and 'Republican'). Would the terms "left" and "right" have the same meaning in all parts of the world at all points in history? Of course not. But when people make a statement without context, you can assume they mean the terms as the majority of their contemporaries use them.
Spooky23 13y ago
> Also we compared the prices and it is almost impossible to beat amazon for these things as well. Huh? Where did you look? For formula, diapers, wipes, etc. Amazon didn't come close to Target, even without coupons. Amazon was like $23 for diapers that were $19.99 at Target. I've been a prime member forever, and wanted to use Amazon, but it easily cost 10-20% more, even with automatic ordering. Combine Target retail or sale prices with coupons and the 5% credit card discount and it was an unbeatable combo.
- vtbose 13y ago
  I agree. Items are no longer, consistently cheaper. (ex:Horizon 8oz Milk packs, are at least 2x more than our local grocery stores.) Even their Subscribe and Save program changed to introduce a 5 item minimum. Seems like, they are finally able to charge a (small)premium for the 'Amazon Shopping Experience'.
- simplemath 13y ago
  Costco. Even if all you bought at Costco was formula and diapers, you'd more than subsidize the $50 membership over the course of a year vs. what you'd pay basically anywhere else. Of course the economy of scale applies to that membership fee. Scaling across more kids makes a better value prop.
  - chiph 13y ago
    Plus, if you get the Costco Amex card, you'd get cash back. I got $170 back last year with my $110 Executive membership, and I didn't even try very hard.
    - simplemath 13y ago
      Besides the not-inconsiderable saving money part, more valuable to me is it allows me to compress shopping trips. Shaving 2-3 hours a month off the shopping time budget? F yes. I hate shopping.
      - 13y ago
001sky 13y ago
I am amazed at how amazon remains doing business with so low margins or no profits. It's called the bait and switch? That's always how it works. They will extract value from you, likely in ways you don't understand. Or cant comprehend. At times you won't expect. Anything else is a mathematical impossibility, given the fiduciary repsonsibility of management. Its not if but when.
- 001sky 13y ago
  see: https://news.ycombinator.com/item?id=6594314 https://news.ycombinator.com/item?id=6594314 (Dont forget this applies to taxes as well through NOLs.)
cylinder 13y ago
I love Prime, but there's no way that shipping a 20-roll pack of paper towels[1] that cost less than the store, in a giant cardboard box, in two days via an airplane to my door, is sustainable. They are taking a loss, even factoring in the membership fees, and at some point they won't be able to get away with it any longer. [1] Or a big heavy television. Or anything else you can find on Amazon.
- RealCasually 13y ago
  On the paper towels I agree, but large electronics like TVs are sourced from local warehouses and hand delivered similarly to how Best Buy would do so.
- mwfunk 13y ago
  I don't know why this got any downvotes, it's absolutely true. If someone's going to downvote something, they should always at least comment on what they don't like about it.
  - tomkarlo 13y ago
    It's not necessarily true. It's just idle / uninformed speculation with almost no insight into Amazon's internal operations or supporting facts. That's why it's getting downvoted. Just because he doesn't know how they can do it profitably doesn't mean they don't know how to do it profitably.
- jmccree 13y ago
  I would guess this is why amazon keeps expanding their distribution footprint so much. I would hazard a guess a rather large percentage of the US population is already in a 2-day ground shipping radius. In the past couple years, I can only think of one or two things shipped via prime that came via air mail, even overnighted stuff came ground.
  - Zancarius 13y ago
    > I would hazard a guess a rather large percentage of the US population is already in a 2-day ground shipping radius. I live in a fairly low population state, and there are at least 2 major UPS distribution centers within a 3-6 hour drive. My small town also has an UPS office and ground facility where shipments through them to the surrounding communities originate. Even FedEx has distribution centers nearby (although their shipping here is notoriously slow and clumsy). So, I'd believe it. I can't think of anything gets shipped out here via air and much of this area is rural. The only reason Amazon's "free" shipping is slow to this region is likely because they probably hold orders destined for a specific area or zip code until they can get a bulk shipping rate on all of the items and send them out via the same carrier. I've speculated about this before because Amazon will happily hold onto items for 1-2 weeks via free shipping that will arrive within 2-3 days after they've been marked as "shipped." Amazon Prime shipped items usually arrive within 2 days, and like you, I'm pretty sure those are overnight ground.
FrankenPC 13y ago
Agree with everything you said. They have the perfect formula. Unfortunately, I see them ultimately going the way of Ebay if we don't see some healthy competition sometime soon.
steven2012 13y ago
I came in to write exactly what you wrote above, point-for-point. I love Amazon, I with buying big-ticket items like stoves and refrigerators were easier through them. And I still have a bit of trepidation of buying TVs, etc, and would prefer going to Costco for those, since shipping back is so expensive in case something goes wrong. If they have a solution for that they will get all my business.
- mkr-hn 13y ago
  Look for a Sears Outlet: http://www.searsoutlet.com/ http://www.searsoutlet.com/ My parents bought a giant freezer for $100 from one years ago. It sips power and keeps a week supply of food frozen. The catch is that you might have to live with a harmless scratch or ding.
- kuwahara 13y ago
  Amazon has "Enhanced delivery" for things like TVs. Basically they use a special carrier that will come into your house and set-up the TV and make sure it's working before you sign for delivery. More info in the link below http://www.amazon.com/gp/help/customer/display.html/ref=help_search_1-1?ie=UTF8&nodeId=201238350&qid=1382472450&sr=1-1 http://www.amazon.com/gp/help/customer/display.html/ref=help...
enscr 13y ago
This. Amazon has done almost everything right for the customer (as Bezos emphasizes in all his interviews). For me, the primary weak point is the dubious quality of third part sellers sometimes. Other than that, it's an awesome place to shop.
- twistedpair 13y ago
  Crazy, a company that uses its economy of scale to drive down costs, cut prices across the board (TV's, books, AWS) and reinvest those profits in new services and products, continuously. Quite different from the rent seeking companies in the hardware and telco spaces. If Apple and TWC were Amazon, you're iPhone would cost $150 without a contract and you're cable internet would be $10/mo.
  - AsymetricCom 13y ago
    Amazon doesn't have the... 'Washington Infrastructure' to be able to compete at a regulatory level, so they have to compete on price like any other homeless vagabond.
    - sudoscience 13y ago
      Amazon has lobbyists and Obama has given speeches in Amazon fulfillment centers...
      - donavanm 13y ago
        For PACs in the 2012 cycle Amazons PAC spent $220K, Microsoft spent $2.3M, Oracle $540. In direct lobbying this year Amazon spent $1.7M, Microsoft $5.5M, and Oracle $3.7M. So yeah, Amazon is paying to get representation. But they're still significantly smaller than the "enterprise" folks.
incision 13y ago
>"- Easiest returns if the need arises." This has actually become the most compelling thing about Amazon for me. I've been a Prime member since the start and Amazon has taken care of me without question even when it's not entirely "their" problem (stolen packages, marketplace sellers, my own mistakes). Also, a not entirely well known benefit of Prime is the option to share the free 2-day shipping benefit with four family (They call it "household member", but no need to have the same address) members.
- enra 13y ago
  Thanks! Didn't know about this
mmagin 13y ago
My experience is that a lot of bulky but cheap items cost more than in local stores. They're rolling shipping costs into the product cost.
ck2 13y ago
Note that sellers can have any review deleted. So lack of negative reviews is meaningless on Amazon.
- pkulak 13y ago
  Is that true? Then why isn't everything 5 stars?
- umanwizard 13y ago
  I don't think this is true -- it sounds completely antithetical to Amazon's values. Do you have something to back it up?
  - ck2 13y ago
    We sold some books on amazon as a publisher a few years ago (not just a third party but the actual listing owner) and Amazon happily removed any derogatory review we requested without hesitation. To be fair, there is good reason for this but I am sure it is easily abused, but it is not like they checked the review, the action was near immediate when they got the request.
- oskee80 13y ago
  I see very highly rated negative reviews all the time. They even make a point to show you helpful critical reviews.
limejuice 13y ago
I used to be an Amazon fanboy, too, but I don't buy much from them anymore after (1) Target, Best Buy, and other retailers started pricematching amazon prices. Since Target gives you 5% off for using Target card, Target is now almost always cheaper than amazon. and (2) Amazon started charging sales tax. That was a HUGE reason I ordered items from them. I still like amazon, and still have Amazon Prime, and I am still looking forward to their Black Friday / Cyber Monday deals.
- adestefan 13y ago
  If Amazon ever started charging sales tax in Maryland, then I'd probably stop purchasing from them too.
pbreit 13y ago
Amazon could raise prices negligibly and/or curtail capital expenditures and become insanely profitable. But why would it do that?
loceng 13y ago
The point of business is you're doing it right if you maintain $0 profits - otherwise you're paying taxes, and you're not undercutting competition - so you're not killing them off. This is why Amazon is now only upping their $25 to $35 minimum. I'm wondering how much competition got destroyed by that early on.
nilved 13y ago
> I am amazed at how amazon remains doing business with so low margins or no profits. The sweatshop labor probably helps them a lot. They're worse than WalMart.
- joshmn 13y ago
  Shhh don't remind us.

gcb1 13y ago

but their inventory sucks. way too limited. unless you count in the other sellers. i.e. stuff not marked as sold by amazon, then all that you said stop to be true. reviews means little because when bad reviews pile up, they create a new listing. shipping is weird. some stuff may be shipped from china. arduino clones. oh and that, you get arduinos clones being sold as originals. at least the returns are usually still better than the alternatives.

asdfologist 13y ago
Also, a large portion of the reviews are fake.
- enraged_camel 13y ago
  Not sure why you got downvoted, because you are absolutely right. Fake Amazon reviews is actually a huge PR business.
- jessaustin 13y ago
  I doubt fake reviews could be eliminated without making everything suck. Don't believe everything you read. At least with popular items a sort of consensus emerges.
- rubberband 13y ago
  You mean the 5-star reviews which state that Product X is amazing, and the reviewer would buy it again, recommend it to their friends and purchase all future products made by that company... Are fake? Kidding aside, it's horrible. I find myself going to other sites for reviews (NewEgg is a good one), then buying on Amazon. Crappy of me, I suppose. But they've hooked me with Prime.
  - jrs99 13y ago
    There are a lot of reviews i read that don't make any sense at all, like they were generated by some algorithm and the review fails to say anything even remotely meaningful. I always wonder where those reviews come from and they always have like 3 out of 3 people found this review helpful instantly the minute the review is written. I love and use Amazon all the time. but there are so many weird things about it. Sometimes I buy something thinking it's from Amazon, but it's not, it's from another seller, and sometimes the product is not "mint." It seems like it was opened before and put back in and there are finger prints all over it or something that is "slightly" off like a tiny dent. I feel like there's definitely room for something better.
- chaz 13y ago
  Honestly, reviews everywhere run the risk of being fake. Amazon, Target, YouTube, App Store, Yelp, Zagat, etc. Caveat emptor. I do read the negative Amazon reviews, though. I'm also finding myself looking at their customer-submitted photos to get a better sense of size+function, and checking on YouTube for reviews as well. I'd rather get a review of a radiator thermostat from a guy that has reviewed a few of them (and posted videos of them all) than trust a bunch of 50-word reviews anywhere else.
therobot24 13y ago
- inventory is limited? which amazon website are you visiting? - anecdotal, but in the several years of using amazon, never had a problem with any of the 'non-amazon' sellers. There are ratings for a reason. That's like saying you didn't get what you wanted from one ebay listing so all of ebay is bad - reviews don't mean nothing..what's your problem with the current reviews. Like anything you read, take it with a grain of salt. Amazon also includes verified reviews, as in, people who actually purchased the product. Search google if amazon isn't enough for you - based on the rest of your post you ordered what you thought was an arduino from a non-amazon seller off of amazon, found out it was a clone, and was pissed cause you thought the reviews would have made that more clear
- Pxtl 13y ago
  > - inventory is limited? which amazon website are you visiting? Idunno, maybe he's Canadian? Amazon.ca is a joke compared to the American inventory.
  - graeme 13y ago
    Fellow Canadian here. Check out amazon.ca again if you haven't looked in the past few months. It's still far from amazon.com, but they just added quite a few non-book items. I recently ordered three electronic items that normally I would have had to get shipped across the border.
  - Aldo_MX 13y ago
    If you believe Amazon.ca is a joke try Amazon.com.mx
- lookingsideways 13y ago
  - inventory is limited? which amazon website are you visiting? The amazon.es selection is much more limited than amazon.co.uk's selection. I typically end up buying from the UK and having it shipped across as it will usually be cheaper despite the extra shipping charges.
- gcb1 13y ago
  feel free to buy from any random seller. if you filter by products sold by amazon their inventory diminishes to the point that you cant choose more than one brand
deleted 13y ago
[deleted]
toomuchtodo 13y ago
Looking through the last several years of my Amazon account, I've purchased over ~$170K in product from them, ranging from Cisco switches/firewalls to jeans to phones/smartphone cases and even some more.....avant garde items for my wife. Inventory sucks? Reviews meaning nothing? Incorrect!

jon-wood 13y ago

There are things bought on Amazon which leave me wondering how they can possibly be making money on them. I recently bought 4kg of cat litter from Amazon, which was shipped to me next day for free - I may be utterly out of touch with how much they're paying for shipping, but I can't see the purchase price even covering that side, never mind the product itself.

pallandt 13y ago
They most likely make up for it (the small loss or lack of profit) by selling other items, at least that's what happens at other companies applying the same strategy. It evens out and they can boast about the huge number of SKUs they're able to offer.
- milesskorpen 13y ago
  ... and they don't actually have to worry about actually making money. It's run as a charity for consumers paid for by investors.
  - MichaelGG 13y ago
    Can you elaborate? Google Finance shows a profit of $631M for 2011, and $1.1B for the year prior, while only a loss of $39M for 2012. Their IPO is $1.50 compared to $332 today. Did they really take on so much investment that they still haven't made it back?
    - 001sky 13y ago
      The thing is, companies don't pay tax on sales, but on profits. And Amazon is a company with a very strange attitude to profit: it doesn't seem to like it. In the year 2012, it made a worldwide loss of $39m, even as it had sales totalling $61bn. That year was an aberration, with a costly acquisition weighing the company down, but previous years have been similar. 2011 saw just $631m net income on worldwide sales of $48bn, and in 2010 – the company's most profitable year to date – it scraped $1.15bn of profit on revenue of $34bn. 631/48000=? 1,15/34=? Those are your margins. If they are less than T+400bps[1] you are "losing money" for investors. Unless, there are other investors looking to take the stock off your hands. It's hard to imagine where all those investors think the extra profits will come from. Do they expect Amazon to suddenly announce one day that it has finished trying to grow, and will be raising prices immediately? Or do they think that eventually, every single one of its competitors will have given up, and folded beneath the company's relentless expansion? Unless you have a real answer for this, you are betting on the greater fool theory. Of course, you may have a better answe than this. [Digging around a bit, it seems to (/may) be tax avoidance. Amazon is eating fulfillment costs in lock-step with its increasing gross profits on product sales]. [1] technically, multiplied by another factor of around 1.8, which is the sales/asset ratio. This number appears to be <6%. http://static.cdn-seekingalpha.com/uploads/2013/1/8/2164901-13576813760855193-Andr%C3%A9-Fernon_origin.png http://static.cdn-seekingalpha.com/uploads/2013/1/8/2164901-...

abirfrankel 13y ago

They are starting to limit the terms of service for Prime members, I think for this very reason but, I'm pretty unhappy about it.

DennisP 13y ago
In what ways?
- marincounty 13y ago
  They make it difficult to return inexpensive items. It's happened two times when I have been a Prime Member. Once, they sent me the wrong model radio. It was only 10 dollars, but it's the principal of the blah. When I tried to return it was not just a click--I had to call, and the number was actually busy. Plus--that two day shipping--works great for their items, but it's hit, or miss with resellers.
  - chaz 13y ago
    I've only returned a few items over the years, and I've spent a lot of money with them. I tried to return an $11 product last year. They just refunded me the money and told me to keep it. I had a $35 product stolen off my doorstep once (empty box left behind). They shipped me a new one, no questions asked.
  - Lewisham 13y ago
    You can also do a web chat, which is a lot easier then telephoning.

BillyMaize 13y ago

Same here. My girlfriend and I both buy basically all non food items from Amazon because we live in a small town and we are a 20 minute interstate drive away from any stores other than krogers. This has saved us a ton of money on gas and lots of time that easily makes up for the prime cost each year. The one time I have had to return a package was very easy as well. I can't imagine ever going back to spending gas money and my free time driving to a store because they might have what I want, usually at a higher price, without a rating system to see what others who bought the same thing have experienced.

dmix 13y ago
Ugh, I have Amazon prime in Canada and use it constantly, but amazon.ca has an incredibly smaller selection of items than .com. Amazon seems to be slowly expanding it, but still only 25% of the inventory of it's American counterpart. So jealous. Border/customs tariffs from American websites ruins any cost savings (like paying $20 in fees for a shipping a $40 item [1]). That is the root problem, given the geographic nearity. http://www.ups.com/content/ca/en/shipping/cost/zones/customs_clearance.html http://www.ups.com/content/ca/en/shipping/cost/zones/customs...
- scott_karana 13y ago
  I've been shipping to a US drop location at the border, and crossing by car. Paying duties and taxes that way still makes it worth me while. :-) (I use Ship Happens, but there are many more)
- voltagex_ 13y ago
  Try living in Australia. It's a great country but Amazon won't ship many things to me.
  - ajtaylor 13y ago
    This is particularly true for electronics. However, I've noticed that if the fulfiller is Amazon then there's a better chance of shipping an item to Australia. I can't remember what it was now, but I remember one item where storage option A was fulfilled by Amazon and would ship to AU but storage option B was fulfilled by another company who would NOT ship to AU. There's also an option somewhere to restrict search results to only items that can be shipped to the chosen country. You'll be disappointed by the reduced selection though. In this case, I suggest Amazon UK who has reasonable shipping to Australia.

holri 13y ago

Reasons not to buy from amazon: https://stallman.org/amazon.html https://stallman.org/amazon.html

VMG 13y ago
tl;dr because it's not a commune I specifically find the argument funny that amazon "steals" from me because it doesn't pay "enough" taxes, even though they pass their savings to me more directly than the state ever will
- Kototama 13y ago
  You are confusing state redistribution of income and wealth with competitive offers. If the state was only to satisfy particular interests then you would have clientelism.
- unsigner 13y ago
  In the sufficiently left mind, you are unworthy to spend your own money, the state will spend them better; thus, passing savings to you is bad for you.
  - icebraining 13y ago
    The existence of the state is inseparable from the existence of slavery. -- Marx (who apparently was not "sufficiently left" - or maybe you're just ignorant of what the Left defends. Protip: the Democrats are not "left" by any reasonable standard)
    - mynewwork 13y ago
      Better tip - 99% of America would without hesitation agree with a statement like "The Democrat party is the main left-wing party in America". (Similar with 'right' and 'Republican'). Would the terms "left" and "right" have the same meaning in all parts of the world at all points in history? Of course not. But when people make a statement without context, you can assume they mean the terms as the majority of their contemporaries use them.

Spooky23 13y ago

> Also we compared the prices and it is almost impossible to beat amazon for these things as well. Huh? Where did you look? For formula, diapers, wipes, etc. Amazon didn't come close to Target, even without coupons. Amazon was like $23 for diapers that were $19.99 at Target. I've been a prime member forever, and wanted to use Amazon, but it easily cost 10-20% more, even with automatic ordering. Combine Target retail or sale prices with coupons and the 5% credit card discount and it was an unbeatable combo.

vtbose 13y ago
I agree. Items are no longer, consistently cheaper. (ex:Horizon 8oz Milk packs, are at least 2x more than our local grocery stores.) Even their Subscribe and Save program changed to introduce a 5 item minimum. Seems like, they are finally able to charge a (small)premium for the 'Amazon Shopping Experience'.
simplemath 13y ago
Costco. Even if all you bought at Costco was formula and diapers, you'd more than subsidize the $50 membership over the course of a year vs. what you'd pay basically anywhere else. Of course the economy of scale applies to that membership fee. Scaling across more kids makes a better value prop.
- chiph 13y ago
  Plus, if you get the Costco Amex card, you'd get cash back. I got $170 back last year with my $110 Executive membership, and I didn't even try very hard.
  - simplemath 13y ago
    Besides the not-inconsiderable saving money part, more valuable to me is it allows me to compress shopping trips. Shaving 2-3 hours a month off the shopping time budget? F yes. I hate shopping.
    - 13y ago

001sky 13y ago

I am amazed at how amazon remains doing business with so low margins or no profits. It's called the bait and switch? That's always how it works. They will extract value from you, likely in ways you don't understand. Or cant comprehend. At times you won't expect. Anything else is a mathematical impossibility, given the fiduciary repsonsibility of management. Its not if but when.

001sky 13y ago
see: https://news.ycombinator.com/item?id=6594314 https://news.ycombinator.com/item?id=6594314 (Dont forget this applies to taxes as well through NOLs.)

cylinder 13y ago

I love Prime, but there's no way that shipping a 20-roll pack of paper towels[1] that cost less than the store, in a giant cardboard box, in two days via an airplane to my door, is sustainable. They are taking a loss, even factoring in the membership fees, and at some point they won't be able to get away with it any longer. [1] Or a big heavy television. Or anything else you can find on Amazon.

RealCasually 13y ago
On the paper towels I agree, but large electronics like TVs are sourced from local warehouses and hand delivered similarly to how Best Buy would do so.
mwfunk 13y ago
I don't know why this got any downvotes, it's absolutely true. If someone's going to downvote something, they should always at least comment on what they don't like about it.
- tomkarlo 13y ago
  It's not necessarily true. It's just idle / uninformed speculation with almost no insight into Amazon's internal operations or supporting facts. That's why it's getting downvoted. Just because he doesn't know how they can do it profitably doesn't mean they don't know how to do it profitably.
jmccree 13y ago
I would guess this is why amazon keeps expanding their distribution footprint so much. I would hazard a guess a rather large percentage of the US population is already in a 2-day ground shipping radius. In the past couple years, I can only think of one or two things shipped via prime that came via air mail, even overnighted stuff came ground.
- Zancarius 13y ago
  > I would hazard a guess a rather large percentage of the US population is already in a 2-day ground shipping radius. I live in a fairly low population state, and there are at least 2 major UPS distribution centers within a 3-6 hour drive. My small town also has an UPS office and ground facility where shipments through them to the surrounding communities originate. Even FedEx has distribution centers nearby (although their shipping here is notoriously slow and clumsy). So, I'd believe it. I can't think of anything gets shipped out here via air and much of this area is rural. The only reason Amazon's "free" shipping is slow to this region is likely because they probably hold orders destined for a specific area or zip code until they can get a bulk shipping rate on all of the items and send them out via the same carrier. I've speculated about this before because Amazon will happily hold onto items for 1-2 weeks via free shipping that will arrive within 2-3 days after they've been marked as "shipped." Amazon Prime shipped items usually arrive within 2 days, and like you, I'm pretty sure those are overnight ground.

FrankenPC 13y ago

Agree with everything you said. They have the perfect formula. Unfortunately, I see them ultimately going the way of Ebay if we don't see some healthy competition sometime soon.

steven2012 13y ago

I came in to write exactly what you wrote above, point-for-point. I love Amazon, I with buying big-ticket items like stoves and refrigerators were easier through them. And I still have a bit of trepidation of buying TVs, etc, and would prefer going to Costco for those, since shipping back is so expensive in case something goes wrong. If they have a solution for that they will get all my business.

mkr-hn 13y ago
Look for a Sears Outlet: http://www.searsoutlet.com/ http://www.searsoutlet.com/ My parents bought a giant freezer for $100 from one years ago. It sips power and keeps a week supply of food frozen. The catch is that you might have to live with a harmless scratch or ding.
kuwahara 13y ago
Amazon has "Enhanced delivery" for things like TVs. Basically they use a special carrier that will come into your house and set-up the TV and make sure it's working before you sign for delivery. More info in the link below http://www.amazon.com/gp/help/customer/display.html/ref=help_search_1-1?ie=UTF8&nodeId=201238350&qid=1382472450&sr=1-1 http://www.amazon.com/gp/help/customer/display.html/ref=help...

enscr 13y ago

This. Amazon has done almost everything right for the customer (as Bezos emphasizes in all his interviews). For me, the primary weak point is the dubious quality of third part sellers sometimes. Other than that, it's an awesome place to shop.

twistedpair 13y ago
Crazy, a company that uses its economy of scale to drive down costs, cut prices across the board (TV's, books, AWS) and reinvest those profits in new services and products, continuously. Quite different from the rent seeking companies in the hardware and telco spaces. If Apple and TWC were Amazon, you're iPhone would cost $150 without a contract and you're cable internet would be $10/mo.
- AsymetricCom 13y ago
  Amazon doesn't have the... 'Washington Infrastructure' to be able to compete at a regulatory level, so they have to compete on price like any other homeless vagabond.
  - sudoscience 13y ago
    Amazon has lobbyists and Obama has given speeches in Amazon fulfillment centers...
    - donavanm 13y ago
      For PACs in the 2012 cycle Amazons PAC spent $220K, Microsoft spent $2.3M, Oracle $540. In direct lobbying this year Amazon spent $1.7M, Microsoft $5.5M, and Oracle $3.7M. So yeah, Amazon is paying to get representation. But they're still significantly smaller than the "enterprise" folks.

incision 13y ago

>"- Easiest returns if the need arises." This has actually become the most compelling thing about Amazon for me. I've been a Prime member since the start and Amazon has taken care of me without question even when it's not entirely "their" problem (stolen packages, marketplace sellers, my own mistakes). Also, a not entirely well known benefit of Prime is the option to share the free 2-day shipping benefit with four family (They call it "household member", but no need to have the same address) members.

enra 13y ago
Thanks! Didn't know about this

mmagin 13y ago

My experience is that a lot of bulky but cheap items cost more than in local stores. They're rolling shipping costs into the product cost.

ck2 13y ago

Note that sellers can have any review deleted. So lack of negative reviews is meaningless on Amazon.

pkulak 13y ago
Is that true? Then why isn't everything 5 stars?
umanwizard 13y ago
I don't think this is true -- it sounds completely antithetical to Amazon's values. Do you have something to back it up?
- ck2 13y ago
  We sold some books on amazon as a publisher a few years ago (not just a third party but the actual listing owner) and Amazon happily removed any derogatory review we requested without hesitation. To be fair, there is good reason for this but I am sure it is easily abused, but it is not like they checked the review, the action was near immediate when they got the request.
oskee80 13y ago
I see very highly rated negative reviews all the time. They even make a point to show you helpful critical reviews.

limejuice 13y ago

I used to be an Amazon fanboy, too, but I don't buy much from them anymore after (1) Target, Best Buy, and other retailers started pricematching amazon prices. Since Target gives you 5% off for using Target card, Target is now almost always cheaper than amazon. and (2) Amazon started charging sales tax. That was a HUGE reason I ordered items from them. I still like amazon, and still have Amazon Prime, and I am still looking forward to their Black Friday / Cyber Monday deals.

adestefan 13y ago
If Amazon ever started charging sales tax in Maryland, then I'd probably stop purchasing from them too.

pbreit 13y ago

Amazon could raise prices negligibly and/or curtail capital expenditures and become insanely profitable. But why would it do that?

loceng 13y ago

The point of business is you're doing it right if you maintain $0 profits - otherwise you're paying taxes, and you're not undercutting competition - so you're not killing them off. This is why Amazon is now only upping their $25 to $35 minimum. I'm wondering how much competition got destroyed by that early on.

nilved 13y ago

> I am amazed at how amazon remains doing business with so low margins or no profits. The sweatshop labor probably helps them a lot. They're worse than WalMart.

joshmn 13y ago
Shhh don't remind us.