
Company Makes $70M Selling Random Stuff on Amazon - prostoalex
http://www.inc.com/magazine/201603/burt-helm/pharmapacks-amazon-warehouse.html?cid=cp01002fastco
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salgernon
I feel that this is an untenable situation and business model. When people
first took to buying their "random crap" via amazon, it was at least backed by
an amazon customer service experience that defaulted to very good - amazon
prime shipping, consistent shipping and packaging, consistent return policies.

But once these marketplace sellers came into being, the qualify of the
experience is on the whole, lacking.

Years ago, my family would use a particular salad dressing enough that when we
found it on Amazon as a "send me a case of this every three months" thing, we
were happy with that. It was marginally cheaper than buying at the store, but
it was far more convenient

At some point, we started receiving things from sellers that were obviously
not Amazon themselves, and then endless emails asking us to rate their
service, etc. Sometimes the product would be poorly package or damaged in
shipping. Once it seemed like something had maybe turfed off their pantry
shelf into a box to send us. It was annoying but not worth our time to 'fix',
so we just canceled that order.

But lately it seems like things have been getting harder to deal with when
these third party sellers are involved. I don't want to save $1.37 on a $200
router that I receive in obviously opened-and-returned condition and missing
parts, and then receive an insulting letter from the (actual) seller about it
somehow being my fault and saying that I should pay the return cost.

It may be possible go get amazon involved in resolving this - BUT IT IS NOT
WORTH MY TIME. At some point, it was easier and cheaper to use Amazon for all
these types of purchases, but Amazon Marketplace is hurting their brand.
Weakest link and all that.

(Maybe we'll get a return to brick & mortar stores for radio-shack or similar
things.)

~~~
benzofuran
I'd love to see an "Amazon Only" mode that was a switch on the main page to
only show the store for sold by or fulfilled by Amazon. I'm sure this can be
done somehow and would make the experience much better. The crap 1000 review
emails would be nice to disappear as well.

~~~
JorgeGT
At least in Amazon Spain there is an option to select "Amazon.es" as seller in
the search filters:
[http://i.imgur.com/LzS0LY7.png](http://i.imgur.com/LzS0LY7.png)

This way you only browse things sold and managed by Amazon directly and not
third-party vendors.

Is this not available in other Amazon subsidiaries?

~~~
johansch
This is a bit off-topic, but here is another stupid thing. My experience with
amazon.es:

1\. I go there. Everything is in Spanish, despite my IP being IP-geolocated to
Sweden by every single IP-geolocation database I know of. My browser's Accept-
Language HTTP header is "en-US,en;q=0.8,sv".

2\. I manage to sign in with my global Amazon account - they can now see that
my shipment and verified payment location is in Sweden. Everything is still in
Spanish.

It would be fine if it was just the product descriptions which lacked english
translations that were not available in e.g. English, but this scheme just
seems incompetently managed. They run each national site as a silo, language-
wise?

This kind of thing was a fun adventure ~17 years ago, ordering exotic stuff
from Amazon Japan, but in this day and age it just feels stupid.

~~~
swimfar
Just to provide a counter-point, I'm the exact opposite. I get annoyed when
websites try to change the language for me based on my location. Just because
I may currently be in Spain doesn't mean that Spanish is my preferred
language. When I go to amazon.de, I expect everything to be in German. If I
need a different language, I prefer to choose it myself. Even having the
language connected to my account wouldn't be preferable to me. I would still
prefer the site to be in the language of the "hosting" country (but I'm sure
this is a much less common preference).

I guess my point is that different people have different preferences which may
be one reason why the site isn't designed like you would like it to be.

I understand what you're saying about how you expect amazon to be one unified
shopping location. But I imagine that amazon.es is designed primarily for the
Spanish market and people in Sweden using the site is a much smaller,
unintended market.

~~~
johansch
First: I specified that I was providing them no less than three separate data
points: location, language, shipping address.

I wouldn't expect some tiny spanish company to do this.

However, with a global giant like Amazon I do. Especially when they have
already solved the hard part - the logistics around international shipment and
payments.

The sensible thing for amazon.es to do when they detect a customer who is
probably not from Spain (based in e.g. IP-based geolocation) would be top show
some dismissable banner at the top of the page saying "We see you are visiting
from Sweden. Would you like to read the core part of the site in English?
<YES> <NO>")

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simonswords82
I've built software for companies that sell on Amazon _exactly_ the way these
guys work. The products sold were different but the logic exactly the same.
Write software that intelligently guesses the optimum prices and automates
listing on Amazon. There's more to it than that, but this is the crux.

This is a TOUGH business to be in. They're under attack from every conceivable
angle every single day:

1) Customers complaining on Amazon, often not legitimately

2) Minimum wage employees doing the "picking and packing" to ship to customers
not turning up for work, making mistakes or worse still stealing from the
company

3) The postal service letting them down not delivering an item which results
in more 1) customers complaining

4) Suppliers spotting that my clients are on to a good thing and trying to rip
them off, gouging them on prices or just messing them about in general

5) Margins so tight that they squeak when they walk. This business is all
about volume of sales because of those margins. Which means you need to have
lots of people, floor space, and other associated fixed overheads to achieve
said volume

As if all of that isn't bad enough, you're in the pocket of Amazon. A company
who at any given point in time for any reason they deem fit could simply shut
your Amazon listings down and just like that your business dies.

I'm sure they're doing great, and I wish these guys well, but holy shit is
this a tough business to scale.

~~~
danieltillett
This is why you stay out of low markin businesses if you can at all costs -
easier said than done of course.

~~~
simonswords82
Indeed. I'd probably add low barrier to entry as yet another reason this
business model sucks too!

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spangry
That's awesome, and good on those guys.

Markets can only be competitive when information is ubiquitous and barriers to
entry are low. This, I think, is one of the less talked about revolutions
brought about by the internet: the creation of hyper-competitive markets that
have led to superior outcomes for consumers.

~~~
benevol
> superior outcomes for consumers

You're not factoring in the fact that the Internet creates huge monopolies
(just like money also has a natural monopolizing effect; in other words "rich
get richer, poor get poorer").

We end up with a couple of huge Internet companies which will increase their
pressure as soon as they are sure that they are "strong enough" (meaning:
protected from healthy competition which usually favors the consumer).

Example: Amazon - they currently keep only a very tiny margin, because they
are still about increasing their overall market power. Once they have
maximized that, they will use their power to increase their margin and all
players (including the consumer) will feel their heat.

~~~
ArkyBeagle
That's not clear. The idea that (non royal-patent) monopolies always pursue
dominance to corner price seems problematic.

Like Standard Oil, Amazon is ... obsessively keeping margins down for the sake
of keeping margins down. Who would have to fall by the wayside for them to
"win"? WalMart?

Don't look now, but WalMart has quite the online retail presence. I'm not sure
how to evaluate the advantage/disadvantage of "in store pickup" but I've used
it for big bulky things, when I'd needed better control over when I took
possession of the item.

Meanwhile, Amazon's effect may well be part of our increasingly deflationary
economic cycles.

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benevol
In the long run, you can

a) control the production of the good (or service)

b) control the interface to the consumer

Everything else are middlemen and will disappear. These guys' suppliers do a)
and Amazon does b). These guys are simple middlemen who add no real/critical
value and will be crushed by Amazon. Just a matter of time.

~~~
tyingq
In the real world, though, opportunities arise that neither "a" nor "b" take
advantage of.

One of them is noted in the article...grey area product sources. If "b" isn't
taking the time to find distressed inventory, there's an opportunity for a
middleman to do so, and undercut "b".

There's also some value added where the middleman has expertise or something
to offer that neither 'a' nor 'b' has. That could be better marketing (product
photos, how-to videos), or better support (more lenient return policy, deeper
technical support, etc), bundling multiple products together, niche sales, or
something else.

Generally, successful middlemen find something missing between "a" and "b" and
fill the gap. Is it a war of escalation, where either "a" or "b" can react?
Sure...but typically middlemen can move faster.

Or, in short, they exist for a reason, and I don't see that the internet age
changed anything about that other than pace of change.

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arbuge
>>Unlike eBay, where each vendor maintains a separate listings page, Amazon
tidily groups its Marketplace sellers by item, hiding away the inferior
offers, to showcase the best deals up front. (In seller parlance, landing the
number-one spot is called "getting the buy box.")

It's a key difference. For example we purchase shipping labels on Amazon and
Ebay. On Amazon it's harder to know what you're getting unless you carefully
check the marketplace seller you're buying from. The intuitive process of just
reordering what worked for you previously from your purchase history doesn't
work on Amazon as it does on Ebay. All too often, a different seller now owns
the buy box with an inferior product.

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x5n1
Wonder how is that after tax net income. But yes there has to be a unicorn
there and this is one of those exceptions. Most Amazon retailers are
complaining about getting shafted.

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finnn
this site is fucking unbearable.

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TrevorJ
I wonder how long it will be before Amazon starts truly transitioning towards
becoming the end to end supplier/seller. It seems to me that they have
strategically used third party sellers to bankroll the needed infrastructure
and provide vast amounts of data to mine. Third party sellers can't stay on
Amazon forever unless they have margin, and it's a near-certainty that Amazon
could capitalize on that margin better than a third party reseller can.

~~~
fanf2
Amazon Basics already exists.

~~~
TrevorJ
Tip of the iceberg.

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nomkaaoa
Seems like an awful lot of trouble for 3-6% net after COGS. From that, they
have to pay their employees, rents, lawyers, etc. all with the threat that on
any given day there could be wild fluctuations in their revenue. Good luck to
them, but let's see how long they last. Amazon, unfortunately is a zero sum
game.

~~~
pmorici
Are you sure you aren't confusing net and gross? The graphic in the article
pretty clearly says, "3-6% net profit margin per item". I would take that to
mean after accounting for expenses. Meaning they make a profit of between 2-4
million on their 70 million in sales.

~~~
kgwgk
If it is really the net margin it doesn't make sense to say "per item". Maybe
this metric includes all the variable costs (like product acquisition cost,
salaries directly linked to handling the orders and cost of delivery) but
there are still fixed costs that have to be paid from that "net."

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KenanSulayman
Requiring registration for reading the article is BS

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solidangle
Blocking their cookies and Javascript codes circumvents that. This can be done
using NoScript.

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smoyer
I've got uBlock running and didn't notice there was a registration page at
all.

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Freak_NL
Ditto. Nothing at all with uBlock Origin, just the article.

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ambicapter
I use uMatrix and it wholly blocked me from opening the page?

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gorhill
Be sure your uMatrix HOSTS files are up to date, I can see a `inc.com` in the
packaged Peter Lowe's list, it seems this has been removed at some point.

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nefitty
The opportunities on Amazon are exciting. The company is still growing,
continually gaining customers. As far as I can glean it has recently been
pushing to make international sales easier, which is a whole 'nother pot of
gold to start snatching coins from.

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justincormack
And Amazon makes $200m or so from them, based on the margin figures.

~~~
jsnell
That $70M is clearly their total sales, not their net income. And I'm pretty
certain that when Amazon is acting purely as a marketplace intermediary, they
won't be counting the full value of the order as revenue. So Amazon is making
something like $7-10M a year from them.

~~~
mdorazio
I'm trying to figure out what their net income looks like, and I don't think
it's much. They've got 16 customer service reps, over 100 packers, who knows
how many other employees, refunds and replacements to deal with, plus the
warehouse lease that all have to come out of their margin. What they're doing
is still impressive, but they're not taking home Apple-level profits any time
soon.

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mattedwards984
This is a very inspiring story! Love it.

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stickfigure
I know this gauche on HN, but... I'm on a macbook air. Between the "skip ad"
popup and the top bar that eats the top 2/3 of my screen, the article is
unreadable. After some scrolling around the top bar seems to have gone away,
but I've already lost interest.

Please stop making your articles unreadable. It's not like I've disabled
javascript. Actually... I suspect it would be more readable that way. Hmmmm.

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elorant
That's why I love the Reader View feature in Firefox. I use it all the time,
even at sites with good UX/UI practices.

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moldinaga
Do you really not understand that 70M in revenue <> "making" 70M?

~~~
mrweasel
Kinda hard to tell, loads of people in the tech industry struggles with the
concept of profit and focus solely on revenue.

