Amazon Prime members buy twice as much, don't compare on price • Hacker News Board

Re: Amazon Prime members buy twice as much, don't compare on price

#21

Post by rdl » Mon, Feb 27, 2012, 5:45 PM UTC

Duff wrote: post #14

ShabbyDoo wrote: post #5

I have been surprised that Amazon has not vertically integrated into delivery and distribution. Imagine if they had bought DHL. They would have turned what must today be a huge variable cost into a largely fixed one. I don't have time to write about all the interesting innovations in distribution which could result from combining warehousing and delivery. Perhaps fears of antitrust lawsuits and hardball tactics from…

Shipping is a tough business. You need lots of trucks, ramp space at airports, and lose the ability to cherry pick what states you operate in. Consider that despite billions in investments, both DHL before they went away and FedEx Ground today are still not as good as UPS.

FedEx Ground started as a different company (Roadway Package System) -- to this day, it has a lot of contracts, union rules, etc. which make it vastly worse than just a ground version of FedEx. The only FedEx acquisition which seems to be any good is Custom Critical (used for shipping organs, live animals, etc. on next-flight-out commercial service, to get stuff door to door as fast as possible).

Re: Amazon Prime members buy twice as much, don't compare on price

#22

Post by ericdykstra » Mon, Feb 27, 2012, 5:45 PM UTC

Amazon Prime and Amazon "subscribe and save" are two excellent products. I love reducing trips out to crowded stores and time thinking about shopping choices. I don't have to worry about customer service, returning defective products (relatively, way easier on Amazon), etc. I think Jason Calacanis' article about the "Cult of Amazon Prime" hits on a lot of what has made it so successful, and what will make it successful going forward: http://www.launch.is/blog/the-cult-of-amazon-prime.html

Re: Amazon Prime members buy twice as much, don't compare on price

#23

Post by rdl » Mon, Feb 27, 2012, 5:47 PM UTC

ShabbyDoo wrote: post #5

I have been surprised that Amazon has not vertically integrated into delivery and distribution. Imagine if they had bought DHL. They would have turned what must today be a huge variable cost into a largely fixed one. I don't have time to write about all the interesting innovations in distribution which could result from combining warehousing and delivery. Perhaps fears of antitrust lawsuits and hardball tactics from…

They have experimented with it, with the AmazonFresh service (fresh.amazon.com). I'm sure it's run by a contractor somehow, but I'm not sure if it's an real arms-length entity or another Amazon tax structuring thing.

Re: Amazon Prime members buy twice as much, don't compare on price

#24

Post by [deleted] » Mon, Feb 27, 2012, 5:51 PM UTC

ryandvm wrote: post #2

Amazon Prime was a brilliant move. Get people to pay what is probably less then the average user's shipping costs for a year and then they'll refuse to buy products from anyone but you. And now it turns out they'll even go as far as ignoring pricing to quell cognitive dissonance. Nice.

[deleted]

Re: Amazon Prime members buy twice as much, don't compare on price

#25

Post by jrockway » Mon, Feb 27, 2012, 5:53 PM UTC

ShabbyDoo wrote: post #3

"82% of Prime members buy on Amazon even if the item is less expensive somewhere else" The supposed "source" referenced another study (sans link), so I can't get the answer to the obvious question: Was "less expensive" computed using the marginal cost to the customer of this particular purchase? Meaning, do other sites offer the widget for a few dollars less but charge a lot for 2nd day shipping? I'm a Prime customer…

I agree with you. Buy.com is often cheaper, but the items don't even ship the same day. Why wait around when I can pay $10 extra on a $200 item and get it same day?

Ultimately, Amazon is doing what I think all companies should: compete on value instead of on price.

Re: Amazon Prime members buy twice as much, don't compare on price

#26

Post by jrockway » Mon, Feb 27, 2012, 5:54 PM UTC

PhrosTT wrote: post #9

ShabbyDoo wrote: post #3

"82% of Prime members buy on Amazon even if the item is less expensive somewhere else" The supposed "source" referenced another study (sans link), so I can't get the answer to the obvious question: Was "less expensive" computed using the marginal cost to the customer of this particular purchase? Meaning, do other sites offer the widget for a few dollars less but charge a lot for 2nd day shipping? I'm a Prime customer…

There's also the money you save but not stepping foot in a store. That is, you don't throw extra items in your cart out of temptation.

Are you sure about that? Amazon spends a lot of money (and screen space) trying to recommend items for you to buy. I have to imagine that they do that because it works.

Re: Amazon Prime members buy twice as much, don't compare on price

#27

Post by sliverstorm » Mon, Feb 27, 2012, 5:54 PM UTC

ryandvm wrote: post #2

Amazon Prime was a brilliant move. Get people to pay what is probably less then the average user's shipping costs for a year and then they'll refuse to buy products from anyone but you. And now it turns out they'll even go as far as ignoring pricing to quell cognitive dissonance. Nice.

IMO It's hardly about cognitive dissonance; rather, people don't like to shop around on every damn thing they buy.

So, once you position yourself in customer's minds as reliably having competitive pricing (not always the #1 cheapest, but always close) they feel comfortable ordering from you without shopping around.

Re: Amazon Prime members buy twice as much, don't compare on price

#28

Post by jrockway » Mon, Feb 27, 2012, 5:57 PM UTC

ShabbyDoo wrote: post #4

"Amazon spends more than $90 a year for each Prime customer, losing $11 annually for each subscriber." "Losing"? If the other stat of purchase volume increasing from $400 to $900 is true, Amazon is buying volume business for just a 1% discount. I wonder how the profit margins skew between average purchases and those which only happened because a customer had signed-up for prime? I recently ordered some collar stays a…

Yeah, the article is very poorly written. What they meant to say was that Amazon invests $11 in each customer, and the result is a doubling of purchases. I am sure Amazon makes more than $11 out of every $900 in sales, which makes this a good deal for them.

Re: Amazon Prime members buy twice as much, don't compare on price

#29

Post by jrockway » Mon, Feb 27, 2012, 5:59 PM UTC

sliverstorm wrote: post #27

ryandvm wrote: post #2

Amazon Prime was a brilliant move. Get people to pay what is probably less then the average user's shipping costs for a year and then they'll refuse to buy products from anyone but you. And now it turns out they'll even go as far as ignoring pricing to quell cognitive dissonance. Nice.

IMO It's hardly about cognitive dissonance; rather, people don't like to shop around on every damn thing they buy. So, once you position yourself in customer's minds as reliably having competitive pricing (not always the #1 cheapest, but always close) they feel comfortable ordering from you without shopping around.

I buy Amazon because of the certainty. Item doesn't arrive? "Very sorry, we've overnighted another one." Item is wrong? "Sorry, here's your money back, and keep the item." Item doesn't fit? "Here's a mailing label to send it back."

And so on. The consistency of service is why Amazon is good to buy from. You order something and you know you'll have it in 2 days or less.

Re: Amazon Prime members buy twice as much, don't compare on price

#30

Post by dot » Mon, Feb 27, 2012, 5:59 PM UTC

ShabbyDoo wrote: post #5

I have been surprised that Amazon has not vertically integrated into delivery and distribution. Imagine if they had bought DHL. They would have turned what must today be a huge variable cost into a largely fixed one. I don't have time to write about all the interesting innovations in distribution which could result from combining warehousing and delivery. Perhaps fears of antitrust lawsuits and hardball tactics from…

but then they'd have a local presence in the states they ship to and would have to charge sales tax. they'd lose their ~10% price advantage.