How Amazon Makes Money or Duh

[crich70]

Originally Posted by Lemurion

Color me surprised... not.

Amazon provides excellent customer service and provides Kindle devices inexpensively so that people will be more likely to spend money there... in other words because it's good business.

I tend to agree. If a company doesn't have good cs people will leave and not come back and with things like Amazon Prime it's a cinch that they are raking in more $$ than they are spending. Also with so many of their ebooks being sold at .99-$2.99 you don't see how things add up right away. I mean 4 books at $2.99 comes to $12.00 for example and I imagine a lot of people buy multiple books even at the higher prices like $9.99 so the math comes out pretty good for Amazon.

[twowheels]

Potential spoiler, if you haven't read Catch-22:

Spoiler:

“I don’t understand why you buy eggs for seven cents apiece in Malta and sell them for five cents.”

‘I do it to make a profit.’

‘But how can you make a profit? You lose two cents an egg.’

‘But I make a profit of three and a quarter cents an egg by selling them for four and a quarter cents an egg to the people in Malta I buy them from for seven cents an egg. Of course, I don’t make the profit. The syndicate makes the profit. And everybody has a share.’

Yossarian felt he was beginning to understand. ‘And the people you sell the eggs to at four and a quarter cents apiece make a profit of two and three quarter cents apiece when they sell them back to you at seven cents apiece. Is that right? Why don’t you sell the eggs directly to you and eliminate the people you buy them from?’

‘Because I’m the people I buy them from,’ Milo explained. ‘I make a profit of three and a quarter cents apiece when I sell them to me and a profit of two and three quarter cents apiece when I buy them back from me. That’s a total profit of six cents an egg. I lose only two cents an egg when I sell them to the mess halls at five cents apiece, and that’s how I can make a profit buying eggs for seven cents apiece and selling them for five cents apiece. I pay only one cent apiece at the hen when I buy them in Sicily.’

‘In Malta,’ Yossarian corrected. ‘You buy your eggs in Malta, not Sicily.’

Milo chortled proudly. ‘I don’t buy eggs in Malta,’ he confessed… ‘I buy them in Sicily for one cent apiece and transfer them to Malta secretly at four and a half cents apiece in order to get the price of eggs up to seven cents apiece when people come to Malta looking for them.’

‘Why do people come to Malta for eggs when they’re so expensive there?’

‘Because they’ve always done it that way.’

‘Why don’t they look for eggs in Sicily?’

‘Because they’ve never done it that way.’

‘Now I really don’t understand. Why don’t you sell your mess halls the eggs for seven cents apiece instead of for five cents apiece?’

‘Because my mess halls would have no need for me then. Anyone can buy seven-cents-apiece eggs for seven cents apiece.’

‘Why don’t they bypass you and buy the eggs directly from you in Malta at four and a quarter cents apiece?’

‘Because I wouldn’t sell it to them.’

‘Why wouldn’t you sell it to them?’

‘Because then there wouldn’t be as much room for profit. At least this way I can make a bit for myself as a middleman.’

‘Then you do make a profit for yourself,’ Yossarian declared.

‘Of course I do. But it all goes to the syndicate. And everybody has a share.’

Don’t you understand? It’s exactly what happens with those plum tomatoes I sell to Colonel Cathcart.” “Buy,” Yossarian corrected him. “You don’t sell plum tomatoes to Colonel Cathcart and Colonel Korn. You buy plum tomatoes from them.” “No, sell,” Milo corrected Yossarian. “I distribute my plum tomatoes in markets all over Pianosa under an assumed name so that Colonel Cathcart and Colonel Korn can buy them up from me under their assumed names at four cents apiece and sell them back to me the next day at five cents apiece. They make a profit of one cent apiece, I make a profit of three and a half cents apiece, and everybody comes out ahead.”

[elemenoP]

How does Amazon make money? They don't. They grow revenue every quarter, and they have yet to turn a profit.

http://www.nytimes.com/2013/10/22/te...ofit.html?_r=0

So yes, they DID sell you that Kindle--and everything else!--at a loss.

eP

[Andrew H.]

Originally Posted by elemenoP

How does Amazon make money? They don't. They grow revenue every quarter, and they have yet to turn a profit.

It's not true that Amazon has never turned a profit - their first profitable year was in 2003, and they turned a profit as recently as 2011. It is true, however that they have generally had a low margin and never been *very* profitable when compared to their revenue.

[fjtorres]

Originally Posted by Andrew H.

It's not true that Amazon has never turned a profit - their first profitable year was in 2003, and they turned a profit as recently as 2011. It is true, however that they have generally had a low margin and never been *very* profitable when compared to their revenue.

In 2010 they had net income of over $1B...

http://www.internetretailer.com/2011...fits-boom-2010

...and promptly launched a $2B stock buyback followed by a massive infrastructure investment effort.

Amazon is operating at breakeven/minimal loss by *choice*, not because they are incapable of making a profit.

[Katsunami]

Amazon sells Kindles cheap – perhaps at a loss – because it knows getting a device into a customers hands means that customer will spend an extra $4,500 at Amazon over the next 10 years.

Except with me. I read on a Kindle, and buy my books everywhere but Amazon.

I *HAVE* to shop at Amazon.com, being in the Netherlands. The one time I tried to shop in the UK (because the book cost $19.95 at Amazon.com, and £2.99 at Amazon.co.uk, while others didn't have the book), I got an e-mail stating that I had to prove that I actually lived in that country.

That sort of crap makes me shop at Kobo most of the time because I can buy from (almost) any country, the books are priced comparably to Amazon.com (for me, at least), even without discount codes. Shopping at Kobo US + discount codes = unbeatable price, and the fact that it's epub is icing on the cake (for me).

Diesel E-Books was very nice with regard to Forgotten Realms novels, for $4.15. (Amazon US: $6.59 - $9.95 depending on age, Kobo US: $6.59, NL: $8.55 after conversion.) I got quite a few of them there, but now they're all US-only for some reason. Therefore I've switched those over to Feedbooks.com (€4.25/$5.81) or Kobo US with discount codes.

ebooks.com is one of the most expensive stores I frequent, and often it's STILL cheaper than Amazon.com. (For me, at least.)

Long story short: I only shop at Amazon.com for ebooks if there's no other choice.

[shalym]

Originally Posted by Katsunami

Except with me. I read on a Kindle, and buy my books everywhere but Amazon.

I *HAVE* to shop at Amazon.com, being in the Netherlands. The one time I tried to shop in the UK (because the book cost $19.95 at Amazon.com, and £2.99 at Amazon.co.uk, while others didn't have the book), I got an e-mail stating that I had to prove that I actually lived in that country.

That sort of crap makes me shop at Kobo most of the time because I can buy from (almost) any country, the books are priced comparably to Amazon.com (for me, at least), even without discount codes. Shopping at Kobo US + discount codes = unbeatable price, and the fact that it's epub is icing on the cake (for me).

Diesel E-Books was very nice with regard to Forgotten Realms novels, for $4.15. (Amazon US: $6.59 - $9.95 depending on age, Kobo US: $6.59, NL: $8.55 after conversion.) I got quite a few of them there, but now they're all US-only for some reason. Therefore I've switched those over to Feedbooks.com (€4.25/$5.81) or Kobo US with discount codes.

ebooks.com is one of the most expensive stores I frequent, and often it's STILL cheaper than Amazon.com. (For me, at least.)

Long story short: I only shop at Amazon.com for ebooks if there's no other choice.

So you never buy anything from Amazon? (note that I'm talking about physical goods here, not necessarily just ebooks) I believe this article is saying that people who buy Kindles spend more money OVERALL at Amazon, not just more money on ebooks.

Shari

[Katsunami]

Originally Posted by shalym

So you never buy anything from Amazon? (note that I'm talking about physical goods here, not necessarily just ebooks) I believe this article is saying that people who buy Kindles spend more money OVERALL at Amazon, not just more money on ebooks.

Shari

I do buy large quantities of second hand CD's at the Amazo.co.uk marketplace.

For some reason, shipment from the UK to the Netherlands is only €2.01 (add €0.01, which is the price of the actual CD, most of the times), while shipment from the Amazon.de marketplace to the Netherlands is €6.

I don't think either Amazon.co.uk or the seller of the CD's are making much money.

Sometimes I buy things at Amazon.co.uk or Amazon.de, if it's cheaper than buying the same things in the Netherlands, but that's not often.

[Rizla]

Meanwhile, Amazon's Kindle Fire HDX with an 8.9 inch screen costs $379 – much cheaper than a comparable $499 iPad from Apple.

Thats not cheap for a tablet. You can get a Samsung Tab 3 for about the same and it wont come with all the crippling amazon lock-down restrictions. Thats no way cost price. Comparing it to an overpriced ipad is absurd.

[HarryT]

Originally Posted by Rizla

Thats not cheap for a tablet. You can get a Samsung Tab 3 for about the same and it wont come with all the crippling amazon lock-down restrictions. Thats no way cost price. Comparing it to an overpriced ipad is absurd.

Does the Tab 3 have the same screen as the HDX? The screen is the most expensive component of any tablet.

[fjtorres]

Comparing a Kindle Fire to a generic Android tablet misses the point of the product.
FIREs aren't marketted as android tablets any more than eink Kindles are marketed as Linux devices.
http://www.zdnet.com/kindle-fire-upd...gn-7000023335/

Kindles are content consumption devices ala iPxxx family and they don't pretend to be anything else. The software is simplified and tuned to that purpose. The intent is to go after Apple, not the generic android market, which is why they are built with premium hardware that goes toe to toe with Apple's and offers features you don't get on generics. The 2012 models had the acknowledged best audio and networking of any tablet, period, and the 2013 model's screen puts Apple's to shame.
If you're looking to live in the Google ecosystem, Kindles are no more for you than are iPads.
But if you are comfortable in the Amazon gardens, Kindles can be quite satisfying buys and most Kindle buyers fully understand what they are doing.

Edit:
Recent review:
http://www.3g.co.uk/PR/Dec2013/amazo...-9-review.html

Mojito is certainly very different to Android. There’s none of the customising malarkey with backgrounds, themes and widgets. Instead Fire OS is centred around the content.

When the HDX is powered up, you get a carousel, which is a bit like a shelf that scrolls, containing all your Amazon content such as books, apps, movies etc. Whatever you accessed the most recently pops up first, which is handy if you were half way through a game or movie. It is possible to remove items from the carousel if you prefer a more minimalist approach. A more standard menu is located above the carousel, for access to things like Web, Games, and Videos. While underneath you’ll find all your apps. So far, so easy to navigate. Delving into folders and sub folders though can be a little confusing, and it is easy to get lost, until you’re more familiar with the OS.

Amazon didn’t become the international retail giant it is by missing any tricks. It has included every which way possible on the Kindle Fire HDX to get to its online store and spend your cash. For example, the first menu option is Shop, and the unlock screen is an advert for Amazon. Finish a book, and recommendations pop up. It is obviously a great marketing opportunity for Amazon, and we don’t begrudge them taking advantage of it. Especially since you’re pretty much tied to the store for content anyway. The recommendations actually proved quite useful.

[tubemonkey]

Originally Posted by Rizla

Thats not cheap for a tablet. You can get a Samsung Tab 3 for about the same and it wont come with all the crippling amazon lock-down restrictions. Thats no way cost price. Comparing it to an overpriced ipad is absurd.

Originally Posted by HarryT

Does the Tab 3 have the same screen as the HDX? The screen is the most expensive component of any tablet.

• Fire HDX 8.9" --- 2560x1600 - 339ppi - 2.2GHz Quad-core --- $379
• Gal Tab 3 10.1" --- 1280x800 - 149ppi - 1.6GHz Dual-core --- $300

The Fire has cutting edge hardware. Meanwhile, Samsung's idea of improving the product line is to change the name from Tab 2 to Tab 3. The hardware is irrelevant.

[Andrew H.]

Originally Posted by fjtorres

In 2010 they had net income of over $1B...

http://www.internetretailer.com/2011...fits-boom-2010

...and promptly launched a $2B stock buyback followed by a massive infrastructure investment effort.

Amazon is operating at breakeven/minimal loss by *choice*, not because they are incapable of making a profit.

Perhaps. But we're still talking profit of $1.15 B on sales of $34 B.
In the same year, Google had profit of $8.5 B on revenue of $29 B.

[fjtorres]

Originally Posted by Andrew H.

Perhaps. But we're still talking profit of $1.15 B on sales of $34 B.
In the same year, Google had profit of $8.5 B on revenue of $29 B.

And?
How many pairs of shoes did Google deliver that year?
Might as well compare them to Joe's Crab shack while you're at it.

Google is in the advertising business, Amazon is in retail and services. It would be Apples and Oranges except Google does neither and Amazon does both.

[HansTWN]

Originally Posted by fjtorres

And?
How many pairs of shoes did Google deliver that year?
Might as well compare them to Joe's Crab shack while you're at it.

Google is in the advertising business, Amazon is in retail and services. It would be Apples and Oranges except Google does neither and Amazon does both.

Exactly, not every business can work with profit margins like drug dealers. And Amazon could make a lot more money now if they wanted. But they choose instead to invest in the future, which should be applauded. And not that Amazon's shareholders were left out in the cold, the stock has more than doubled in 3 years.