Amazon Prime members buy twice as much, don't compare on price
lukew.com
lukew.com
The supposed "source" referenced another study (sans link), so I can't get the answer to the obvious question: Was "less expensive" computed using the marginal cost to the customer of this particular purchase? Meaning, do other sites offer the widget for a few dollars less but charge a lot for 2nd day shipping?
I'm a Prime customer, and I've mostly given up on comparison shopping for small items. Amazon's prices are usually good enough that, especially coupled with the free 2nd day shipping, my effective "wage" for comparison is too low to make it worth it. Nevermind the "it just works" feature of Amazon's system (not just website -- the entire process by which a widget comes to my house).
My wife and I have forced ourselves to change our shopping behaviors and ask ourselves before thinking about leaving the house, "Do I really need this thing now, or can it wait a day?" $4 for overnight shipping is a bargain compared to wasted time, gas, etc. Stores are harder and harder to justify. That my wife finds ordering a bunch of clothing, trying stuff on at home, and returning what she doesn't want to be much more efficient makes me wonder what the future of retail clothing becomes. She sometimes even regards the "home try-on" process as superior because she can see how a new item of clothing looks with other, previously purchased garments.
If I buy something on Amazon via Prime (which means Amazon themselves will be fulfilling it), I know that if I order it 2 day shipping it will arrive in 2 days. If I bump it up to next day shipping (within the clearly marked and real-time updated window of shipping) it will arrive tomorrow.
Amazon and Newegg are the only two web retailers that I trust to predictably get my items on a set time-table. It is all too common for other online sites to gladly accept orders for next day shipping or two day shipping at ridiculous markup and then actually use those shipping methods but only after sitting on the order for days before actually shipping it out... not exactly what I had in mind, guys.
I don't think Amazon has ever been late in the two years I've had prime.
I can kind of see how this works for merchants selling through Amazon. AMZN provides the customer with a good experience, makes customer feel valued, customer is more inclined to buy more products despite a bad moment knowing they'll be taken care of.
Probably not how it pans out in practice, however.
paypal does business this way as well.
It's hard to argue with the logic behind a customer-centric policy here. Merchants are going to go where the customers are and they can spread the cost of dispute resolution, etc over far more transactions than an individual. Makes sense to inflict the "pain" on their side.
I'm sympathetic regarding some of the more egregious stupidities Amazon has foisted on some merchants, but when it comes to this part, it's pretty unambiguously what you signed up for.
Consider it from the other end: If you were selling autonomously on your own site, would you treat customers this well? What does your answer say about you? What impact do you think your answer will have on potential customers' choices?
On top of that I am starting to really, really hate the amazon market place because their product offerings are horribly unorganized, they list in lots of wrong but popular categories and they put something up as a different product despite the same product already being there at least twice.
Also I absolutely love ordering online and getting stuff in the mail so I decided to pay the I-dont-know 20 bucks a year for the Amazon Prime subscription and get free next-day(!) delivery on each and every order. Why would I give that up and pay for the slower and worse alternative?
I have never heard of this happening ever with amazon, though I would love to know where your experience with this is coming from.
My guess would be that Amazon's business model is very sensitive to the return rate, since returns are very expensive for them: their whole system is built around getting product out the door to the customer not the other way round!
One or two expensive returns from a customer could wipe out all the profit they'll ever make from that individual. If they believe they can identify those customers who are likely to cost them money, it's in Amazon's interest to cut off service to those customers as early as possible.
Perfectly rational behaviour, but I imagine highly frustrating for those customers who naturally feel that they've been somehow accused of wrongdoing when Amazon decides it doesn't want to do business with them any more.
Of course it's possible that those who go online to complain about this are in fact abusing the system, but from Amazon's POV it makes perfect sense: they don't want picky customers who will return borderline goods because it will eat into their margins. It's much more profitable to sell to those who won't notice the dead pixels on their laptop display (or whatever the problem happens to be).
- Amazon ships fast
- Sending things back to Amazon is free and fully automated
- If something breaks in a year, Amazon will usually replace it without a big hassle
- I don't have to get another account at another merchant that will save my password and credit card data in plaintext
- Amazon packaging is great
- ...
There is more to a purchase than just the product itself
There's an added bonus if you live near a distribution center, in which 2nd day often turns into next day. In a handful of cases, I've had next day turn into same day -- ordering something before I go to work, and finding it was delivered in the middle of the afternoon by a specialty shipper like LaserShip.
The 2% gas (& food?) / 1% everything is the same as any other (good) card.
Also yes, pay it off immediately. Not paying off any credit card immediately is insane, because the interest rates on basically all credit cards is abysmal. There are a lot of credit cards that will have 0% intro periods, but then the standard 10~15% rate after that. I've never seen one with an actual low interest rate (and if you think about it, why in hell would anyone offer such a card?) - correct me if I'm wrong though.
Treat it like a debit card, but enjoy the benefits of building a credit score.
People may find that too creepy, but Amazon could do something else: gather lots of feedback about what fits customers and what doesn't. You get 3 pairs of pants, rate them "too big" and "too small" and "just right". Eventually that could correlate that if you and Customer X both fit these pants recently, the shorts he bought last week will probably fit you too.
(This would be more complicated for women, of course.)
Ultimately, Amazon is doing what I think all companies should: compete on value instead of on price.
But screen real-estate is quite a bit cheaper than the physical counterpart.
Nope Amazon is cheaper 99% of the time once you factor in the "pain in the butt" price.
(For years I would read how Amazon pioneered A/B testing and measured statistics on every pixel of its site and tweaked out the wazoo, and I would wonder how this was possible given that the site was a chaotic mess that actively impeded me when shopping there - could my sense of what is effective and attractive be that out of whack? And then I read in Yegge's famous Google+ post that this was not true, but the cluttered chaos was kept at the specific request of the CEO, Jeff Bezos. And I went, 'oh of course; that explains everything.')
Notice that you can have great reviews or product search engines despite a busy chaotic layout - the search engine source code doesn't give a toss what the pages look like as long as it has the data it needs, and the reviews come in if you have enough customers and don't make too hard on them to submit.
See also: Any direct marketing long form sales letter.
Compared to the stacks of full-price books I was getting from Borders a decade ago, I'm doing a lot better.
However, I buy so much from the (I'm a Prime member) the I almost always have a small box around. I just put the item in it, print out the pre-paid shipping label, and drop the box in a UPS box or at a UPS store. It's not that bad.
I can order by 9AM and, for just $3.99, have it delivered that same day.
The first time I did this, I forgot I even had Prime, so I was ready to pay for that for 3-5 day shipping. What a pleasant surprise that was!
One Friday morning last summer, I decided to do some work around the house that weekend, but I didn't have a big enough ladder. A couple clicks later, I have a 22 foot extension ladder being delivered to me on a Saturday.
Even with Saturday overnight delivery it was $2 cheaper than Home Depot, and I didn't have to try to figure out how to cram the ladder into my econobox car to bring it home.
But unless I really want something, I find I still fall into the old habit of "I'm ordering from Amazon, I might as well get a few things to make up for shipping." If I can't find enough things to make it "worthwhile", I often won't buy it.
I've been a prime member for years. Shipping is free. But my mind is still usually stuck in the old ways (even if I'm only 28). I have to fight my instinct to tell myself "It's OK to order just one small thing."
The tipping point for me was in early '09 or so when Amazon introduced their iPhone app. At that point if it came to my mind that there was something I needed, I'd just pull out the phone and buy it immediately on Amazon.
That changed my habits too when browsing their normal desktop site. From then on, the vast majority of my Amazon purchases have been one-off purchases where I knew what I wanted, spent two or three minutes searching, bought it, and got out. And I do it often; between me and my wife's purchases there's an Amazon box on the front doorstep 2-3 times a week.
In the vast, vast majority of cases that I've price shopped elsewhere, Amazon is almost always the cheaper option. And if they're more expensive, it's generally by only a dollar or two (also depending on how their pricing algorithm is working that day - I've had times where I've checked in the morning, then come back to buy in the afternoon and there's a whole $5 difference). This leads to the phenomenon of, if you shop on Amazon a fair bit (which Prime's obviously do, but I bet a lot of other "non-Primes" do too), you will probably reach a point where you just quit spending the extra time to price-shop and just buy the thing you're looking for. You end up saving even more that way because you now have more time for other things.
All that to say - I think just identifying Prime members with this behavior is a little narrow in focus. My guess is that there are a whole lot of other customers who fit this pattern, but don't have Prime, and I bet there would be some value in pursuing that analysis deeper!
The price change added up to only 1 or 2 dollars, but from a customer service perspective, it was super classy. I'm yet to see any other company do this.
The $22 hair gel my wife bought was three for $24 at Amazon. I don't have much hair left, so I think those three bottles i just bought will last for two years.... and I never have to search it out again in my life.
We did the same thing with bulk bottles of mouth wash, which we now transfer into small desktop size containers. I laugh when the bottle arrive in the mail.... the only issue is what do i do with all these boxes?!
We've been giving them to our two year old to paint and build things out of.... seems to work well. :-)
( very kind of you to include a link! )
Subscribe and Save is slowly eliminating my need to go to Target for the same reason. Every month, I bought the same things from Target. Now, it "magically" shows up via UPS and I can easily adjust if I notice I'm running short on napkins or have plenty of tissues in the closet.
These two models have created a tremendous amount of lock-in. Its a win for Amazon (I buy more) and a win for me (less time/less hassle/almost always less money).
The only problem with Amazon Prime is that I sometimes annoy my officemates by ordering lots of random small items (thus, the UPS/FedEx guy ends up coming every day, sometimes multiple times, and covers my desk with small boxes...) Road flares, dish detergent, whipped cream chargers, ... lots of ORM-D stuff. Plus anything electronic or kitchen appliance.
"Losing"? If the other stat of purchase volume increasing from $400 to $900 is true, Amazon is buying volume business for just a 1% discount. I wonder how the profit margins skew between average purchases and those which only happened because a customer had signed-up for prime? I recently ordered some collar stays and had them overnighted for $4. Their cost was $20 for what amounted to some little pieces of stainless steel (exactly what I wanted). The margin on these has to be much better than a DVD player.
Regardless, 3% of $400 == $12, so with these numbers, Amazon breaks even on a new $400/year client, and makes money on any client that spends more than that.
The digital content should not be considered in Prime membership cost. People buy into Prime membership for the free shipping, not the digital content. Rather, free digital content is meant to give people's foot into the door of Amazon streaming platform.
The digital content is more of a market development cost for the fledgling platform Amazon is creating.
So, once you position yourself in customer's minds as reliably having competitive pricing (not always the #1 cheapest, but always close) they feel comfortable ordering from you without shopping around.
And so on. The consistency of service is why Amazon is good to buy from. You order something and you know you'll have it in 2 days or less.
(Sunk cost, you say? Believe me, I know about sunk cost, and sunk cost is vastly over-invoked and probably a minimal problem in individual human psychology: http://www.gwern.net/Sunk%20cost )
Amazon generates 130% more business per subscriber just by losing a mere $11/subscriber. Those are numbers that anyone could salivate at.
they're pretty smart folks, lets speculate what insight this might give us. maybe they think that by bundling video and shipping, they can funnel content consumers from kindle/fire to their product store?
It's just a focus on user experience. Companies solve genuine problems, and while people pay for solutions, they happily pay more for great shrink wrapping.
Narrow thinking like this is why other retailers don't offer Prime. If you can turn a $400 customer into a $900 customer, you're probably more than covering that "loss" and it should be considered a marketing expense if anything. Put another way, what company wouldn't spend $11 to bring in $500 of customer purchases?
The right price point for Prime should be one where the customer benefits by saving on shipping and other costs ("this loss") but Amazon benefits by increasing their overall annual spend -- mostly by moving their spending over from other online and offline merchants. Seems like they're right in that sweet spot.
I've spent an obscene amount of money in the 3 years I've had prime. I've definitely saved money on the necessities, but it's easy to one-click the impulse stuff. The subscribe and save stuff is great too. In my opinion, Amazon Prime is the best deal in online shopping.
I routinely find items priced lower someplace else online, but the difference is usually less than the cost of shipping. I go out to stores much less than I used to, and when I do I compare everything to Amazon. It's not uncommon for me to purchase several items from my phone and walk out empty handed. It's getting to the point where I mostly only go to stores for food and things that can't wait a day.
Sooner or later brick and mortar retailers are going to experience massive fallout from Prime.
It's easy to think of something I need, hit amazon, select prime eligible, and buy in a matter of 3 clicks...No worry about cost or when it will be at my door.
Amazon must have a pretty good deal going with UPS (& FedEx for next day air).
Prime has completely changed the way I shop for a lot of everyday items and for someone who lives in a rural area and is a 20 minute, 15 mile drive to the nearest Wal Mart, it's really made my life more convenient.
Consider that despite billions in investments, both DHL before they went away and FedEx Ground today are still not as good as UPS.
From the shipping side , with it's prime program they're so much better then other e-commerce competitors, that they won't gain much customer lockup by buying DHL(altought it might make them money), and they'll pay a big price.
On the other hand , if they'll control the customer, they'll have enough market power to force DHL or some other shipper to their terms. And with today's IT system two companies can have deep integrations if they want.
That would be a bit too vertical for my taste. I'm not sure massive hassle of trying to staff & run their own to-the-door shipping empire would beat the UPS service I get now.
* Guaranteed to arrive within 2 days. Other sites it not even ship it within 2 days.
* Easy to return items in case something goes wrong.
* They already have my billing and shipping information, and I trust them to securely store it.
* I can see all my orders in one place.
Factoring in all of those things, plus the time I don't waste comparison shopping to save a dollar here and there, I'm pretty sure it's the better deal in most cases.
Recently though, I've started making a habit of converting people to use ShopRunner, and letting everyone I know to get on ShopRunner when the promotion is free. The experience I've had with ShopRunner is not as good as Amazon Prime, but it is close. And I fear the Amazon monoculture more than I enjoy Prime.
Don't expect Prime to be as good when they don't actually have to compete on merit. Promote the competition, even if it costs you a little now - it's an investment for the future.
(Re: shoprunner, every couple of weeks they used to have a "get in free today" deal; Now it's $1/year once every few weeks. Set up an alert on dealnews.com to be notified the next time this happens)
Compared to online alternatives: * Even if less elsewhere online I stick with Amazon because the Amazon experience is known and reliable.
Compared to a local shop:
* Customer reviews are much better, broader, and more in depth than getting input from a local shop owner. * Selection much larger.
I still buy most things on Amazon - it's a better deal than driving to Target or even the grocery store sometimes.
Interesting though - so many of you are talking about 2 day shipping... is that an American thing? Prime in the UK is next day delivery.
My shopping now is the grocery store, dollar store, clearance clothes from big box stores, and amazon. The exception to this is hobby stuff that occurs at shows.
Well not painful, but being able to order something at 10PM and having it arrive at lunchtime at work the next day was such a better shopping experience than I normally get here.
I really hope amazon has aspirations of opening an AU store sometime soon.
I'd be surprised if some states have not even considered this. Does anybody know if it would even be allowed by law?
Now guess when Prime launched. Yes, 2005, the beginning of the hockey stick growth.
Prime has been a huge success for Amazon - more like a stroke of genius.
Thanks, Mehul
Amazon.ca is still pretty much just books.
http://en.wikipedia.org/wiki/Amazon.com_controversies#Canadi...
I had assumed it was for import/distribution reasons, but I'd be interested to find out the real reason.
The Canadian site now tends to have all the books the US site has.
"The bottom line: If you are a non-Canadian who wants to open a business in Canada, you will have to immigrate to Canada or find one or more Canadians to team up with."
http://sbinfocanada.about.com/od/startup/f/Non-Canadians-How...
Books were the first step, and if you notice other departments have started to be available on our .ca-- I assume it's just a logistics issue before they establish a near identical system.
In some ways it's kind of sad, because I do think it will hurt the Canadian arts in the same way Canadian film and television has become second-rate American entertainment-- but the damage is done and with the way things are set up and have been established over the last 20 years, it's inescapable.
I've been a Prime member since its inception and am always amazed at how much time and money I save by not having to leave the house to shop.
Books, electronics, cleaning supplies, toothpaste - anything I can get through Amazon, I get through Amazon.
Bonus - now the Prime membership includes Amazon Instant Video.
•Spend 130% more than regular Amazon customers. (source)
•May be responsible for as much as 20% of Amazon's overall sales in the U.S.
Eh... those numbers don't line up.
Also, the "U.S." qualification can skew things a bit.
Luke has some good stuff out there, but it's all guts. Very little to none formal work.