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Amazon’s Battle to Break into the Grocery Market

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Re: Amazon’s Battle to Break into the Grocery Market

#61

Post by 8166284 »

ryanworl wrote: post #56
CodeWriter23 wrote: post #44

Earlier quoted context omitted.

No. Sell them then invest another $100 to restock. ROI remains at 1.7%.

Your model is too simplistic here. The actual cash leaving Amazon's bank account may not be due to their supplier until 30 or 60 days after delivery. If it takes Amazon 6 days to sell that $100 worth of goods, they can effectively sell $1000 worth of product before that initial cash is due to the supplier if we're talking net 60. This is how a $100 initial cash investment in inventory can produce $17 worth of cash at…

You're desperately trying to contrive a scenario that does not exist, the rate on buying merchandise and selling it in groceries is still 1.7%. Borrowing money and playing with the time window does not change this.

Re: Amazon’s Battle to Break into the Grocery Market

#62

Post by brianwawok »

nol13 wrote: post #51
baron816 wrote: post #42

Physical supermarkets can still be really terrible. It always seems to take me over an hour to do my grocery shopping. My idea to bring the industry into the 21st century would be take a similar route to Blue Apron et al, where all the ingredients are combined into a single package. The difference is that the work of preparation would be distributed to local restaurants looking to supplement their income, and people…

"Physical supermarkets can still be really terrible. It always seems to take me over an hour to do my grocery shopping." An accident, this is not.

My local grocery store I buy online. Pull up. They put the items in my car. Cost $5 for the service. And this is a flyover state smallish size chain not a SF giant grocery store.

Re: Amazon’s Battle to Break into the Grocery Market

#63

Post by SerLava »

afarrell wrote: post #30

Amazon needs to get a lot better at selling people complimentary goods. Once I buy something, I frequently see multiple advertisements for that exact product. Why can't they develop a database of products that compliment each other and so when someone buys a kitchen tool, they start advertising cookbooks. Example: "On Prime Day, Members purchased over 215,000 Instant Pot 7-in-1 Multi-Functional Pressure Cookers" http…

I'm no expert in this area. But I think this is due to the inherent nature of a system where the ads are all pushed by people marketing specific products, rather than a centralized "what is the best product to market to this person right now?" type of system.

It's pretty easy for a toaster guy to say "Amazon, show this ad to people who looked at toasters" without ALSO selectively hiding it from people who just bought a toaster.

It's harder to pin down a pattern indicating the imminent purchase of a toaster. Like for instance, someone seems like they're probably 20 years old, and now they're looking at wedding stuff. They are probably going to be influenced by a toaster ad, but getting it to them would require a toaster manufacturer to set up some pretty complicated shit.

Re: Amazon’s Battle to Break into the Grocery Market

#64

Post by walrus01 »

wongarsu wrote: post #13
jerf wrote: post #9

Earlier quoted context omitted.

Actually, you can't forget the possibility that someone will attack it, for profit or even just the lulz. If you have the idea I can pretty much promise someone's going to try it long before there's a 1000 of these stores.

People are attacking regular stores' checkout systems already. We call those people shoplifters. And our normal method of dealing with them (have a human that catches a few of them to deter the more law-abiding citizens) will work equally well in a checkout-less store. The big new challenge is telling the difference between a shoplifter and a normal software error. But that is only relevent for the most sophisticated…

steak = 4011

Re: Amazon’s Battle to Break into the Grocery Market

#65

Post by erikpukinskis »

afarrell wrote: post #30

Amazon needs to get a lot better at selling people complimentary goods. Once I buy something, I frequently see multiple advertisements for that exact product. Why can't they develop a database of products that compliment each other and so when someone buys a kitchen tool, they start advertising cookbooks. Example: "On Prime Day, Members purchased over 215,000 Instant Pot 7-in-1 Multi-Functional Pressure Cookers" http…

> Why can't they develop a database of products that compliment each other

Well, the goods would need some way to communicate, and then there's the question of how does an inanimate object come up with something nice to say about another object....

Unless you meant complement.

Re: Amazon’s Battle to Break into the Grocery Market

#66

Post by lelandbatey »

scrollaway wrote: post #53
brokenmasonjars wrote: post #48

Sort of wish they'd focus on what they already have first. I mean I get it, it's a good market to get into ...but.. how about - making a single login for abebooks fr, uk, com, etc.. that aligns with your main amazon account and - audible account. Why do I need maybe 7 different accounts on services owned by the same company? Better yet, how about taking the databases of books on sale at the various abebooks sub regio…

> making a single login for [...] Why do I need maybe 7 different accounts on services owned by the same company? Wasn't this what the HN community was up in arms about when Google did it for YouTube?

I suspect not, since that seemed to stem from a "forced-merge" of what where separate identities, for communication purposes. Basically, people don't like their Youtube comments and viewing history being tied in with a Google+ account (even if that wasn't happening, people where worried).

However, there's not usually that same desire for separate identities with online stores (for non-intimate purchases). So when a consumer goes to buy an audio book and they see they can use the same Amazon login that they use for buying USB chargers and lightbulbs, all they think is "oh, how convenient"!

Re: Amazon’s Battle to Break into the Grocery Market

#67

Post by Spooky23 »

Johnie wrote: post #32
Spooky23 wrote: post #18

It's cool that they are trying to innovate here, but it seems like a weird area to focus on. The high growth areas in grocery are things like prepared foods and produce. Owning the middle of the store to try to out-Walmart Walmart seems like a low-value proposition. I've been using Amazon Fresh for a few months. The delivery aspect is awesome, but the rest of the business is pretty questionable. They cannot keep anyt…

>I've been using Amazon Fresh for a few months. This is an artifact of living in Silicon Valley bubble. The rest of the country don't live this way.

I live in Albany, NY. Definately not in a bubble.

They have an arrangement with USPS to deliver groceries. The service itself is fantastic. It's just that they are effectively attaching $20 to each order in different costs and have trouble managing the packing operation.

It's great for us because they deliver early and it reduces our grocery trips.

Re: Amazon’s Battle to Break into the Grocery Market

#68

Post by ghaff »

thedarkginger wrote: post #40
trome wrote: post #24

Earlier quoted context omitted.

Sure, but who'd actually trust Amazon with their food? I know I wouldn't, they've screwed up 3 out of 5 orders in the past year, leading me to have little faith that they won't give me E Coli covered veggies. They're opening a large, car centric Amazon Grocery pickup location just over in Ballard as a test, but the particular location they picked is a parking lot for 3 to 4 hours a day, and is over 3 blocks from tran…

Since the article stresses repeatedly that Amazon is all-in on produce... I think this is a big question for their ML approach. One of the annoying parts of not-really-self-checkout that is available in big grocery stores today is that you have to scroll through a screen, choose the correct brand (i.e. Dole Banana), and then weigh it before it prices your order. Wonder what their strategy is to price variable weight…

Yeah. This is one of the reasons why I really don't care for self-checkout in grocery stores. Sure, self-checkout is mostly OK so long as you're swiping small boxes of barcoded stuff. But get to produce and it's a mess. I basically won't use self-checkout if I have any non-barcoded merchandise. (Which basically describes every time I go to a grocery store.)

Re: Amazon’s Battle to Break into the Grocery Market

#69

Post by erikpukinskis »

swampthinker wrote: post #54
scrollaway wrote: post #53

Earlier quoted context omitted.

> making a single login for [...] Why do I need maybe 7 different accounts on services owned by the same company? Wasn't this what the HN community was up in arms about when Google did it for YouTube?

Not really. The backlash came more from Google trying to push G+ alongside that YouTube rollout.

I lost control a YouTube account with over 4 million views due to the changeover, so I am kind of bummed about it.

Re: Amazon’s Battle to Break into the Grocery Market

#70

Post by mediaman »

CodeWriter23 wrote: post #44
petra wrote: post #20

Earlier quoted context omitted.

This is net-profit from revenue, i.e. from those $1000 of sold goods. But you only need to invest $100 to buy them.

No. Sell them then invest another $100 to restock. ROI remains at 1.7%.

It sounds like there's a lot of confusion here between ROI and margins.

ROI is not margin. And there are different types of margin.

"Net margin" is the profit from revenue net of not only the cost of merchandise, but all the overhead costs: the cashier, the retail leases, the buyer, accounting staff, management, etc.

"Gross margin" is (roughly) the amount made for every additional sale. If you buy apples for $0.80 and sell them for $1, your gross margin is 25%. This gross margin must pay for all the overhead expenses mentioned above. Based on the total number of apples you sell, you may figure you have to cover $0.18 of overhead per apple sold, leaving you with a net margin of 2%. But the important thing to understand is that you aren't actually paying $0.18 more in overhead per apple for every extra apple sold: you're making $0.20 and paying nothing in extra overhead. So increasing volume of sales can substantially improve net margins, if it doesn't take extra overhead.

"Return on investment" (ROI) relates to how much capital is required to generate net margins. You absolutely can run a low net margin business that has high ROI. How? You turn inventory like crazy, or better yet, don't have inventory (think drop-shippers). Or you take a long time to pay suppliers, reducing the amount of capital required by the business, and get paid up front by customers. Amazon's market model for third-party sellers ("FBA")would be high ROI even if it were low margin because they do not own the inventory, get paid up front by customers, and then sit on the cash for 90 days before paying the FBA vendor. Hell, I suspect the total capital required for that business is negative. No wonder they're so focused on expanding it! You don't need high margins if your business model throws cash at you. Just keep net margins above zero and you'll be swimming in cash.

(Hint for startups: find a business model like that. You won't need VC and you'll get vastly personally richer than one with high margins, but which requires massive capital, and therefore dilutes you as the founder to a pittance.)

It is also possible to have a business with high margins but low ROI, if it is extremely capital intensive relative to profits, such as a big manufacturing plant in an industry where it takes them a long time to get paid.

I'm not sure what Amazon's plan is. But the fact that the grocery business has low net margins is not a reason not to get into it. It all depends on the economics, which is more complicated than just "low margin."

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