How does Amazon make any money?

[Winston]

Last Friday I placed an order for five items, all sold by or fulfilled by Amazon. Two were add-on items. ALL were shipped separately via USPS, UPS, and ONTRAC. To give an example, one add-on item, a small sanding sponge, was shipped via USPS and the other, a 4-pack of AAs, was shipped via UPS! This isn't the first time this has happened.

They make it up on averages, I guess.

 

[Zeus-cat]

A while back their goal was to be the go to source for people. And they lost money every year for quite a few years. I'm not sure if that is still their goal or not, or if they are profitable now or not. I use it more than I like, but it is pretty darn easy to find most stuff on their site. I tend to go there first, and then look around. You can definitely find better prices on a lot of stuff if you do even a little bit of searching. I'm looking for a Grizzly drill press and the Amazon price was at least 30 to 40% more than direct from Grizzly. Ouch!

I prefer to order direct from a vendor unless I am bundling a few things and get free shipping. And from what I have read Mr. Bezos is just the kind of boss I hated when I worked for a large corporation.

 

[Winston]

A while back their goal was to be the go to source for people. And they lost money every year for quite a few years. I'm not sure if that is still their goal or not, or if they are profitable now or not. I use it more than I like, but it is pretty darn easy to find most stuff on their site. I tend to go there first, and then look around. You can definitely find better prices on a lot of stuff if you do even a little bit of searching. I'm looking for a Grizzly drill press and the Amazon price was at least 30 to 40% more than direct from Grizzly. Ouch!

I prefer to order direct from a vendor unless I am bundling a few things and get free shipping. And from what I have read Mr. Bezos is just the kind of boss I hated when I worked for a large corporation.

I like Amazon's liberal return policy. They even provide a return shipping label PDF with paid postage and they guarantee refunds for anyone who sells on their site even if the seller doesn't provide a refund. I used that once when I bought a pair of 7.4V lipos that the seller (I think a Chinese seller based upon the store name who simply drop shipped from within the US) sent to me as naked packs in a loose plastic shipping bag via first class mail, violating multiple shipping safety codes for lipos in the process. They proved to be 50% of their claimed capacity and he gave me a complete runaround through multiple email exchanges. Amazon provided the refund, hopefully dinged the seller's theiving arse, and I left him a detailed one star product review.

On Grizzly stuff, I recall reading about a metal cutting band saw somewhere and thinking that it looked identical to one I'd seen at Harbor Freight. Sure enough, just different paint color:

https://www.grizzly.com/products/4-x-6-Metal-Cutting-Bandsaw/G0622

https://www.harborfreight.com/horizontal-vertical-metal-cutting-bandsaw-93762.html

I wonder how many other items they sell are available at Harbor Freight.

 

[les]

One thing that confuses me are some items at Amazon are ridiculously OVER priced.
$10 items for $900
I don't understand why some items have such absurd prices

 

[Zeus-cat]

Those are not the same saws. The motors are clearly different, plus other things are not quite the same. I have a Grizzly band saw and it has worked very well. I wouldn't get a Harbor Freight saw if I intended to use it heavily. There are a lot of ways a vendor can cut corners; especially on power tools. Using a cheaper motor is one way. I suspect the motor in the HF saw is a lower grade than the Grizzly.

 

[rharshberger]

Those are not the same saws. The motors are clearly different, plus other things are not quite the same. I have a Grizzly band saw and it has worked very well. I wouldn't get a Harbor Freight saw if I intended to use it heavily. There are a lot of ways a vendor can cut corners; especially on power tools. Using a cheaper motor is one way. I suspect the motor in the HF saw is a lower grade than the Grizzly.

+1 and Grizzly has an excellent reputation for good quality at reasonable prices (Grizzly's dealer brand is Shopfox).

 

[TopRamen]

Amazon and having Amazon Prime has been a real blessing in my life, and I don't say that about many things. So many of the things I require simply cannot be purchased locally or is unique to my circumstance that regular brick & Mortar stores would have to special order it, and then they would still have a mark-up for there effort.
Sometimes I get deals on Amazon with shipping so fast that I feel like I really must be sticking it to someone. I hate to use poor quality anything, but that cheapo $14 Chinese Foam Gun is all metal, and if I ruin it, I won't be out 40-80 bucks for another decently reviewed model.
I have a decently reviewed model, but I like the adjustments on the cheapo much better.
Reading their "Reviews" is an asset for making informed decisions, and they include that in their conveniences, so I don't hesitate to use them.

 

[KenECoyote]

[h=2]How does Amazon make any money?[/h]Last Friday I placed an order for five items, all sold by or fulfilled by Amazon. Two were add-on items. ALL were shipped separately via USPS, UPS, and ONTRAC. To give an example, one add-on item, a small sanding sponge, was shipped via USPS and the other, a 4-pack of AAs, was shipped via UPS! This isn't the first time this has happened.

They make it up on averages, I guess.

To answer your question, IMHO (and having a Marketing degree...might as well try to use it), it's their scale. They are ENORMOUS and have HUGE shipping contracts. With that amount of leverage and that amount of goods shipped, they can negotiate down to very low cost shipping. I'm sure they even have a group (or department) dedicated to find ways and algorithms on how to get the package to you as cheap as possible. Plus they get people to sign up for Prime and those often buy much more stuff - guilty as charged.

 

[KenECoyote]

One thing that confuses me are some items at Amazon are ridiculously OVER priced.
$10 items for $900
I don't understand why some items have such absurd prices

I believe Amazon allows sellers to sell for whatever they want to...same way you can list an old beat up Estes Alpha rocket on Ebay for $500. I'd also guess some are cases where the seller mis-enters the price (ex. $900 instead of $9.00)...more often when the seller is overseas.

BTW - Beware of 3rd party sellers selling high demand items for low prices...check how long they've been around and make sure they have good feedback over time first. I'm disputing 2 cases of sellers like this and despite Amazon's A-Z guarantee, I just wasn't able to make a claim on one (instructions said to choose a certain option, but that wasn't coming up), so I had to go to my credit card company.

 

[Winston]

One thing that confuses me are some items at Amazon are ridiculously OVER priced.
$10 items for $900
I don't understand why some items have such absurd prices

I investigated that once and found a page where a guy explained that it is due to badly configured automatic pricing programs from sellers which get into a positive feedback loop when comparing the prices of others with equally badly configured price monitoring programs. You'll see it most often for long out of print used books, DVDs and CDs which can reach insane prices, but you can see them on new product pages, too. There are some joke items that, just as on eBay, start with insane prices to make sure they aren't actually bought. Then there are those thieving sellers who just want to see if they can catch some sucker.

There have been multiple times I've bought items for really great prices from sellers on Amazon whose items were fulfilled by Amazon only to go back as little as a day or two later and find a higher, sometimes considerably higher price. I got an unbelievable deal (< half retail) on a very high quality stereoscopic microscope with video camera attachment (not adapter, an eyepiece shaped video camera) to later find that it was being sold for only about 15% off retail. I think they may lower prices for items that aren't moving until they get a nibble and they then raise the price.

 

[Winston]

To answer your question, IMHO (and having a Marketing degree...might as well try to use it), it's their scale. They are ENORMOUS and have HUGE shipping contracts. With that amount of leverage and that amount of goods shipped, they can negotiate down to very low cost shipping. I'm sure they even have a group (or department) dedicated to find ways and algorithms on how to get the package to you as cheap as possible. Plus they get people to sign up for Prime and those often buy much more stuff - guilty as charged.

I hear they say, "We sell at a loss after shipping, but we make up for that with volume." Sorry, couldn't resist. Seriously though, I agree with you.

I think they make up for instances such as mine with the many more high value purchases with high markups where only a single item is shipped or where the items come from the same warehouse and can all be placed in a larger box. My order was apparently a worst case one because the one physically large item was an AmazonBasics item which are all pre-packaged in custom fitted boxes into which nothing else can be put and which are made to be shipped without a second outer box.

 

[Winston]

Amazon and having Amazon Prime has been a real blessing in my life, and I don't say that about many things. So many of the things I require simply cannot be purchased locally or is unique to my circumstance that regular brick & Mortar stores would have to special order it, and then they would still have a mark-up for there effort.
Sometimes I get deals on Amazon with shipping so fast that I feel like I really must be sticking it to someone. I hate to use poor quality anything, but that cheapo $14 Chinese Foam Gun is all metal, and if I ruin it, I won't be out 40-80 bucks for another decently reviewed model.
I have a decently reviewed model, but I like the adjustments on the cheapo much better.
Reading their "Reviews" is an asset for making informed decisions, and they include that in their conveniences, so I don't hesitate to use them.

I have an acquaintance who built his house years ago using cheap Harbor Freight electric tools back when they were vastly cheaper than name brand tools. He went through two cordless drills and was still way ahead. BTW, I see stuff now at Harbor Freight that cost more at deep discount sale prices than they cost at normal prices just a few years ago. Neither the major, continuing economic slump compared to past years in China justify that nor does the better dollar exchange rate. They simply increased their markup considerably, not necessarily at the store level, but at the corporate warehouse importer level. Either that or there are some new and major import tariffs I don't know about.

 

[Woody's Workshop]

+1 and Grizzly has an excellent reputation for good quality at reasonable prices (Grizzly's dealer brand is Shopfox).

Not exactly true. Grizzly is a distributor of Shop Fox.
"SEE HERE"

 

[KenECoyote]

I hear they say, "We sell at a loss after shipping, but we make up for that with volume." Sorry, couldn't resist. Seriously though, I agree with you.

I think they make up for instances such as mine with the many more high value purchases with high markups where only a single item is shipped or where the items come from the same warehouse and can all be placed in a larger box. My order was apparently a worst case one because the one physically large item was an AmazonBasics item which are all pre-packaged in custom fitted boxes into which nothing else can be put and which are made to be shipped without a second outer box.

Funny you should mention that. Today I got a HUGE box (big enough for a human or two to fit in) which contained a 16" square toy and a folding camp chair. My wife and her friend saw it arrive and said "WHAT THE HECK DID YOU ORDER?!?".

I said "I DON'T KNOW, BUT I'M KEEPING IT!".

 

[KenECoyote]

I have an acquaintance who built his house years ago using cheap Harbor Freight electric tools back when they were vastly cheaper than name brand tools. He went through two cordless drills and was still way ahead. BTW, I see stuff now at Harbor Freight that cost more at deep discount sale prices than they cost at normal prices just a few years ago. Neither the major, continuing economic slump compared to past years in China justify that nor does the better dollar exchange rate. They simply increased their markup considerably, not necessarily at the store level, but at the corporate warehouse importer level. Either that or there are some new and major import tariffs I don't know about.

My opinion of HF tools (drills to a lathe) is that they are cheap and they do the job. Some of the stuff I have looks like it's made for third world countries and guess what...that may be very true! It seems designed to be rough, but functional and semi-durable and I can see people using them in a mud flat.

 

[KenECoyote]

Amazon and having Amazon Prime has been a real blessing in my life

I can understand how you feel. I often shop Amazon before trips to get appropriate and useful stuff. On my recent trip to a fossil hunt on the beach, I picked up some Amazon items and got them in a few days and people during the trip really thought the stuff I had was cool and functional (I read the reviews!).

I told one of the impressed friends that I consider Amazon to be the modern (and virtual) swiss army knife!

Also I think about the cost of gas and time on a trip to the stores and suddenly the deal is even better.

 

[chrisudy]

Love Amazon and amazon prime. It's nice to be able to order stuff like ink cartridges, books, etc without having to 1) remember that you need it, 2) having to go out and get it, and 3) it just show up in two days with no shipping costs.

It's great for sending Christmas presents to the out-of-town niece and nephews.

I use the subscribe and save program as well - stuff that I buy regularly shows up once a month (at a discount too...)

All that being said, you still need to compare prices to make sure that the convenience is worth it...

Chris

 

[rharshberger]

Not exactly true. Grizzly is a distributor of Shop Fox.
"SEE HERE"

Grizzly has been a brand since 1983, Woodstock International since 1989, one is painted white, the other green, when two similar machines are priced out, as I did before buying my Grizzly 1023RL tablesaw ( I compared the Grizzly G0690 in the Griz showroom in Bellingham and the Shopfox W1819 in my local power tool dealers store) the tools other than color and accents were identical. Grizzly via direct sales rather than a dealer sales location is a savings of about $200 dollars for the mechanically isentical saw.

HF power tools are junk,but for what they cost you can throw them away when the break and just buy another, I have had the same Makita 4" angle grinder for 20 years, my Dewalt 12 and 18 volt cordless drills, impact, cordless skill saw for over 15 years and have for the most part done inexpensive repairs or battery replacements ( they are however getting to the point of replacement). Good tools are cheaper in the long run, and even more so if you use the to make a living.

The same can be said of off brand electronics and other cheap items from Amazon, the question is what is your time worth exchanging junk for more junk, or buying a good tool up front and being able to spend two hours making money or losing two hours worth of earnings going to HF to exchange a defective tool. Years ago HF did have a fairly good cordless drill, it was an exact copy of Dewalts 12 or 18 volt Nicad battery line, so exact in fact I used fix a few for customers using Dewalt parts like switches, motors, planetary gear transmissions etc, however those days are long gone.

 

[Winston]

My opinion of HF tools (drills to a lathe) is that they are cheap and they do the job. Some of the stuff I have looks like it's made for third world countries and guess what...that may be very true! It seems designed to be rough, but functional and semi-durable and I can see people using them in a mud flat.

Let me provide two rare examples in my experience where they didn't do the job, one confusing, one funny.

They had a hole saw set on sale that I bought. Tried to use it and the centering drill bit wouldn't penetrate to such an extent that one would think the drill was in reverse. Took it in to exchange. They tried to drill using the center bit, attempting to drill into the checkout counter's wood base after comparing the bit in the exchanged set with the one in the original set and seeing that they appeared identical and were equally sharp with equal pitch, etc. Original bit would not drill AT ALL, replacement would.

They had many-compartment transparent plastic storage boxes on sale. Bought two. After removing the plastic wrap, I attempted to remove the label covering the entire top of the large box, a label showing the potential view of contents once the box was filled with parts. Expecting them to just slide off I instead found that the labels on both boxes were liberally and permanently glued in place with something brown that looked like gorilla glue applied to every square inch of the underside of each label. Returned them on my next visit.

 

[Winston]

Years ago HF did have a fairly good cordless drill, it was an exact copy of Dewalts 12 or 18 volt Nicad battery line, so exact in fact I used fix a few for customers using Dewalt parts like switches, motors, planetary gear transmissions etc, however those days are long gone.

With HF cordless power tools, when they change models, forget ever getting replacement battery packs, another advantage of going with name brand stuff, especially if you use them to make your living. Plus, the price differential between name brand and HF tools isn't what it used to be.

 

[Bat-mite]

Lots of articles out there about fake products on Amazon, and Amazon does nothing to crack down on it.

Want a book by Stephen King? There are many on Amazon that you've never heard of, except they are by "Stephen R. King." For years they were sold as being by "Stephen King," and only recently did they force him to put his middle initial in there.

 

[Winston]

Lots of articles out there about fake products on Amazon, and Amazon does nothing to crack down on it.

Want a book by Stephen King? There are many on Amazon that you've never heard of, except they are by "Stephen R. King." For years they were sold as being by "Stephen King," and only recently did they force him to put his middle initial in there.

I had a site bookmarked that specifically IDs fake Amazon products based upon customer feedback and other analysis of Amazon web page contents but I deleted it. I never used it because I know what to avoid among the few kinds of counterfeit vulnerable items I purchase on-line:

1. Flash memory cards - buy only those sold by Amazon itself, not those fulfilled by Amazon or from 3rd party sellers doing their own shipping.
2. Same for lipo and li ion cells/batteries as R/C packs, camera or phone batteries. I've had good luck with only ONE lipo pack purchase of R/C packs that were clearly marked as a name brand and well reviewed by people who actually MEASURED THEIR PERFORMANCE with battery chargers. Especially 18650 li ion cells and other li ion cells primarily used in flashlights can seem to be marked as a name brand, but they will have too-large marked capacities or some other minor label printing change from the authentic name brand cells. In many of those cases, user reviews mean nothing because the vast majority don't actually measure cell performance. Also, quality of a confirmed good product can drop instantly if the seller gets swindled himself with a bad lot or counterfeit stock. That can be seen by analysis of the dates of clusters of negative customer reviews.

#2 is so bad of a problem that I had to ask for reliable US based li ion sellers in a flashlight forum.

 

[Winston]

Amazon reportedly hopes to open a massive chain of 2,000 grocery stores
Amazon is plotting its takeover of physical retail - 5 Dec 2016

https://www.theverge.com/2016/12/5/13849008/amazon-go-grocery-convenience-stores-retail-expansion

Amazon’s ambitious physical retail plans extend well beyond its new cashier-less convenience store unveiled earlier today. According to a report from The Wall Street Journal, Amazon hopes to ultimately operate more than 2,000 grocery and convenience stores across the US in a number of different formats. The goal is for Amazon, the biggest online retailer in the US, to completely control the physical flow of products from its warehouses to the end consumer, opening up the possibility for a more robust delivery network and a retail presence that rivals Target and Walmart.

Amazon just launched a cashier-free convenience store
No lines, no registers, no self-checkout machines - 5 Dec 2016

https://www.theverge.com/2016/12/5/13842592/amazon-go-new-cashier-less-convenience-store

 

[Bat-mite]

Okay, so when do the antitrust suits start?

 

[Peartree]

This weekend I ordered something from Amazon that I never expected NOT to buy at a brick and mortar store.

A tire.

This summer I had a spectacular blowout on the freeway while towing my cargo trailer. Thankfully, it stayed (mostly) in one piece, I got to the side of the road and replaced it with one of my spares. Since then, I wire brushed and repainted the rim, but when I looked for a replacement trailer tire, there are none to be found. Tractor Supply Company, which is my usual "go to" store for trailer parts, will sell me a new tire WITH a rim, but I already have a rim. I just need a tire and, strangely, they don't sell the tires separately. Most places that sell car tires, like Wal-mart, Goodyear, etc. only carry car tires. So I looked online, and lo and behold, I can buy one through a vendor on Amazon for less than anything I could find anywhere near me despite paying ten bucks for shipping.

Weird.

 

[KidRockET]

Amazon just launched a cashier-free convenience store
No lines, no registers, no self-checkout machines - 5 Dec 2016

https://www.theverge.com/2016/12/5/13842592/amazon-go-new-cashier-less-convenience-store

First McDonalds...

https://www.forbes.com/sites/realsp...-self-service-kiosks-nationwide/#6dd2c35762e1

Now this...

I wonder how many...

15.00/hr jobs will be lost...

Market forces at work...

 

[EXPjawa]

This weekend I ordered something from Amazon that I never expected NOT to buy at a brick and mortar store.

A tire.

This summer I had a spectacular blowout on the freeway while towing my cargo trailer. Thankfully, it stayed (mostly) in one piece, I got to the side of the road and replaced it with one of my spares. Since then, I wire brushed and repainted the rim, but when I looked for a replacement trailer tire, there are none to be found. Tractor Supply Company, which is my usual "go to" store for trailer parts, will sell me a new tire WITH a rim, but I already have a rim. I just need a tire and, strangely, they don't sell the tires separately. Most places that sell car tires, like Wal-mart, Goodyear, etc. only carry car tires. So I looked online, and lo and behold, I can buy one through a vendor on Amazon for less than anything I could find anywhere near me despite paying ten bucks for shipping.

Weird.

I've actually bought tires (full sets) on Amazon a couple times. Typically, they're cheaper model and size for model and size than other sites and stores when you consider shipping, tax, etc. Of course mounting and balancing is a consideration too, but my father has access to that equipment and does it for me. So, yeah, even tires. They've displaced Tire Rack completely for me (so far), though the info on their site is still useful. Kind of like Apogee in that way...

 

[Pat_B]

I can't remember the name of the online place I buy my camper tires at, but the mounted tires come at a price that's cheaper than buying the tire itself and paying to have it mounted on my existing rims. So new rims with tires every time for me.

 

[H_Rocket]

• If you need it, go to McMaster
• If you want it, go to Amazon
• If you can't find it at either one...It's not made

Most people do not realize that Amazon makes a ton of money with something a lot of us use and don't even know it...AWS (Amazon Web Services).

 

[TopRamen]

I can spend time looking for a specialty blade locally, or I can have it tomorrow or the next day, and not have to go "Questing".




Good Luck getting an 8" Blade locally or affordably. Thanks Amazon, I can run this Saw now.

I had to have another for other stuff, so I only have about $45 into Blades and can learn the saw with each Blade.