is Amazon getting worse?

It is a rip-off. Try the video for a free
month. It's hard to navigate and it
constantly screws up when watching.
I never have a problem with Nflix.

Quote: AZDuffman

Sure WMT pays more, but they sell more.

Fair point. Wal-Mart's revenue is 5 times bigger than Amazon's. But consider this: in 2013, Amazon had revenue of $74.4B while Target had revenue of $73.3B that same year.

Which do you think is a bigger expense: A) Amazon's shipping costs, or B) Target's cost to operate 1,900 stores? I'd go with answer B.

Quote: reno

Fair point. Wal-Mart's revenue is 5 times bigger than Amazon's. But consider this: in 2013, Amazon had revenue of $74.4B while Target had revenue of $73.3B that same year.

Which do you think is a bigger expense: A) Amazon's shipping costs, or B) Target's cost to operate 1,900 stores? I'd go with answer B.

See my previous point, the issue is marginal cost per item. It cost AMZN to ship each additional item, but once the store is paid for the marginal cost to sell one more item is far lower, almost zero.

Quote: AZDuffman

See my previous point, the issue is marginal cost per item. It cost AMZN to ship each additional item, but once the store is paid for the marginal cost to sell one more item is far lower, almost zero.

Shipping and fulfillment costs are quite high, and not the golden panacea some folks expected from the internet age. For high volume stuff, having a store is probably cheaper than shipping, even if you are bundling a whole bunch of stuff together in one order.

Quote: AZDuffman

See my previous point, the issue is marginal cost per item.

If I ship a standard box at the USPS and I add another item that fits it costs ZERO extra dollars.

I just always assumed that shipping was a way to get revenue, and not a real cost share.

It's like these cheap boxes that the cable company provided when they digital in 2009. They are not a retail item, but I am guessing that they cost $30 since they only produce a standard definition signal and decode the encryption. The retail equipment charge is $13/month so they obviously are just a thinly veiled attempt to raise revenue.

Quote: reno

Yes, exactly.

The only reason the Sams Club & Costco business model works is becasue their prices are substantially lower than regular retail. Amazon's prices are not nearly low enough to compete with Costco or Sams Club.

Costco's business model is the $40 a year they get from you, they don't need profit from the sales. If you look at financials the amount brought in by the memberships and the net profit are usually almost the same. They are the kings of loss leaders and finding a few items that they can purchase and sell at hugely discounted prices but the majority of their items you can find as cheap or cheaper elsewhere.

Quote: AZDuffman

See my previous point, the issue is marginal cost per item. It cost AMZN to ship each additional item, but once the store is paid for the marginal cost to sell one more item is far lower, almost zero.

AZD I am suprised that you think the store is ever paid for. Major retailers such as Wal Mart and Target are almost always tenants. They feel they can utilize their capital better elsewhere in their operation. Also as anchor tenants they often get such favorable lease rates that they are probably below the landlords true costs but he uses them to attract the smaller tenants that provide the profit for the development.

I also think that the marginal cost for the bottle of Tums is more than you think. It had to be freighted to the store, stocked, check-out and possibly even went through a distribution centre before the customer walked out the door with it.

Quote: kenarman

AZD I am suprised that you think the store is ever paid for. Major retailers such as Wal Mart and Target are almost always tenants. .

In about half of Walmarts stores, they pay rent
to themselves. A Walmart company owns the
building and real estate, they save hundreds
of million in taxes a year doing this.

Meijer, the chain that Sam stole the
supercenter idea from, owns all 140 of their
stores outright. They only build a new
one if it's totally paid for. This protects
them from anything the economy does,
they have never closed a store.

The guy who started it was from the old
country. He knew that if you owned the
building your butcher shop was in, and
you lived upstairs, you could survive any
economic turn.

Quote: Evenbob

It is a rip-off.

I will defend one aspect of Prime Pantry. The $6 shipping fee gets you up to 45 lbs of stuff. That's a heavy box. So if you buy a 45 lb bulk bag of dog food or kitty litter or several cases of Pepsi, the $6 fee is a decent deal. But unless you're handicapped or live extremely far away from a grocery store, I don't know why anyone would bother paying $99/year + $6/order to buy groceries from Amazon.

Also, the fact that it's only $6 to for a 45 lb package is a clue to just how steep a discount Amazon gets from USPS & UPS due to their enormous volume of packages

Quote: AZDuffman

You are assuming the Tums comes from the same center. It may well not.

There's no reason for Amazon to only stock antacid at some fullfillment centers, but not others. It's a popular product, it isn't particularly bulky or heavy, and it's not perishable, so Amazon might as well stock it at 100% of their fulfillment centers.

Total antacid sales in 2014 were over $1.7 billion (all brands). Why cede a penny of those sales to Walgreens or Target without putting up a fight? But if they're demanding $7.50 a bottle for a product that Walgreens sells for $4, they've already thrown in the towel.

Combined U.S. sales for Tums EX and Tums Ultra was over $145 million. If Amazon captured just 3 percent of that market ($4.5 million) and had just a 5 percent mark-up on each bottle, that's still $225,000. To a company with $75billion in annual sales, that $225,000 is a meaningless rounding error. But with Wall Street breathing down their necks demanding more profits, every penny of profit counts.