Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The Illusion of a Profitable Amazon Prime Now and Prime Fresh

stratelogical.com

Post reply on HN
Print view View original

21–30 of 85 posts

Re: The Illusion of a Profitable Amazon Prime Now and Prime Fresh

#21

Post by gringoDan »

swengw wrote: post #5

If you assume a driver’s wage is at least the Seattle minimum wage of $15 per hour, add nominal fulfillment and delivery costs of $5 per order (the contractor’s fuel, car etc.) and nominal sales and marketing and general administration costs of $5 per order, Amazon needs to fulfill close to eight minimum order ($35) deliveries per hour to breakeven just on the variable costs Across 25 associates, the average number o…

It seems like the person who wrote this analysis assumed unchanging variable costs, rather than recognizing that they will decrease over time.

1) Where did they get a $5 marginal SG&A number? This seems high to me and no source is given.

2) There is no way that, at scale, delivery costs are as high as $5/order.

The IRS standard rate for mileage in 2018 is 54.5 cents/mile. (Maybe not the most accurate metric to use, but a decent rule of thumb.) So this analysis assumes that, at scale, for the average order a driver travels 9.17 miles. This routing would be incredibly inefficient - Amazon should "batch" deliveries so that in a 10-mile "loop" a driver can drop off 3+ orders.

Furthermore, I'm not sure if Amazon drivers are employees or 1099 workers. If they're independent contractors, the delivery costs are irrelevant to Amazon, since they're passed through to the drivers.

3) Naturally, drivers utilization rates will increase as demand increases.

Re: The Illusion of a Profitable Amazon Prime Now and Prime Fresh

#22

Post by stratelogical »

aresant wrote: post #16

The author dramatically underestimates the opportunities of scale and future tech in her model. Amazon is already: - Installing lockers into apartment communities https://www.amazon.com/b?ie=UTF8&node=6442600011 that make deliveries dramatically more efficient. - Predictive logistics & ordering patterns are a core Amazon discipline and they are world class at it. - Droning looks like a gimmick today, but why should i…

I would add Robot deliveries to this list as well. Yes, if these take off, things will look different.

https://www.theverge.com/2017/7/25/16024470/starship-technol...

Re: The Illusion of a Profitable Amazon Prime Now and Prime Fresh

#24

Post by patrickg_zill »

I think that the price to the vendor of FBA was not taken into account.

It does not take much research to figure out what Amazon is charging the vendors for Prime under FBA. You can look at the rates for Fulfillment by Amazon online. Remember that Amazon doesn't pay for shipping to their warehouse.

For instance, an $18,1 kg roll of 3d printer filament shipped via FBA nets Amazon about $8 by my calculations. Yes it has to be shipped and fulfilled, which involves taking it off the shelf and adding a shipping label. What are Amazon's costs for shipping/delivering 1kg small packages? Far less than $8.

Re: The Illusion of a Profitable Amazon Prime Now and Prime Fresh

#25

Post by leggomylibro »

aresant wrote: post #16

The author dramatically underestimates the opportunities of scale and future tech in her model. Amazon is already: - Installing lockers into apartment communities https://www.amazon.com/b?ie=UTF8&node=6442600011 that make deliveries dramatically more efficient. - Predictive logistics & ordering patterns are a core Amazon discipline and they are world class at it. - Droning looks like a gimmick today, but why should i…

The lockers are amazing. If you live in an apartment building, the leasing offices which sign for packages are often only open during business hours. If you live in a house, there's a good chance that someone grabs your package off your porch.

So what do you do if you need a strip of LEDs for a project that you're putting together by this weekend and you don't have the right hours open in your schedule? (Or [insert random product here]?)

Just have it show up at the supermarket/drug store/gas station in a couple of days. Easy.

It's also cool that the apartment buildings can install the lockers and use them for packages which Amazon never touches, for the whole 'business hours' problem. But as Amazon's programs for offering free shipping to 3rd-party sellers are making it more of an 'Everything Store' by the day...well, it'll definitely be interesting to see what happens.

Re: The Illusion of a Profitable Amazon Prime Now and Prime Fresh

#26

Post by feniv »

aresant wrote: post #16

The author dramatically underestimates the opportunities of scale and future tech in her model. Amazon is already: - Installing lockers into apartment communities https://www.amazon.com/b?ie=UTF8&node=6442600011 that make deliveries dramatically more efficient. - Predictive logistics & ordering patterns are a core Amazon discipline and they are world class at it. - Droning looks like a gimmick today, but why should i…

Eventually, Amazon could also combine their predictive ordering with their lockers to stock common goods before they're ordered (some combination of a vending machine and a pickup locker).

Re: The Illusion of a Profitable Amazon Prime Now and Prime Fresh

#27

Post by rndmize »

CodeCube wrote: post #18
daxorid wrote: post #6

Earlier quoted context omitted.

[edit] Disregard, can't ask an earnest question on HN either.

Yeah my dude, I'd almost venture to say that you are the outlier here (echo/bubbles, yay!). For many that I know, food is an on-demand lazy loaded resource. Sure, sometimes they buy groceries (usually when they run out of pop-tarts) ... But the odd day when they actually cook dinner, it's a trip to the store for just those ingredients that are necessary. Is it horribly wasteful and inefficient? yes. Does that get fac…

Efficiency aside, that feels like awful planning to me. Growing up in the Bay Area, the threat of a significant earthquake has been ever-present. My family always had several dozen bottles of water and a reasonable amount of canned/jarred/dried food around.

Re: The Illusion of a Profitable Amazon Prime Now and Prime Fresh

#28

Post by rabboRubble »

rndmize wrote: post #27
CodeCube wrote: post #18

Earlier quoted context omitted.

Yeah my dude, I'd almost venture to say that you are the outlier here (echo/bubbles, yay!). For many that I know, food is an on-demand lazy loaded resource. Sure, sometimes they buy groceries (usually when they run out of pop-tarts) ... But the odd day when they actually cook dinner, it's a trip to the store for just those ingredients that are necessary. Is it horribly wasteful and inefficient? yes. Does that get fac…

Efficiency aside, that feels like awful planning to me. Growing up in the Bay Area, the threat of a significant earthquake has been ever-present. My family always had several dozen bottles of water and a reasonable amount of canned/jarred/dried food around.

Yeah, but do you want that sort of food when you are sick? Plus I don't dig into my emergency supplies when there are other options available.

Re: The Illusion of a Profitable Amazon Prime Now and Prime Fresh

#29

Post by otalp »

pontifk8r wrote: post #7

The article estimates certain costs (e.g. $5 paperwork/overhead) without much factual evidence. Relatively small reductions in those costs could make all the difference in profit or loss on any particular order.

The author is a pm at Amazon
Post reply on HN