For most things I buy (new), I find usually Amazon is the cheapest*.
Sometimes Amazon can offer considerably cheaper price than directly buying from manufacturers. For example, Amazon often sells Lego sets at cheaper price where as Lego itself never sells below list price!
When Amazon reduce prices, do they still make profit or they lose money on the assumption that on longer term, it will wipe out their competitors from business?
Yes, I understand that they pay very little tax. But from consumer points of view they offer cheaper price and reasonably good service.
* = There have been exceptions where Amazon were not the cheapest but those are just exceptions.
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I'd guess most is economy of scale.
Manufacturer may keep it's web prices close to retail to maintain 'integrity' of distribution chain.
Amazon has a few massive warehouses running on minimal staff and geared for absolute efficiency. Same with distribution, costs driven down to absolute min and monitored at every stage. By product is that they can look smart by texting /emailing exactly when you can anticipate delivery.
The tax thing helps but I suspect they're viable anyway; tax saved goes to the bottom line.
Last edited by: Bromptonaut on Fri 5 Apr 13 at 13:47
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There are cases where they will sell at a loss. However, there are other examples..
1) Amazon's fully allocated cost price + cost of sales + profit is lower than Lego's (for example)
2) There is little customer overlap. i.e. few Amazon customers would go to Lego direct, few Lego direct customers would go to Lego.
3) Indirect sales open an audience that Lego cannot connect to.
4) Management cost of Lego is considerably higher than that of Amazon so the corporate contribution is higher.
5) Lego do not want high volume sales and thus price to hold their direct sales to a certain level.
6) Amazon logistics cost is lower than Lego's impacting the cost price.
And many other reasons...
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Books usually end up the same price as in high street book shops, once post and packing are included. For some reason, Amazon insist on first class mail but I don't grumble: I recently ordered a book from them on a Sunday and got it the next day.
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>> Books usually end up the same price as in high street book shops, once post
>> and packing are included.
I generally go for no cost P+P and get most things within four days.
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Especially good when I get several books at once - which I normally do.
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We use the Prime service. Next day delivery guaranteed and not limited to one address so Miss B can use it to order books for Uni and get them straight to her flat. At least while offspring are in Education and needing stuff quickly it's well worth the £50pa it costs.
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I know of cases where authors have withdrawn their books from Amazon as the price Amazon require means the author makes no profit... usually low volume specialist publications where sales are in hundreds.
Last edited by: madf on Fri 5 Apr 13 at 15:23
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Depending on what agreement you have for publishing books in Kindle format, Amazon reserve the right to offer them at a discounted price (even free) and you can do nothing. Except if your book is any good and there's another by the same author you might by that one. I know I've bought some books that I got the initial one for free or very cheap. A low risk way to try a new author.*
* And yes I know you can send samples of Kindle books but you don't get much of the book in that way.
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>> Depending on what agreement you have for publishing books in Kindle format, Amazon reserve the right to offer them at a discounted price (even free) and you can do nothing
But Amazon won't reduce your loyalty amount if they do so. At least that's true for authors who publish directly to Amazon (for Kindle).
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Amazon logistics are a bit odd sometimes (or at least their customer delivery is) -
I ordered a Bosch aero wiper blade which with "free" delivery as it was £2 cheaper than the local motor factors, and in stock.
A couple of days later I took a call from Amazon confirming delivery day (a bit odd, as previously I've had these delivered from elsewhere by the postie, along with the junk mail).
Sure enough, next day comes a 7.5 tonne truck with driver and mate to deliver a largish box, inside which was my solitary wiper blade.
Cost of delivery must have been several times that of the blade.
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>> When Amazon reduce prices, do they still make profit or they lose money on the
>> assumption that on longer term, it will wipe out their competitors from business?
For many years since its start up, Amazon didn't make profit, but was building up revenue streams. Over time fabulously effective and flexible pricing strategies based on number of hits for goods, let alone turnover of same were developed and Its built up massive computer skills and facilities and is starting to flex its muscles in "the cloud"
Funnily enough, 40% of its sales they dont even have to fulfill*, coming instead from "affiliates" where amazon just cream a percentage of the sale.
*means no warehouse, distribution, overheads of any kind. The affiliate even buys the packing materials from Amazon!
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I have started buying my compressed air cans from Amazon, 5 star branded, workeds out at around £3 per can, compared with the £6 I was paying in my local computer shop for £10 in Maplin!>
Is also good for the odd computer part, but you have to be wary about buying laptop parts from the marketplace, too much fake goods.
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As a recent convert to Kindle, I was surprised to discover that e-book downloads don't enjoy the same VAT exemption as hard copy books.
Try as I might, I cannot come up with a logical reason why this should be the case when both the content and its use are, to all intents and purposes identical between the two types of media.
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eBay can prove far cheaper than, for example, Amazon and Argos..
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>> eBay can prove far cheaper than, for example, Amazon..
Generally there are more reliable and honest traders on Amazon than ebay IMHO though.
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>> As a recent convert to Kindle, I was surprised to discover that e-book downloads don't
>> enjoy the same VAT exemption as hard copy books.
>>
>> Try as I might, I cannot come up with a logical reason why this should
>> be the case when both the content and its use are, to all intents and
>> purposes identical between the two types of media.
>>
Try looking at VAT on food... tinyurl.com/ckgvq4j
All illogical.
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VAT as a means of collecting tax is illogical AND inefficient.
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VAT doesnt cost the vatman antyhing, all buisnesses and shop owners collect it for him....for nowt
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No its a highly efficient economic tax - effectively a flat consumption tax. Its method of collection minimises avoidance and maximises compliance.
Exemptions and different rates make it less efficient. One overall flat rate on everything would be the ideal from an economic perspective.
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>>VAT as a means of collecting tax is illogical AND inefficient.
In what way?
Indirect taxation, self-assessed taxation and profit taxation would all seem pretty logical and efficient to me.
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Strange way of working Amazon - I get free delivery from Amazon UK in Spain, but if I buy the same thing from Amazon Spain they charge for delivery. Presumably UK customers are subsidising this free delivery - thanks. Also Amazon UK charge Spanish rates of VAT, whereas most UK online sellers charge at the UK rate.
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P.S. It sometimes pays to check the prices from Amazon in other countries, such as France, Italy or Germany. Checking out a camera recently gave these results:
Amazon UK = €1207
Amazon DE = €1091
Amazon FR = €899
Amazon ES = €899
Amazon IT = €865
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How can Amazon offer cheaper price? - Bromptonaut
