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Amazon's minimum order size for free shipping is now $35

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Re: Amazon's minimum order size for free shipping is now $35

#131

Post by jmccree »

cylinder wrote: post #77
codegeek wrote: post #17

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 ha…

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.

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.

Re: Amazon's minimum order size for free shipping is now $35

#132

Post by MichaelGG »

milesskorpen wrote: post #91
pallandt wrote: post #50

Earlier quoted context omitted.

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.

... and they don't actually have to worry about actually making money. It's run as a charity for consumers paid for by investors.

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?

Re: Amazon's minimum order size for free shipping is now $35

#133

Post by yvishyar »

In a decade it amazon has raised the minimum order by $10. Given that Amazon is a pure data driven company, we can guess this is the inflation cost which turn out to be 3.4% as per US Gov data the inflation for last decade is 2.29%

I would rather believe amazon than the govt

Re: Amazon's minimum order size for free shipping is now $35

#134

Post by skelsey »

simplemath wrote: post #125
chiph wrote: post #122

Earlier quoted context omitted.

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.

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.

For me it's worth it even if I didn't recoup the cost of membership. The availability of tasty USDA prime beef makes it all worthwhile.

Re: Amazon's minimum order size for free shipping is now $35

#135

Post by bgilroy26 »

JumpCrisscross wrote: post #117

" This is the first time in more than a decade that Amazon has altered the minimum order for free shipping in the US. " The BLS's Transportation Services urban CPI has increased 29% since August 2003, or 2.6% annually. Amazon would need to have offered the free-shipping-for-orders-over-twenty-five deal for the last 13.3 years, or since before June 2000, for this threshold increase to be on par with inflation.

Inflation accounts for ~2/3 of the increase

Re: Amazon's minimum order size for free shipping is now $35

#136

Post by wtvanhest »

Spooky23 wrote: post #65
codegeek wrote: post #17

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 ha…

> 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…

I live in downtown Boston which seems to have no convenient shopping like DC or Florida. Very overpriced CVS is where I must buy stuff.

When I buy things like you describe, I price check at walmart.com. typically amazon is less after shipping.

Re: Amazon's minimum order size for free shipping is now $35

#137

Post by nknighthb »

jon-wood wrote: post #32
codegeek wrote: post #17

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 ha…

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.

I'm sure they lose money or are right on the edge with some Prime customers.

That said:

* Large-volume shippers have always gotten much lower prices than you'll get walking into a UPS store. Amazon is an uber-volume shipper.

* Their warehouse network minimizes the actual distance products must travel on average.

* I naïvely assume they've worked with carriers to optimize how they interface with them (both digitally and physically; e.g. boxes stacked/arranged in certain ways for pickup).

* Amazon often does not have the lowest prices for things, especially small/cheap items. If you buy a $5 widget you could have gotten for $3 at the local hardware store, some of that is probably making up for cheap shipping.

Re: Amazon's minimum order size for free shipping is now $35

#138

Post by 001sky »

MichaelGG wrote: post #132
milesskorpen wrote: post #91

Earlier quoted context omitted.

... and they don't actually have to worry about actually making money. It's run as a charity for consumers paid for by investors.

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?

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 http://static.cdn-seekingalpha.com/uploads/2013/1/8/2164901-...

Re: Amazon's minimum order size for free shipping is now $35

#139

Post by VLM »

andrewvc wrote: post #21
xn wrote: post #18

The "no minimum order size" statement about Prime is a bit disingenuous. Many low-cost items are now Add-On Items ( http://amzn.to/1a4NFBI ), meaning that Amazon will only ship them in an order of at least $25. Prime has become a bit less useful over the past year due to the introduction of Add-On Items.

Well, I agree that it's somewhat less useful. There is an upside though, as shipping things has an environmental impact and people probably shouldn't be wasting a box + shipping on a missing cover for a food processor.

So we'd be better off environmentally shipping a whole new food processor?

Re: Amazon's minimum order size for free shipping is now $35

#140

Post by JumpCrisscross »

bgilroy26 wrote: post #135
JumpCrisscross wrote: post #117

" This is the first time in more than a decade that Amazon has altered the minimum order for free shipping in the US. " The BLS's Transportation Services urban CPI has increased 29% since August 2003, or 2.6% annually. Amazon would need to have offered the free-shipping-for-orders-over-twenty-five deal for the last 13.3 years, or since before June 2000, for this threshold increase to be on par with inflation.

Inflation accounts for ~2/3 of the increase

At least 72.5%. That assumes the $25 threshold was set exactly a decade ago.
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