Amazon gives non-Prime members free shipping at $35 or more of eligible items. Instead of simply letting users get the product with free shipping, they’ve added a discount that prices it exactly one cent below the $35 limit, while only subsidizing the price with $3.38, which is about half of what they’ll then charge you for shipping.
I dont think you understand how “Amazon” exists as we know it.
Amazon, the store. the store that sells stuff at “unbeatable” prices and has convenient fast shipping options. exists because Amazon, the corporation, makes most of its money through platforms that are NOT the store.
for example the AWS division, which handles web hosting, Makes money hand over fist compared to the store. so they can afford to sell stuff at either a loss, or breaking even. (and they’re still somehow making money off the ordeal. dont ask me where)
Its hard to make a competitor to Amazon because you’d need a surrogate company constantly feeding it money to stay afloat. Amazon the store, is a facade of a larger corporation
I’m not sure that’s entirely true.
Most of their money comes from retail, either the site, subscriptions, or the seller services they provide. AWS, while massive, isn’t what’s keeping them afloat.
You’re entirely correct though that competition with Amazon is difficult because of those additional sources of revenue. Having additional stable sources of income gives them the ability to accept lower margins in retail with less risk.
The way they make money selling things with no profit or at a loss is to ensure that someone else is always paying the difference. “Free shipping” with a paid subscription means that rather than providing shipping for a loss, they just need to do it for less than the subscription. Turns out “guy with a van” can deliver a lot of packages for quite cheap. So many that he’ll be out delivering from 3am to 9pm, and for $5 they’ll drop your package off first and call it overnight.
In some cases they can get the seller to pay for shipping as a promotional incentive, since Amazons conditioned people to look for free shipping as a precondition to considering a product.
Only give away for free what you got someone else to pay for.
Revenue is not profit.
Yes, but revenue pays for things like salaries, advertising, etc.
It helps with cash flow sure, but if it’s not profit you’re going into debt to pay that.
What do you think profit is? It seems like you’re conflicting profit with income.
Profit is revenue - cost of goods.
If you make a widget and it costs you $100 to make, and you sell it for $110, you have $10 profit. Then you have all the other expenses that it takes to run a business, lets say that’s $200.
Your revenue is $110
You profit is $10
Additional Expenses: $200
You NET profit (AKA Net Income) is $-90
I mean, non profits exist. Of course it’s not the case for Amazon, but you don’t need to profit in order to exist as a company, and people still get to make money.
All companies have to earn a profit, not just to pay for the expense of the goods plus all of the overhead, but also to be able to reinvest and grow. There’s a difference between earning a livable wage while the company as a whole remains poor and earning barely enough to live on while the investors pull in massive gains year over year.
A company taking excess revenue and reinvesting it isn’t profit.
There may be phrases with the word profit in them that include that value, but the general accepted definition is profit is the money that gets distributed to the stakeholders after expenses are covered. This is things like dividends for publicly traded companies, or for private companies, it’s just straight up paying out the cash to stakeholders.
Non profit doesn’t mean no profit.
Non profits make enough profit to pay their employees, rent, and any other business needs, or they get money from other sources. They still need and make money to operate.
For a company to succeed, there must be profit, or have an outside source of funding.
You cannot pay rent, employees or other business expenses with revenue and no profit without going into debt.
Non profit means no profit. Salaries, rent, etc are not paid from profit.
That is fundamentally what profit is, revenue less expenses. By definition, profit is money that does not have anywhere to go in a business, and so gets distributed to stake holders of the company.
This is why you’re wrong
Profit is revenue minus cost of goods
NET profit or net income is after expenses unrelated to cost of goods.
If a widget costs you $100 to make and you sell it for $100 that’s $0 profit.
Tack on all the other expenses to run a business and now you’re in debt.
Profit is not NET profit.
Edit: Below shows some guidelines, on how they can earn profit.
NON PROFITS can earn profit, they’re just restrictions on it.
Heh, “revenue is not profit”.
Non-profits are specifically not allowed to have revenue in excess of expenses. If they take in too much money, the excess has to be put back in for operational expenses in the future, an endowment or something like that.
(In the Netherlands) Non profits are allowed to make profit, they just need to pay tax above a certain amount of net profit. The thing that makes them “non-profit” is that they are prohibited to pay out that profit. Hence there is no incentive for (excessive) profit.
They were also famously unprofitable for a very long time, longer than most businesses would consider reasonable. They were founded in 1994 and it took until 2003 to make a profit. They were investing a lot of money back into the business.
Exactly. A systemic issue with capitalistic markets is that they inherently select for short term thinking.
Does it make sense to destroy 90% of your profitability 5 years from now for a 20% bump in profit this quarter? Well, yes, it does, because that’s 20% more profit to expand and take over the market.
Even if a business were to try to make good long term decisions, it would immediately be crushed and pushed out of the market by all of its competitors willing to make those shortsighted decisions for immediate profits.
Except in the case of Amazon, thanks to AWS they were able to make good long-term decisions with their e-commerce platform by making short term decisions with AWS.
AWS didn’t exist until after Amazon became profitable. They were already making good long-term decisions before AWS.
Right, back when they were just a bookstore. All I really know about Amazon is that they focused on long-term profitability over increased short-term profits to expand and capture more of the market, and it worked. The problem is that not everyone can do that. They spent every year since 1994 operating at a loss, when anyone else would have been snapped up by another company in the space, and it’s not clear how that didn’t happen. The landscape of e-commerce would have been very different if it had.
Walmart and Target already do it. Just get rid of the public facing store part and send it to me as cheap as retail.
There are companies in china already doing this.