How does Amazon not lose money on Prime shipping?

[Kent Adams]

If you were to look at the whole Amazon picture over the years, you would see that the reason Amazon isn't making much money is because they reinvest their income into infrastructue at a huge rate every year worldwide. They could make boat loads of money at any time.

Good point Jason. I took a look at their cash flow statement and they are spending quite a bit on capital expenditures. Operating cash flow was $6.8B at last FYE. Love the company but I'd never buy the stock.

[John K Jordan]

Sometimes you can find the same item on Amazon without Prime shipping and compare. Sometimes the price for the Prime version is higher by the approximate cost of the shipping. Hmmm. Other times I also wonder how they make money. My UPS guy said Amazon gets huge discounts so the shipping companies are offsetting the cost.

Regardless, I've had Prime for years (from before the price went way up) and to me it is still worth it for the 2-day shipping even though non-prime shipping is often as fast. I purchase a lot of farm-related items - it helps to know the delivery date at the time of purchase since I live behind fences and gates.

[Brian Elfert]

In this particular case Amazon had the lowest price of any place online for the item. Yes, Amazon's prices for a lot of stuff are higher due to the free shipping.

[Kevin Nathanson]

To answer the original question, the lose $1 to $2 billion a year on shipping.

http://www.marketwatch.com/story/is-...fit-2015-07-14

K

[Doug W Swanson]

I love my Prime. Many times I will order small things that don't qualify for the free shipping. The Prime allows me to get those items delivered without adding on $5-10 shipping to the item price which many times is under $20. That's a pretty big savings over the course of a year. Plus it saves me the time of running to the local store and purchasing the items there (and many times not knowing if the store will actually have what I need). Prime also lets me order items that would normally come from different vendors (say a woodworking tool and a Lego set) and have them shipped in the same package (or at least come in the same order).

Another nice thing about Prime is access to free movies and TV shows. I don't watch a lot of movies at home but when I'm on shift at the FD, we have limited channels on TV and Prime lets me (and my crew) watch movies that we normally would have to pay for.

[Todd Mason-Darnell]

Amazon is not in the shipping business, but in the business of selling stuff. The Prime shipping is a hook to get people to buy more and stay loyal to Amazon (I have been a Prime member since 2008 or 2007). On average Prime members spend significantly more at Amazon than non members:

http://qz.com/221910/amazon-prime-members-spend-almost-twice-as-much-as-other-amazon-shoppers/

[Brian Elfert]

To answer the original question, the lose $1 to $2 billion a year on shipping.

Is it really a loss, or just a cost of doing business? The articles are not clear when they say Amazon is losing money on shipping if it means that Prime shipping costs $1 billion more than they are collecting in Prime membership fees, or simply that Prime is costing $1 billion in shipping fees.

[Brian Elfert]

I suspect part of why Amazon is building distribution centers all over is to reduce shipping costs, prime and otherwise, on commonly ordered items. In my case the item I ordered appeared to be the only one in stock and it had to be shipped from California to Minnesota.

[Rich Riddle]

To answer the original question, the lose $1 to $2 billion a year on shipping.

http://www.marketwatch.com/story/is-...fit-2015-07-14

K

I will use it as long as they offer it. It's more than worth it when you purchase more than 100 items a year through them. I enjoy the two day delivery.

[Kev Williams]

I buy lots of stuff from Amazon but what I end up paying in shipping in a year might run $20 or $30, not worth the membership fee. Only shipping I've paid this year was last week, $13, to be sure I got 2 meat thermometers in time for turkey day!

As for shipping, Amazon has all the clout Walmart does. Years ago Walmart held the record companies hostage by stating they wanted to pay less than $10 per CD (they'd been selling them for less than $10 and paying $12). At the time Walmart was the largest retailer of CD's with 20% of the market. Yet CD's were only 2% of Walmart's gross. So either sell to us cheap, or we'll just quit buying altogether. What a position to be in: we don't need your money, but it seems you need ours!

Amazon is sitting in that same cat-bird seat. Hey, Shipping Company, we ship a bazillion packages a day, and you're already going to all these places anyway, so you might as well take $X.xx for shipping our stuff, or we'll just find someone who will. I just did a quick google, it's estimated that Amazon ships over 3,000,000 packages DAILY. If a shipping company flat-rated every Amazon package to everywhere at $2.00 each 5 days a week, lets see... 15 million packages a week x 52 weeks x 2 = $1,560,000,000 in shipping revenue...

Just my opinion, but nobody's losing any money...

[roger wiegand]

1) Prime members spend a *lot* more money on Amazon overall, and once they have ti will choose Amazon over other providers at similar or slightly lower prices 2) Prime members are starting to spend a lot of money on streaming media (you get some content free, but a lot of it is paid, and now that we have it it gets used in our household, albeit not by me). I think they pretty much make up the shipping costs with other new income. Remember that Jeff Bezos' stated goal is "to sell everything to everyone". They are playing a long term strategy, almost unheard of these days, that will at some point cause them to dwarf WallyMart in both sales and profit. They reinvest in their business at an unheard of rate, with every expectation that at some point they will dominate worldwide retail.

[Pat Barry]

+1 Art. Jeff Bezos is a smart man and hires smart folks to run his company. They make money.

The steaming video service is included with Amazon Prime and so is Kindle book lending. The competitive price for the Amazon video is about $65 per year so that coupled with the shipping really makes it attractive.

[Dan Hintz]

Last I looked, I remember reading Amazon was losing money when Prime was $50... so they raised it to $100. My view of that? They knew how much money they were losing (on average) with $50/yr, and $100/yr was enacted to overcome (or at least help mitigate) that loss. If they're still losing money (and "lose" is a relative term here) on shipping, they're satisfied with the amount being lost after all of the fees are in.

Not to mention, just because it costs you/me $15 to ship a two-pound package across the States doesn't mean it costs the same in bulk (I'd guess a couple of bucks, tops, in aggregate).

[Jason Roehl]

Not to mention, just because it costs you/me $15 to ship a two-pound package across the States doesn't mean it costs the same in bulk (I'd guess a couple of bucks, tops, in aggregate).

This. Shippers give big discounts when they can pull a whole truck (or 10) up to a warehouse and load up a bunch of packages all going to a shipping hub. This is much more cost effective than having several staff man a counter and take packages one at a time until a truck is full.

[Kevin Nathanson]

Amazon has been historically unprofitable. It is exceptional news when they turn a profit.

http://money.cnn.com/2015/10/22/tech...azon-earnings/

Their business model is predicated on growth, not earnings. This is a subject that is covered extensively by the business press.

A quick google search on "Amazon lack of profits" will yield tons of analysts articles on the subject.

K