Ever Wonder Why Amazon Thrives?

[Hueco]

Why is Amazon killin' it? Simple: Shipping.

Remember what e-commerce was like back in the late 90's? You'd go online, queue up a cart, get to checkout, and then balk at the sometimes astronomical shipping fees. So, you'd yank the phone cord out of your computer, put it back in the phone, grab the yellow pages, call the nearest actual business and confirm availability...and then just go pick up your item.

We have a tough time valuing courier services. Don't forget that Amazon started offering free shipping in ~2000 and had Amazon Prime as an offer...in 2004! Yes, it's been 15 years of Amazon killing the value of a courier to all of us consumers.

Would I like to support national small business? Sure, of course! But I'm not about to pay a slightly higher price AND shipping. Sadly, many mom and paps haven't figured out how to offer free or reduced price shipping and are slowly going the way of the dodo.

It's the same story for big box retail. Unless you can find a way to offer me a *service* that I can't get through a computer, then you're dying. For example, I've built a kick-bubblegum computer and am actively considering VR. I'd like to try before I buy. Best Buy has yet to offer consistent demos. But, I *could* get it delivered NEXT DAY through Prime, try it, and send it back FREE if I don't like it, no questions asked...using Amazon.

Big Box needs to realize that the only way they survive is if they offer something in the physical space that cannot exist in the digital - and that is a tangible experience. They need smaller stores, bigger warehouses, and better service. Think of a Tuft and Needle store design (they sell mattresses and have a small store with 5 or 6 bedrooms set up. You can close the door, lay down, and take a nap if you wanted to. Try that bubblegum out. The rest of the location is warehouse that you don't see. So, you get an experience buying, customized service, and same day pickup.)

All that being said, do note that Chinese made junk does get added to the pool of Amazon goods being sold as a product type (like these Apple products Report details how fake Apple products end up sold by Amazon) Their market reach is so large that, on some things, one must now question if the item you're buying is legit or knock-off.

 

[Unka-Boo]

Yeah, well, 26 years means you actually, more than likely, have some sort of a mechanical aptitude. I think the majority of guys I occasionally deal with at Auto Zone and O'Rilley's would have problems finding which hole the oil goes in. Now I said "Guys", that's because there is a very nice looking, long dark haired gal that I run into at O'Rilley's on occasion that REALLY knows her stuff when it comes to cars.

Most frustrating thing in the world for me is walking into a parts store and talking to the button pushers, if the magic box doesnt show it, it doesnt exist
I walked away from automotive 12 years ago, heavy truck has treated me much better

 

[Jcon268]

OK, here's why Amazon is putting brick and mortar stores out of business. I put a new alternator on the boat engine the other day. Of course, getting an identical replacement for the 25 year old alternator was not an option, so I had to rework the mounting brackets a bit. This meant that I needed an alternator drive belt that was about an inch shorter than the original one.

Since car parts guys don't seem to be very net savvy there is really no way to look up the dimensions of the belts available on the NAPA site using the NAPA part number on the original belt, so I went to Amazon and looked up the part numbers for belts an inch shorter and an inch and a half shorter. Just to be on the safe side I thought I'd buy both sizes and use the one that fitted best, and return the other one.

Since returning one of the belts would be a whole lot easier if I purchased from the local NAPA store, I went there and asked for both part numbers. The clerk produced the belts and said, "That'll be $49.90."

"What?!!! Those belts are $8.50 each at Amazon", I replied. "I'll just order them on line. Thanks anyway."

$24.95 each at Napa. $8.50 each at Amazon with free shipping. I ordered both sizes. I'll keep the one I don't use and hope it works as a spare for 1/3 the price.
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As someone who runs a small business, I know for fact that Amazon uses its buying power to drive prices down considerably below standard wholesale. Then they formulate minimal margins based on volumes that no small business could sustain, in fact many other corporations probably won't touch....save for maybe Walmart and a few others.

While I like Amazon, try to understand that there are reasons for small businesses to exist outside low profit retailing. That doesn't mean a small business should be gouging with their prices....but the disparity in prices seems drastic only because of factors I mentioned above. My guess is that NAPA in the end wasn't making much more, if any more at all off selling you the part compared to Amazon. It's also possible they were price gouging to make up for lost volume because of sales to Amazon? In that case, I think the writing is on the wall.

We live in a day and age where consumers can buy just about anything at artificially low prices. Enjoy it while it lasts...it won't last forever.

 

[MannyGlocks]

Small businesses have to be able to compete.

Can't compete?

Get out of the kitchen...

 

[CountryGent]

When we lived in the country we depended on Amazon.

Ditto. When we lived in eastern Oregon, it was an hour and forty-five minutes to a city of any size. We'd do supply runs, but it was easier to just order online. Where we are now is a little closer to "civilization", but for anything other than groceries, a few clicks, and in a day or two a box shows up. Easy-peasy.

Small businesses have to be able to compete.

Can't compete?

Get out of the kitchen...

Exactly. Add some value; if you can't, goodbye.

 

[Hueco]

As someone who runs a small business, I know for fact that Amazon uses its buying power to drive prices down considerably below standard wholesale. Then they formulate minimal margins based on volumes that no small business could sustain, in fact many other corporations probably won't touch....save for maybe Walmart and a few others.

While I like Amazon, try to understand that there are reasons for small businesses to exist outside low profit retailing. That doesn't mean a small business should be gouging with their prices....but the disparity in prices seems drastic only because of factors I mentioned above. My guess is that NAPA in the end wasn't making much more, if any more at all off selling you the part compared to Amazon. It's also possible they were price gouging to make up for lost volume because of sales to Amazon? In that case, I think the writing is on the wall.

We live in a day and age where consumers can buy just about anything at artificially low prices. Enjoy it while it lasts...it won't last forever.

What's funny is that, had NAPA said, "you know, I can't do a price that low, but I can give them to you for 12.50 each" - then the guy probably would have bought. $8 extra and having the part in hand in 30 seconds vs $8 less and waiting two days...

The NAPA manager doesn't have as much authority to make those kinds of deals as you, the small business owner. That actually gives you a bit of an edge.

Also, any business in the commodities space will struggle. We're talking auto parts here - mass produced, usually over seas, and sold in vast quantity from manufacturer to wholesale to retail. If that process now goes from Manu -> Amazon instead of Manu -> Wholesale -> NAPA ... then no wonder things are cheaper, a cog has been removed.

If you're a small biz offering something that I can't buy in bulk like that, like the Victor Company Titan or Kidd 10/22 Receiver that I just got...then you're safe. (Or offering a local service!)

But, if your small biz was simply a cog in the Manu -> Wholesale -> Distro -> Retail chain...then yea, you're going to have a bad time competing against Amazon.

 

[41mag]

I tired to order a date from there once. They sent me an Amazon.

QUOTE]
Possibly damaged with one breast missing???

 

[MannyGlocks]

Such complaints reminds me of all the Mom and Pop store owners wailing that they 'have' to charge twice, maybe thrice as much as Walmart to stay in business.

So, as a consumer, I'm supposed to subsidize you Mr/Mrs Small Business?

Nooooooooope!

Small bizz guy says, ok, but you'll miss us when we're gone.

Yet, I never have...?

Odd...hhhhmmmm.

Wait, it's called the 'Free Enterprise System'.

Can't compete, so sorry, well not really...

 

[Jcon268]

What's funny is that, had NAPA said, "you know, I can't do a price that low, but I can give them to you for 12.50 each" - then the guy probably would have bought. $8 extra and having the part in hand in 30 seconds vs $8 less and waiting two days...

The NAPA manager doesn't have as much authority to make those kinds of deals as you, the small business owner. That actually gives you a bit of an edge.

Also, any business in the commodities space will struggle. We're talking auto parts here - mass produced, usually over seas, and sold in vast quantity from manufacturer to wholesale to retail. If that process now goes from Manu -> Amazon instead of Manu -> Wholesale -> NAPA ... then no wonder things are cheaper, a cog has been removed.

If you're a small biz offering something that I can't buy in bulk like that, like the Victor Company Titan or Kidd 10/22 Receiver that I just got...then you're safe. (Or offering a local service!)

But, if your small biz was simply a cog in the Manu -> Wholesale -> Distro -> Retail chain...then yea, you're going to have a bad time competing against Amazon.

I run a music instrument business that has 3 facets: Retail, Repair and Rentals. Guess which is the least profitable to us ...

But the subsidies from the other facets actually allow us to price what we sell competitively against online entities such as Amazon. There are certain things we can't compete with and we tend not to bother selling them. If I can buy it myself cheaper through my Amazon account than through my wholesaler, then it's no deal.

The point about shipping is important. In order for us to qualify for free freight at a wholesale level, we have to buy in large quantities. Some companies that mark is $500 to $1,000.... and some mfgs require master orders of $5k to $10k. It's pretty astounding that Amazon can offer free freight on a $50 order and we have to buy that much more to get ours free freighted. It's not like we're trying to pass the freight charges along, we're just trying to get rid of the killer so we can price our stuff competitively.

 

[Jcon268]

Such complaints reminds me of all the Mom and Pop store owners wailing that they 'have' to charge twice, maybe thrice as much as Walmart to stay in business.

So, as a consumer, I'm supposed to subsidize you Mr/Mrs Small Business?

Nooooooooope!

Small bizz guy says, ok, but you'll miss us when we're gone.

Yet, I never have...?

Odd...hhhhmmmm.

Wait, it's called the 'Free Enterprise System'.

Can't compete, so sorry, well not really...

What reason do you have to believe that you'll continue to pay artificially low prices when all of the small businesses have been run out of town? They can charge you an arm and a leg at the point and what will you be able to do? Curious if you'll have a showroom to go and look at said parts before ordering online also.

 

[CLT65]

I've known people to get the best of both worlds by buying a national brand at a parts house, getting the "right now" then buying the same part online just so they could "return" it to the parts store, getting the "right price." Always seemed shady, but they never get caught

More than shady, it's fraud. People justify stuff like this by thinking thinking they're not hurting anyone, but it's still fraud.

A few years back a former coworker was bragging about how he went down to Costco and bought the biggest TV they made, the day before his Superbowl party. The day after he returned it. He didn't see anything wrong with it at all., but I never trusted him after that.

 

[Jcon268]

The ignorance here is rather astounding. I'm sure you guys saying small business doesn't matter are all for big government too right? Isn't it great when one company monopolizes a market and controls it right down to the manufacturing process?

But yeah a few extra bucks in your pocket is more important than a guy being in business at all.

 

[MannyGlocks]

"What reason do you have to believe that you'll continue to pay artificially low prices when all of the small businesses have been run out of town? They can charge you an arm and a leg at the point and what will you be able to do?"

Let's see, I've been hearing this particular/specific scare tactic for many, many years now, yet it never happens.

If these prices are so artificially low they'd of gone out of business long ago...

I call bs...but hey, it sounds good...if you're a small business who can't really compete.

I do have sympathy for thier plight, but it ends at my bank account...

 

[thorborg]

I'll look for someone other than Amazon, odds are pretty good I'll be able to find somewhere else that has it for a similar price.

Good luck with those "odds".

From my perspective;
I prefer the touch and feel at a brick and mortar, but the reality is, they, their service, their selection, their inventory, their price, diminishes year after year and continually leaves me wanting!
I can't see paying 65 bucks for something I can get for 12, with free shipping, usually next day delivery. as I did with a cast iron oil filter housing bought recently. Or the head light assembly for my truck; Ford wanted 375, at Auto parts it was 230 best I could find, I got it off Amazon for 85!!!.
Amazon has likely saved me thousands, and even the rare times things didn't show up, or were broke, I never had a hassle getting my money back. I just reorder, and the next day its here!

The big local camping trailer supply place (Curtis) wanted 13 bucks each for 12 v LED lights to convert my trailer. (they only had six in stock) I wanted 11 but 9 at the minimum and would of had to go back again.
That's 117 bucks.
I bought a 24 pack from Amazon for 14.94 total with free shipping. (and brighter bulbs too) Now my battery last for weeks instead of days as with filament bulbs, and I can run them all night long too if I want!
I have found thing at lower cost (online) but usually a stiff shipping price comes with it and dubious if not down right crappy or difficult return policies.
Another thing about dealing with Amazon, I only gave "them" my credit card number, (with giant resources and experience to help protect my account) not hundreds of other companies I might have otherwise bought from directly with limited to no resource or experience for account protection.

 

[Jcon268]

"What reason do you have to believe that you'll continue to pay artificially low prices when all of the small businesses have been run out of town? They can charge you an arm and a leg at the point and what will you be able to do?"

Let's see, I've been hearing this particular/specific scare tactic for many, many years now, yet it never happens.

If these prices are so artificially low they'd of gone out of business long ago...

I call bs...but hey, it sounds good...if you're a small business who can't really compete.

I do have sympathy for thier plight, but it ends at my bank account...

Sounds like you have one opinion on the matter. Not sure what it's founded in other than perhaps your limited experience. It's clear that you haven't worked in many if any small business environments but tell us how it is, please.

It's actually not a scare tactic, it's the truth. A lot of small businesses have been run out by Amazon already but there are still a lot left. Yes, those businesses have diversified to stay alive and they offer .......SERVICE. Gasp. This is WHY Amazon still has to keep those prices low. Only 5% of retail spent dollars are funneled through amazon despite them having 49% market share.

If buying something you didn't like and being able to box it back up and return it equates to service for you then I'm not sure we're in the same discussion. What I see with my own eyes nearly on a daily basis is people buy cheap junk online and try to bring it to us for fixing. That or they just realize they bought junk and have to now rebuy again. How are we supposed to feel bad when you get taken when you didn't take the time to see if a local shop could have offered something similar at a reasonably competitive price?

 

[Hueco]

I run a music instrument business that has 3 facets: Retail, Repair and Rentals. Guess which is the least profitable to us ...

But the subsidies from the other facets actually allow us to price what we sell competitively against online entities such as Amazon. There are certain things we can't compete with and we tend not to bother selling them. If I can buy it myself cheaper through my Amazon account than through my wholesaler, then it's no deal.

The point about shipping is important. In order for us to qualify for free freight at a wholesale level, we have to buy in large quantities. Some companies that mark is $500 to $1,000.... and some mfgs require master orders of $5k to $10k. It's pretty astounding that Amazon can offer free freight on a $50 order and we have to buy that much more to get ours free freighted. It's not like we're trying to pass the freight charges along, we're just trying to get rid of the killer so we can price our stuff competitively.

Trust me, man, I feel for you. I developed a talent for photography in high school and started out in a studio. There was a good bit of demand back when you had to know how to control lighting, develop, and print film. Hell, even spot touch in color where the dust got in the way. I doubt if any of today's photographers would have the first clue how to spot touch...

Anywho, I went solo for a time and over that time I lost my kids school photography to parents with iPhones, lost my youth sports action to cheap DSLRs. Youth team shots, weddings, and high school senior shots became the only consistent revenue streams. I have since got out of that rat race. But, while there, I learned a lot about business process design and automation (solopreneur, remember?)...and started advising other small businesses on how to do the same (run the biz and market at scale like the big boys). Except now I do the same thing for Enterprise corps because...well, it pays better .

It's taken Amazon years to become profitable. That free freight on a $20 order was subsidized not only by other parts of the business but by capitol investors as well. Now, they've got distro centers all over, negotiated rates with the shipping companies, and have their own delivery service akin to Uber. (You can sign up to be an Amazon delivery person. I've known many an Uber drive who did both)

You have to buy a Fender in limited quantity, so you pay more and have to charge more. Some internet biz buys 100 Fenders at a time and has them airdropped to a Fulfillment by Amazon distro. He can now charge less. Just wait until Fender themselves realizes that *they* can do Fulfillment by Amazon and can cut both of you guys out.

That's what I mean - the retail of an item like that simply makes you a cog in the machine. Once manufacturers realize they can go straight to retail using Amazon, it's over for the cogs. Services are the future: Repair, Rental, Lessons...things neither the Manufacturer nor Amazon can provide.

 

[MannyGlocks]

In the late 70's, I went into a small town pharmacy to buy an over the counter product.

The price was over 3 times what I was used to paying.

I was so astonished I blurted out, "I buy this same item for x-number of dollars at Eckard's."

The store owner heard me and yelled, "Yeah, if you want to spend your money for a bunch of New York Jews!"

Needless to say, I never darkened his store again...

But no, small businesses won't bend you over and drive home a good deal... if they can.

They're noble.

BTW, many folks in this small town had to drive too far to get to an Eckards/Walgreens so the small business 'was' the only game in town.

 

[Jcon268]

Trust me, man, I feel for you. I developed a talent for photography in high school and started out in a studio. There was a good bit of demand back when you had to know how to control lighting, develop, and print film. Hell, even spot touch in color where the dust got in the way. I doubt if any of today's photographers would have the first clue how to spot touch...

Anywho, I went solo for a time and over that time I lost my kids school photography to parents with iPhones, lost my youth sports action to cheap DSLRs. Youth team shots, weddings, and high school senior shots became the only consistent revenue streams. I have since got out of that rat race. But, while there, I learned a lot about business process design and automation (solopreneur, remember?)...and started advising other small businesses on how to do the same (run the biz and market at scale like the big boys). Except now I do the same thing for Enterprise corps because...well, it pays better .

It's taken Amazon years to become profitable. That free freight on a $20 order was subsidized not only by other parts of the business but by capitol investors as well. Now, they've got distro centers all over, negotiated rates with the shipping companies, and have their own delivery service akin to Uber. (You can sign up to be an Amazon delivery person. I've known many an Uber drive who did both)

You have to buy a Fender in limited quantity, so you pay more and have to charge more. Some internet biz buys 100 Fenders at a time and has them airdropped to a Fulfillment by Amazon distro. He can now charge less. Just wait until Fender themselves realizes that *they* can do Fulfillment by Amazon and can cut both of you guys out.

That's what I mean - the retail of an item like that simply makes you a cog in the machine. Once manufacturers realize they can go straight to retail using Amazon, it's over for the cogs. Services are the future: Repair, Rental, Lessons...things neither the Manufacturer nor Amazon can provide.

I remember the words coming out of my mouth probably close to 10 years ago...."Well Amazon will never affect the food service industry. What are they going to do, deliver meals to your door?" Imagine how reluctant I was to eat those words when I saw that Amazon, in fact, now offers food delivery service.

I guess the point in all of this is where do your priorities lie? If it's to get the absolute most bargain cheap product you can get, you'll probably get it on the world's largest online clearance bin. There are other aspects of what make a small business valuable but that's obviously not to everyone. I get customers almost every day that just want cheap. They'll also usually drive across town and spend dollars on gas to save a buck. The business I run was handed down by my father who started the business based on the concept of community relationships. There are people who only get their equipment through us. However, there are times where they hand me a wish list and I have to be honest with them....I just can't buy it cheap enough to make it worthwhile. But we get it right 80% of the time.

 

[P7M13]

I seldom purchased from Amazon until this year.
Yes, I see them driving brick and mortar companies out of business - they have had more of an effect on that landscape than Walmart.
What I do see though, is many local businesses that sell on Amazon. Talking with one owner, it's like letting the 800lb Gorilla sit on your living room couch.
However, those businesses still do exist, albeit without the storefront or customer service.
Watch the evolution as Amazon kills mom&pop stores, and the people who prefer FTF will find their sources in the industrial parks.
It's retail evolution, compressed into the lifecycle of a fruitfly. I think in a decade, the difference in purchasing for most between now and the future will be comparable to the old analogy of the old imprint credit cards vs. Debit cards now.
We are being pushed to a cashless society, where everything we do will be tracked.

 

[CLT65]

I like the convenience of Amazon, but some things about their business model I don't care for. It's the same thing with Walmart; it's great for cheap products for the consumer, but it's pretty harsh if you're a supplier or involved in the process much at all. They cut everything down to the narrowest possible margin where's there's no meat left on the bone at all except profits for the shareholders and bonuses for the executives.

So much in the world of Big Business has gone this way now. Everyone is under extreme pressure to trim fat anywhere they can in order to meet their profit goals. More for less is the name of the game. More work with less people, and worse benefits every year is where I've seen it myself.