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(Wired)   Amazon.com may soon drop the price on Prime   (wired.com) divider line 69
    More: Cool, Amazon, R.J. Hottovy, Morningstar, Kindle Fire, operating income  
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5322 clicks; posted to Business » on 13 Mar 2013 at 9:26 PM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2013-03-13 09:33:35 PM
"This company can make a lot less money", said no CEO ever
 
2013-03-13 09:36:04 PM
Yeah, I'm sure they're gonna just leave all that money on the table.
 
2013-03-13 09:37:46 PM

Creative Name: Yeah, I'm sure they're gonna just leave all that money on the table.


Basically they make 700 dollars more a year from Prime members than non-Prime. The thought is to slash the prime fee (i.e. give up some money) to make a boatload of money.

To the Scrooge McDuck money pit.
 
2013-03-13 09:42:38 PM
Yeah, judging by the Prime customers I know (my boss, a 20-something bachelor with two and a half jobs, in particular), they make boatloads from him. Metric boatloads even. We were joking around on a Friday and he ordered at least half a dozen things off of ThisisWhyI'mBroke's site (which linked to Amazon for those products.) Its so random and odd, but he and his roommate do massive Amazon orders for weird stuff that neither wants, like non-perishable food stuff - cereal straws? shelf-stable sandwiches? Just to order weird stuff. Because its one-click purchased and shipped.
 
2013-03-13 09:46:20 PM
Who says a loss-leader doesn't work?
 
2013-03-13 09:49:24 PM

ImpatientlyUnsympathetic: Yeah, judging by the Prime customers I know (my boss, a 20-something bachelor with two and a half jobs, in particular), they make boatloads from him. Metric boatloads even. We were joking around on a Friday and he ordered at least half a dozen things off of ThisisWhyI'mBroke's site (which linked to Amazon for those products.) Its so random and odd, but he and his roommate do massive Amazon orders for weird stuff that neither wants, like non-perishable food stuff - cereal straws? shelf-stable sandwiches? Just to order weird stuff. Because its one-click purchased and shipped.


The suit pajamas on that site are awesome.
ecx.images-amazon.com
 
2013-03-13 09:52:15 PM

And:

ecx.images-amazon.com

 
2013-03-13 09:56:47 PM

HempHead: And:


I laughed way too hard at that. The Kindex Infant Energy Drink just put it over the top.

Well done.
 
2013-03-13 10:00:31 PM
I order 90 lbs of Hi Tek Naturals doggie food every 45 days or so. It arrives in less than 2 days every single time. Everything I order from them arrives ahead of their expected shipping date; the large dog water container I ordered last night arrived today, etc... plus I can stream a decent amount of content as part of the price? What's not to like?

I'll renew my Prime membership for my wife and I in another 2 months without thinking twice about it. Although we don't order weird crap though I may have to check out those shelf stable sandwiches....
 
2013-03-13 10:18:42 PM
Prime is a no-brainer. Small items that I don't need today, but need in the next week or so? Click, click. Here in two days no shipping cost. Usually cheaper than running to the store.
 
2013-03-13 10:18:43 PM
This probably won't happen as if this is like any other large company the Prime profit and loss ledger is separate from the amazon store P/L.  So while Prime people might buy more things that doesn't help the Prime team's numbers.  When there's 10M people using this service that's $800M.  Holy crap that's a large number.

Anyway the article spells it out: Amazon makes about $78 more a year in profit from Prime customers than non prime.  So they would be foolish to drop the price.

Also if you drop the price people might see its worth as zero.  Right now I'm paying $80/year and this might influence me to shop more on Amazon so I get my money's worth out of them.  If the cost was $0 I might think of shopping elsewhere.

Plus Prime has some little gotchas in it.  I have it and we get all our goods shipped for free.  I also can use it to stream movies.  My wife's Kindle however needs her own Prime account to get those features.
 
2013-03-13 10:22:58 PM
Since I don't have cable, Netflix and Prime are all I need. Would still keep it even if prices went up.
 
2013-03-13 10:48:59 PM
I've been a prime subscriber for ages.  Last year, Amazon was the biggest merchant on my Amex year-end statement.  I have zero problem with that.  I get free shipping on almost everything, and by far the best price on almost everything online (factoring in the low-cost or free shipping and absence of sales tax in FL).  I cancelled Netflix when I realized Amazon had about the same quantity and quality of free streaming video, so as far as I'm concerned Prime comes free.  I send myself a reminder on the first of the month to get a free "library book" for my Kindle.

What's amazed me most in the last two years is how much stuff I can get on Amazon.  Maybe through an affiliated (not eligible for free Prime shipping) seller, but Amazon has built the world's largest store that goes way beyond books.  I was renovating a condo last year and found a lot of the stuff (from shower doors to toilets) I needed at prices cheaper than Home Depot or Lowe's (again factoring in the no sales tax bit). I could find anything I wanted from the big box home repair stores at the same price on Amazon, and often cheaper, and without the hassle of driving to their stores and putting up with their "inventories" that never matched what they said they had online.  At one point, my contractor said he needed the garbage disposal asap.  It was on Amazon and eligible for Prime.  I could have driven the one-hour round trip to my local HD, which claimed to have it in stock, and wandered the corridors looking for it, or I could have done the obvious:  paid $3.99 for 1-day delivery via Amazon.

I just bought my new phone through Amazon's wireless site.   http://wireless.amazon.com/ .  My contract with my current phone co was finally up, and I got a better deal there than I did through my existing phone company on the same phone. I've been a customer of AT&T for ten straight years, but they decided to offer new customers a better deal than existing customers.  So,  fine, AT&T, I am now an ex-customer.

I'm pretty sure that at some point Amazon will lose the sales tax advantage it has over bricks & mortar stores, but it won't lose the convenience factor.  Never having to go to a Home Depot store again?  Priceless.
 
2013-03-13 10:50:35 PM
lelio:

Also if you drop the price people might see its worth as zero.  Right now I'm paying $80/year and this might influence me to shop more on Amazon so I get my money's worth out of them.  If the cost was $0 I might think of shopping elsewhere.

This is part of the psychology. I have Prime and my rule is that if I want to order something I always look at Amazon first. Why? Because I'm already paying for it. If the cost where zero I wouldn't think like that and might shop at another on-line location and never get around to shopping at Amazon.

Even then I still don't always buy at Amazon. I recently found the an item that was selling on Amazon for $250 for $200 on another site. I bought it there.
 
2013-03-13 11:04:47 PM
I have Prime and use it a lot. However. I do think that a lot of time the Prime prices are jacked up to cover the shipping. You can get the same item for the same price or less elsewhere without the Prime shipping. IMHO.
 
2013-03-13 11:32:38 PM

HempHead: And:

[ecx.images-amazon.com image 850x740]


This was actually posted by my boss on our coworker's Facebook page as his "belated" baby shower present.
 
2013-03-13 11:37:39 PM

Enormous-Schwanstucker: I order 90 lbs of Hi Tek Naturals doggie food every 45 days or so. It arrives in less than 2 days every single time. Everything I order from them arrives ahead of their expected shipping date; the large dog water container I ordered last night arrived today, etc... plus I can stream a decent amount of content as part of the price? What's not to like?

I'll renew my Prime membership for my wife and I in another 2 months without thinking twice about it. Although we don't order weird crap though I may have to check out those shelf stable sandwiches....


Plum Kids Organic Jammy Sammy. They have grape jelly + peanut butter, strawberry jam + peanut butter and apple cinnamon + oatmeal.
 
2013-03-13 11:39:25 PM
We don't have Prime, although my husband has tried to justify getting it somehow.  I told him we'd just buy a whole lot more crap than we need to feel like we were justifying the cost.  So we always wait until we have at least $25 worth of stuff to buy and then order.  Would have been nice on the books that I just ordered from the UK site and had shipped internationally, but since it doesn't work that way...oh, well.

If they drop the price, we might be interested eventually.
 
2013-03-13 11:39:30 PM

KarmicDisaster: I have Prime and use it a lot. However. I do think that a lot of time the Prime prices are jacked up to cover the shipping. You can get the same item for the same price or less elsewhere without the Prime shipping. IMHO.


Do you have any facts to back up that humble opinion?  Because when I type an item description into Google (which I don't think is trying to help Amazon) I almost always get the reverse results.  The item on Amazon is cheaper. I start shopping on Google, but I almost always wind up buying from Amazon. I've seen one product that was cheaper via Google than Amazon in the last three years, and I told Amazon the site and the price including S&H and taxes. I buy on Amazon every other day.  One slightly over-priced product in three years doesn't make a scam.
 
2013-03-13 11:54:18 PM
I liked the idea of Prime for the free shipping and even got a membership, but of course they don't give free shipping to us Non-contigious Americans.  I certainly don't need them for streaming.  So screw 'em.
 
2013-03-14 12:00:46 AM
They might as well just drop it to $0...I'm sure most of the States will eventually win and the pressure to charge State sales tax will eventually come to fruition.
 
2013-03-14 12:05:37 AM
My biggest complaint about Amazon is their branded rewards card through Chase. I'm not sure what they're smoking over there at Chase, but that card has been one headache after another.

But hey, at least they're keeping the Indian call centers in business.
 
2013-03-14 12:17:26 AM
I buy a lot from Amazon; do nothing but Super Saver Shipping.
 
2013-03-14 12:23:03 AM
Does Prime actually make that much money? I'd wondered because in general 2 day shipping costs a bit, although of course they get bulk rates I'm sure. But the annual rate is cheaper than netflix and they have to pay the studios for the rental fees now too, on top of all the shipping stuff.
 
2013-03-14 12:35:38 AM
a4dzac: They might as well just drop it to $0...I'm sure most of the States will eventually win and the pressure to charge State sales tax will eventually come to fruition.

Even if they do, and I start getting charged NM sales tax on my purchases, I'll still buy a lot of stuff from Amazon, just because it is a hell of a lot easier to find what I want, and see reviews of the same product from others that have purchased it.  I'd gladly still pay 7.5% sales tax (that I would anyway) to save the pain in the ass of searching a bunch of merchants that may or may not have what I'm looking for.

Not to say that I don't shop locally...if I do know a local merchant does have something I need, I buy it from them. A lot of things fall in to that category. I just don't want to visit a bunch of stores on the off chance they -might- have it there at a reasonable price, when I know damn well Amazon has it and I can have it on my doorstep in a couple of days.
 
2013-03-14 01:18:47 AM
If you do an assload of online shopping and do not have a prime account then you are a moron
 
2013-03-14 01:32:11 AM
They're not making much, if any, money from our Prime membership.  We easily buy something once a week from Amazon.
 
2013-03-14 01:35:39 AM

Rustico: Prime is a no-brainer. Small items that I don't need today, but need in the next week or so? Click, click. Here in two days no shipping cost. Usually cheaper than running to the store.


Yup and yup.
 
2013-03-14 01:42:43 AM

Kanemano: "This company can make a lot less money", said no CEO ever




Wat?
 
2013-03-14 01:44:57 AM

ImpatientlyUnsympathetic: Yeah, judging by the Prime customers I know (my boss, a 20-something bachelor with two and a half jobs, in particular), they make boatloads from him. Metric boatloads even. We were joking around on a Friday and he ordered at least half a dozen things off of ThisisWhyI'mBroke's site (which linked to Amazon for those products.) Its so random and odd, but he and his roommate do massive Amazon orders for weird stuff that neither wants, like non-perishable food stuff - cereal straws? shelf-stable sandwiches? Just to order weird stuff. Because its one-click purchased and shipped.



It's like SkyMall for stoners.  I love it.
 
2013-03-14 01:45:01 AM

Creative Name: Yeah, I'm sure they're gonna just leave all that money on the table.




It's so funny how ignorant most farkers are with business and economics, kinda sad actually
 
2013-03-14 01:45:26 AM

almandot: Does Prime actually make that much money?


Crazy idea, but if you read TFA:

...CIRP's market research found those Prime members annually spent more than twice as much on average ($1,224) than non-Prime customers ($505). Adding in the $79 membership fee, Prime members bring nearly $800 more in sales per customer to Amazon. After subtracting all the additional costs of doing business with Prime customers - mainly greater expenses for sales, shipping and video streaming - Morningstar analyst R.J. Hottovy found that Prime members accounted for $78 more in profit before interest and taxes per customer than non-Prime customers. That's almost exactly the cost of a Prime membership.

$78 doesn't sound like much -- until you multiply it by 10 million, the number of Prime members.
 
2013-03-14 01:56:21 AM
I crush them like bugs on prime (well above the yearly quoted average for prime members), but I'm assuming their logistics have gotten to the point where they're still making money on most prime members and can afford to lose a bit on people like me.
 
2013-03-14 02:38:46 AM

MrEricSir: almandot: Does Prime actually make that much money?

Crazy idea, but if you read TFA:

...CIRP's market research found those Prime members annually spent more than twice as much on average ($1,224) than non-Prime customers ($505). Adding in the $79 membership fee, Prime members bring nearly $800 more in sales per customer to Amazon. After subtracting all the additional costs of doing business with Prime customers - mainly greater expenses for sales, shipping and video streaming - Morningstar analyst R.J. Hottovy found that Prime members accounted for $78 more in profit before interest and taxes per customer than non-Prime customers. That's almost exactly the cost of a Prime membership.
$78 doesn't sound like much -- until you multiply it by 10 million, the number of Prime members.


You forgot the most important part at the end of the next paragraph:

Put yet another way: More than one-third of Amazon's profits before interest and taxes came from fewer than four percent of the people who buy stuff on Amazon.
 
2013-03-14 02:50:36 AM
libranoelrose:

Put yet another way: More than one-third of Amazon's profits before interest and taxes came from fewer than four percent of the people who buy stuff on Amazon.

Geez, I'd still be surprised if they actually made money on me, I get lots and lots of relatively small items and I never bother to group them up since I have prime. But geez, maybe their logistics really are that good. They have gone relatively out of their way a few times to make me happy.
 
2013-03-14 03:36:56 AM

libranoelrose: You forgot the most important part at the end of the next paragraph:

Put yet another way: More than one-third of Amazon's profits before interest and taxes came from fewer than four percent of the people who buy stuff on Amazon.


That's also got to be terrifying as a business owner or investor. If the company's bottom line would be impacted by a small minority of "whale" customers walking away, you'd better make damn sure they stay happy. You also have little short-term incentive to care about the majority of your customers.
 
2013-03-14 03:50:55 AM
If their Prime base keeps growing (which it will) it's a staggeringly exciting feeling tonhave as an investor.

They will soon be able to do 2 day delivery at a fraction of the cost due to their building all of these distribution centers all over the country.
 
2013-03-14 06:23:24 AM
Suggestion to Amazon:

Offer tiers. For instance, lower the price to $25, take away the $25 minimum shipping requirement but ship things more quickly than the typical "free super saver shipping" option, but only offer a limited number of 2-day shipments per year or month for these lower-tiered customers. Offer, at least some of, the other perks, such as Kindle rentals. PROFIT.
 
2013-03-14 06:28:08 AM

ImpatientlyUnsympathetic: Enormous-Schwanstucker: I order 90 lbs of Hi Tek Naturals doggie food every 45 days or so. It arrives in less than 2 days every single time. Everything I order from them arrives ahead of their expected shipping date; the large dog water container I ordered last night arrived today, etc... plus I can stream a decent amount of content as part of the price? What's not to like?

I'll renew my Prime membership for my wife and I in another 2 months without thinking twice about it. Although we don't order weird crap though I may have to check out those shelf stable sandwiches....

Plum Kids Organic Jammy Sammy. They have grape jelly + peanut butter, strawberry jam + peanut butter and apple cinnamon + oatmeal.


Oh? That PB/Apple/Cinnamon + oatmeal sounds good. Come to think of it anything with apples and cinnamon and oatmeal is good, to me at least.
 
2013-03-14 06:29:34 AM

libranoelrose: They will soon be able to do 2 day delivery at a fraction of the cost due to their building all of these distribution centers all over the country.


I'm worried that this may cause problems with Amazon pulling a Wal Mart, and once they establish themselves as the preeminent force in a particular market, they slash the number of niche products they offer and instead focus almost entirely on having the inventory of the best sellers, just so they can have the satisfaction of some MBA's dream and by having great-selling products that are more regularly in stock (and delivered more quickly).
 
2013-03-14 06:34:21 AM

cman: If you do an assload of online shopping and do not have a prime account then you are a moron


I do a lot of it, but I rarely buy necessary, immediate needs, so I care less about two-day shipping than I do about free shipping and the possibility of not waiting a week or more while a shipment is being put together from various warehouses. I buy with free shipping in most cases, so I order $25+ worth of stuff from Amazon (or, hell, Walgreens.com of all places has scored me some incredible deals on various things in the past couple months).

If I have something I'm buying for $19.99, I'll throw in $6 of whatever I can use that's on sale or clearance. I've tried a few consumables I'd have never otherwise tried due to this, and some companies are now better for it because I buy their products more often.
 
2013-03-14 06:36:08 AM
And for what it's worth, the $25 thing is why I don't have Prime. If Amazon raised their minimum purchase to $50 or $100 for free shipping, I'd be more likely to go Prime... but if they did that, and they lowered the price of Prime to $50 or less, they'd probably make A LOT more money than they do today.
 
2013-03-14 07:08:29 AM

giftedmadness: It's so funny how ignorant most farkers are with business and economics, kinda sad actually


It's not just Farkers. There was a story on NPR yesterday comparing two apparel companies. When they mentioned the financials, they talked about Company A's sales, and compared them with Company B's profits.
 
2013-03-14 08:43:58 AM

Rustico: Prime is a no-brainer. Small items that I don't need today, but need in the next week or so? Click, click. Here in two days no shipping cost. Usually cheaper than running to the store.


Same here. I live "out in the country" and driving to a store to pick something up can easily cost me $8-$10 bucks in gas alone. Yet somehow with amazon prime I can get a pack of razor blades delivered to my door in two days for about the same cost as at the local Walmat.
 
2013-03-14 08:52:13 AM
Prime video streaming.  $79 a year / 12 months = $6.50 a month.

Cheaper than Netflix, PLUS I get free two day shipping on everything I buy.  This is a no-brainer.
 
2013-03-14 10:14:09 AM

AngryDragon: Prime video streaming.  $79 a year / 12 months = $6.50 a month.

Cheaper than Netflix, PLUS I get free two day shipping on everything I buy.  This is a no-brainer.


How much overlap with Netflix?
 
RJB
2013-03-14 10:52:18 AM

MrEricSir: My biggest complaint about Amazon is their branded rewards card through Chase. I'm not sure what they're smoking over there at Chase, but that card has been one headache after another.

But hey, at least they're keeping the Indian call centers in business.


Just curious, what problems have you had with the card? I've carried that card since 2004, amazingly never had any issues. Maybe I'm just lucky. I did find it strange when they switched from automatically sending me Amazon gift cards to enrolling me in the Chase rewards program, but the latter offers many other options, so I didn't mind - just seemed to defeat the point of the Amazon co-branding.

And though I'm clearly Amazon-loyal, I haven't subscribed to Prime. I considered it until I learned about the Target RedCard: No fee, 5% discount on all purchases, free shipping for anything purchased online. Selection isn't quite as broad as Amazon's, but still quite good.
 
2013-03-14 11:16:34 AM

KarmicDisaster: I have Prime and use it a lot. However. I do think that a lot of time the Prime prices are jacked up to cover the shipping. You can get the same item for the same price or less elsewhere without the Prime shipping. IMHO.


I'm a prime member and bought a very large cat tree off Amazon, the non-Prime version of the one I wanted was list as 20 bucks cheaper, but cost 50 to ship and 5 days delivery instead of 2 days.

I love Prime so much, I wish they had a Canadian version. Right now I'd have to ship everything to my parents address in the US and I can't use it the way I want too (auto food purchases, etc)
 
2013-03-14 11:21:58 AM
Too bad Amazon can't work with Hobbycity.
 
2013-03-14 12:04:35 PM

cman: If you do an assload of online shopping and do not have a prime account then you are a moron


even if you don't and know atleast 4 family members or friends that do, it's a great deal. you can share your prime membership with upto 4 people. i was going to cancel mine after the first year then they introduced sharing option. my sister likes to shop online for daily necessities and will now amazon is her first stop.
 
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