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

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

lukew.com

Post reply on HN
Print view View original

71–80 of 151 posts

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

#71

Post by beagle3 »

jrockway wrote: post #28
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.

The amazon profit margin is something like 3%, which some people consider unsustainable; 3% over the god-knows-how-many billions that flow through them is excellent business. The potential sustainability problem comes from having no margin for error or non-trivial change in structural costs. I don't know enough about it to have an opinion.

Regardless, 3% of $400 == $12, so with these numbers, Amazon breaks even on a new $400/year client, and makes money on any client that spends more than that.

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

#73

Post by iamdave »

leeoniya wrote: post #63
philip1209 wrote: post #56

Earlier quoted context omitted.

Completely true. I bought shoes on Amazon, after 3 months they started to fall apart. I went on service chat and they refunded my full cost immediately and didn't even ask for me to return the old shoes.

this is a nightmare for merchants though, speaking from experience.

Nightmare re: cost/inventory or both?

I can kind of see how this works for merchants selling through Amazon. AMZN provides the customer with a good experience, makes customer feel valued, customer is more inclined to buy more products despite a bad moment knowing they'll be taken care of.

Probably not how it pans out in practice, however.

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

#74

Post by dman »

leeoniya wrote: post #63
philip1209 wrote: post #56

Earlier quoted context omitted.

Completely true. I bought shoes on Amazon, after 3 months they started to fall apart. I went on service chat and they refunded my full cost immediately and didn't even ask for me to return the old shoes.

this is a nightmare for merchants though, speaking from experience.

As a small time seller I can fully attest to this. I hate selling on Amazon just about as much as I love buying on Amazon.

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

#75

Post by pja »

cleverjake wrote: post #53
pja wrote: post #40

Earlier quoted context omitted.

Yeah you can return stuff...right until they decide you're an unprofitable customer and drop you like a hot brick.

[citation needed] I have never heard of this happening ever with amazon, though I would love to know where your experience with this is coming from.

The magic phrase to search for is "extraordinary number of incidents with your orders and corresponding shipments" which is from their standard form email when they cancel your account.

My guess would be that Amazon's business model is very sensitive to the return rate, since returns are very expensive for them: their whole system is built around getting product out the door to the customer not the other way round!

One or two expensive returns from a customer could wipe out all the profit they'll ever make from that individual. If they believe they can identify those customers who are likely to cost them money, it's in Amazon's interest to cut off service to those customers as early as possible.

Perfectly rational behaviour, but I imagine highly frustrating for those customers who naturally feel that they've been somehow accused of wrongdoing when Amazon decides it doesn't want to do business with them any more.

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

#76

Post by leeoniya »

iamdave wrote: post #73
leeoniya wrote: post #63

Earlier quoted context omitted.

this is a nightmare for merchants though, speaking from experience.

Nightmare re: cost/inventory or both? I can kind of see how this works for merchants selling through Amazon. AMZN provides the customer with a good experience, makes customer feel valued, customer is more inclined to buy more products despite a bad moment knowing they'll be taken care of. Probably not how it pans out in practice, however.

the problem is, the customer is not always right. but your money and product is gone regardless...unless you're willing to jump through a ton of dispute hoops most of which take a long time and end up in favor of the customer on some obscure seller agreement clause.

paypal does business this way as well.

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

#78

Post by pja »

icey wrote: post #42
pja wrote: post #40

Earlier quoted context omitted.

Yeah you can return stuff...right until they decide you're an unprofitable customer and drop you like a hot brick.

Does this happen frequently? I haven't heard about Amazon doing this before.

See reply to CleverJake. They closed a stack of accounts a few years ago, whether they're still doing so I don't know, but the same logic applies...

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

#79

Post by tomkarlo »

"Amazon spends more than $90 a year for each Prime customer, losing $11 annually for each subscriber"

Narrow thinking like this is why other retailers don't offer Prime. If you can turn a $400 customer into a $900 customer, you're probably more than covering that "loss" and it should be considered a marketing expense if anything. Put another way, what company wouldn't spend $11 to bring in $500 of customer purchases?

The right price point for Prime should be one where the customer benefits by saving on shipping and other costs ("this loss") but Amazon benefits by increasing their overall annual spend -- mostly by moving their spending over from other online and offline merchants. Seems like they're right in that sweet spot.

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

#80

Post by billybob »

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…

Regarding clothing: I've heard the idea that we'll all scan our bodies, upload that data, and an online site will be able to show us what will fit us.

People may find that too creepy, but Amazon could do something else: gather lots of feedback about what fits customers and what doesn't. You get 3 pairs of pants, rate them "too big" and "too small" and "just right". Eventually that could correlate that if you and Customer X both fit these pants recently, the shorts he bought last week will probably fit you too.

(This would be more complicated for women, of course.)

Post reply on HN