Selling at a loss?

[Its4john]

I’ve just, this evening, ordered an audio lead on Amazon. It is now 9.30pm and it arrives tomorrow (prime).

The plug on one end is 10mm diameter so the postage cost even 2nd class would be £1.55

I paid £1.26

How is this ever part of a good business model?

 

[NickGrogan]

Amazon will deliver, not post service; what is the marginal cost per delivery?

How much have you spent with Amazon over the last year?

What is your lifetime spend with Amazon?

 

[WaveJumper]

And they got some pretty good programs on the TV too

 

[James]

I have never understood how Amazon make these low value orders work. Just the final mile delivery cost would be a minimum £1.20 let alone cost of the item, fulfilment, overheads.

 

[antropy]

I paid £1.26

Do you have Prime? I do and I never see anything that cheap.

Paul.

 

[Its4john]

Do you have Prime? I do and I never see anything that cheap.

Paul.

Yeah I have prime

Amazon.co.uk

 

[antropy]

Yeah I have prime

Amazon.co.uk

Also showing for me at that crazy low price. The wire itself must be so cheap to make that worth it for them.

Paul.

 

[WaveJumper]

Need some brake cleaner ready for the weekend, lets pop into Halfords when we shoot out for lunch I say to my son, have you checked Amazon says he to me - blast & damm no says I.......

One spray tin from Halfords 400ml £9.49 I need a couple - 5L from Amazon plus a spray bottle thrown in £25.00 here tomorrow morning, and no chance of getting the car dinged up in the retail park.

And their share have been pretty good to me this month......I love Amazon

 

[Lucan Unlordly]

Varta E44 Battery from Euro Car Parts £138.99 collected.

Varta E44 Battery from TAYNA online £89.71 order before 6.45pm, pay £7.99 delivery plus an additional £1.99 for guaranteed next day, total £99.69

Order placed at 16.42, DPD notification of pending delivery at 17.42 (arrived at 11.48 am)

 

[DontAsk]

Recently Halfords service centres would supply and fit a battery for less than the cost of the same battery in their stores. Not sure if it was an offer as I had just had a service, and haven't looked again to check.

 

[Nathanto]

I’ve just, this evening, ordered an audio lead on Amazon. It is now 9.30pm and it arrives tomorrow (prime). How is this ever part of a good business model?

We had a very similar conversation in my house this week.

I ordered a £2.50 door latch with free (Prime) delivery which arrived retail-blister-packed, inside a jiffy bag, inside another jiffy bag, inside a courier bag which was delivered by hand by a UPS courier.

On top of that the product page makes a big deal of 'Free Returns" too; "Free returns are available for the shipping address you chose. For a full refund with no deduction for return shipping, you can return the item for any reason". You can bet your bottom dollar that some people will return it if they've ordered the wrong size.

I sort of get it if a cheap second-class Royal Mail or even Amazon's own delivery service is used but a 'proper' courier who has had to specifically drive to my rural mid-Wales home? How is anyone making any money on that transaction?

 

[Chris Ashdown]

Seller probably a chinese retailer who imports large quantities into amazon stock and buys in china at £0.5 so profit at every step including shipping china to UK

 

[Daybooks]

I’ve just, this evening, ordered an audio lead on Amazon. It is now 9.30pm and it arrives tomorrow (prime).

The plug on one end is 10mm diameter so the postage cost even 2nd class would be £1.55

I paid £1.26

How is this ever part of a good business model?

If they made, on the face of it, a 29p loss each transaction then it wouldn’t be a good business model; but they don’t! You chose them for a reason and odds are you’ll use them again when they’ll recoup with interest.

 

[UKSBD]

They also know you just bought an audio lead, they probably know what you bought the audio lead for due to your browsing history.

You will probably buy that from Amazon next time you need a new one due to the subliminal advertising and the good service you received when buying the lead.

 

[Its4john]

If they made, on the face of it, a 29p loss each transaction then it wouldn’t be a good business model; but they don’t! You chose them for a reason and odds are you’ll use them again when they’ll recoup with interest.

That sounds like a bad business tactic. I bought this to replace an item I bought 10 years ago. If I need another one ten years from now I doubt that I’ll recall this purchase, I’ll probably search online for the best value/spec, just as I did this time.

 

[Its4john]

They also know you just bought an audio lead, they probably know what you bought the audio lead for due to your browsing history.

You will probably buy that from Amazon next time you need a new one due to the subliminal advertising and the good service you received when buying the lead.

That sounds like a bad business tactic. I bought this to replace an item I bought 10 years ago. If I need another one ten years from now I doubt that I’ll recall this purchase, I’ll probably search online for the best value/spec, just as I did this time.

 

[Daybooks]

That sounds like a bad business tactic. I bought this to replace an item I bought 10 years ago. If I need another one ten years from now I doubt that I’ll recall this purchase, I’ll probably search online for the best value/spec, just as I did this time.

They seem to be doing very well out of it - even if you and many others had never bought anything else than the one loss making item. Why not buy them out and implement your own business rules?

 

[Paul Kelly ICHYB]

@AmazonGeek can you shed some light on this?

 

[scstock]

I have seen Amazon sell products that we supply them with at less than cost, as their algorithm will match any lower price online, even if it's a few items of bankrupt stock bought at auction. Unlike most retailers these same systems will put the price back up when they cheap deal dissappears.

They don't care if they lose money on some sales, being the dominant platform for online sales is what matters most. They also make way more profit from their AWS platform than from retail so that helps.

 

[thetiger2015]

It's either a loss leader to drag sales/data in or they make a few pence per item and the volume makes it worthwhile.

I prefer to use local businesses where I can and avoid Amazon. Having said that, I did just spend £9.98 on some blank labels, that's including next day delivery. The place I normally use is £18 for the same order and 3 to 5 working days for delivery.

It's the same with TikTok shop - I think they're going to be a thorn in Amazons side with D2C sales, as they're monetising their audience very effectively.

 

[AmazonGeek]

@AmazonGeek[/USER] can you shed some light on this?

Could be all kinds of reasons for this...
- Getting rid of overstock (cheaper to sell at a loss than remove/destroy)
- selling at a loss with consumables because of the LTV of the customer
- auto-repricing tool not set up properly

Not sure about the comment that Amazon's algorithm will match any price online. If Amazon can find a product off-Amazon for cheaper it will remove the buy box on that listing (it does not want to be seen to be more expensive than other websites). Customers can still click 'see more buying options' and manually choose one but most don't realise.

3rd party sellers (who make up the majority) can choose to use a repricing tool to make sure they always have the buy box. The amazon tool will drop the price on the listing (within limits you can set) to match the off-Amazon price and restore the buy box. But it won't put it back up again later (surprise surprise) when the cheaper deal ends. You need a non-Amazon tool for that and there is a cost to those.

They also make way more profit from their AWS platform than from retail so that helps.

Definitely true - they make a tonne of money on the advertising.

 

[japancool]

It doesn't matter if they make 10p profit on the deal, if they're selling thousands of them.

 

[scstock]

Not sure about the comment that Amazon's algorithm will match any price online. If Amazon can find a product off-Amazon for cheaper it will remove the buy box on that listing (it does not want to be seen to be more expensive than other websites).

Maybe that happens for FBA sellers but I have seen the price match phenomenon twice with products that we supply to Amazon as a vendor.

In one case one guy working out of his spare room had bought a load of bankrupt stock including about 5 units of an item that Amazon sold thousands of per year. His sale price quickly became Amazon's price throughout Europe, until the manufacturer bought the seller's stock from him to remove them from the price search algorithm.

AWS is nothing to do with advertising - it is "a subsidiary of Amazon that provides on-demand cloud computing platforms and APIs to individuals, companies, and governments, on a metered, pay-as-you-go basis"

 

[AmazonGeek]

In one case one guy working out of his spare room had bought a load of bankrupt stock including about 5 units of an item that Amazon sold thousands of per year. His sale price quickly became Amazon's price throughout Europe, until the manufacturer bought the seller's stock from him to remove them from the price search algorithm.

Sounds like a repricing tool. They are designed to scrape other sites and if they can find a product cheaper elsewhere, the price will be lowered automatically on the Amazon listing to match it. If they didn't do this, the fair-price policy would kick in and remove the buy box from the Amazon listing until the cheaper price disappeared. The good tools will also put the price back up again (although Amazon's doesn't).

 

[HFE Signs]

And this my friends is why Amazon has killed so many high street businesses

 

[AlanJ1]

And this my friends is why Amazon has killed so many high street businesses

This is the same for all online stores though, not just Amazon.

We run a price checker which flags when our competitors lower the price lower than our own site, we could automate it so it moved the price but we check these for margin. All major retail is doing this.

 

[Nathanto]

And this my friends is why Amazon has killed so many high street businesses

Don't shoot the messenger! If you want to blame anyone then surely it's you, me and the vast majority of posters here who choose to buy from Amazon rather than a high street business?

 

[Chris Ashdown]

Don't shoot the messenger! If you want to blame anyone then surely it's you, me and the vast majority of posters here who choose to buy from Amazon rather than a high street business?

Not just the online shops, In Great Yarmouth we have a dead town center with paid for parking and not a mile away shopping areas with free parking and selection of big retail shops that are busy all day long, we had a thriving market place until the council priced it out of existence and built more shops giving even more reason not to visit town centre. Elected councilors are the peoples worst enemy always looking for large vanity projects as they know best

 

[scstock]

People like ordering things online, regardless of whether the parking is free in the town centre or not.

 

[Chris Ashdown]

People like ordering things online, regardless of whether the parking is free in the town centre or not.

True but also people like to see what they are buying rather than buying online, but parking is a major turn off for town centers

 

[Lucan Unlordly]

True but also people like to see what they are buying rather than buying online, but parking is a major turn off for town centers

I think free parking can be a bit of a red herring at times. Paid parking doesn't seem to bother folk who are eating out, maybe because they have no choice if they want a particular dining experience or have half a chance of knowing how many hours they'll be paying for?

 

[AmazonGeek]

Unfortunately the world has changed. Once people got a taste of ordering everything on line there was no going back for most. I agree - free parking is a red herring; people just like the convenience of ordering everything online and getting it the next day. Most people I know wouldn't go back even if you paid them to park. And provided the listing is done right (great description, Q&As, amazing photos, video, 3D, VR, etc) then that is enough for most and more than makes up for the inconvenience of going to the shops.

 

[DontAsk]

Free parking is not a red herring if you need to visit a bricks and mortar shop. I never pay for parking for shopping and would go elsewhere if I had to pay.

 

[DontAsk]

We used to live near Thame which has loads of 3 hours free parking in the town centre. It also still has lots of independent shops. The two go hand in hand.

 

[DontAsk]

So I ordered 6 of the same item from the same seller. Amazon created 6 orders with 5 invoices and 5 packages delivered today. The 6th is supposedly "arriving today" so that's two van journeys.

Not only crazy but it wastes my time in having to process 6 invoices instead of 1.

 

[AlanJ1]

So I ordered 6 of the same item from the same seller. Amazon created 6 orders with 5 invoices and 5 packages delivered today. The 6th is supposedly "arriving today" so that's two van journeys.

Not only crazy but it wastes my time in having to process 6 invoices instead of 1.

This is the massive flaw on Amazons side where "typically" it is because the items came from 6 different warehouses. Shocked to see it is still happening!

 

[DontAsk]

This is the massive flaw on Amazons side where "typically" it is because the items came from 6 different warehouses. Shocked to see it is still happening!

The sixth one finally arrive today, but they charged 1p extra shipping!

Perhaps the maths to divide the original shipping cost by 6 was too hard for them, causing the delay.