Free shipping economics

[@M]

How do companies make a profit, or even break even, with free shipping on large orders? My most recent Walmart.com order is twenty items, shipping in nine different packages. I'm sure Walmart gets some crazy awesome discount shipping rate from FedEx, given the volume of stuff that they move, but, I'd guess that they're still paying at least $3-4 to ship each of those nine boxes, and probably considerably more for larger items? They bundle shit when they can (one of my packages is 12 CDs and DVDs together, the rest are all larger toys, shipped individually, instead of boxed together like a sensible company would do). All those boxes and padding cost money too. I don't get it. GameStop used to do the same shit too--it'd crack me up when they'd mail me a bunch of 99 cent games individually when I had free shipping.

 

[Tripredacus]

Companies get volume discount from the shippers. There are probably metrics involved that would indicate that a person spends more on average if free shipping is involved, so they can roll the cost savings into margin and still make a profit. Also you have to understand that companies like Walmart are making insane profit on almost everything they sell.

 

[fake]

I don't know anything about money or shipping or finance, but here are my guesses...

If Amazon is making a few bucks on each item, and persuades a lot of people to buy more stuff so that they get free shipping, it offsets the price and they just about break even or make a very small profit (across all orders, not just one given order - I'm sure a ton of them result in loss).

They buy stuff in bulk for less. Amazon can strong-arm brands / manufacturers into selling an item for $35 a piece that would cost Mom & Pop $50 a piece.

Amazon is diversified and probably cares less about its consumer arm and more about its corporate arm. They're probably willing to take a loss on Amazon.com since AWS is so successful. AWS generates "63% of Amazon's operating income in 2019 despite only generating 12.5% of Amazon's revenue."

Big companies like Amazon don't care about net profits – they care about revenue. If they make 500 billion, that's great, even if they had to spend 700 billion to make it - because if they hadn't spent that money, they would have only made 100 billion. They also see recurring revenue from Prime subscriptions, Pantry subscriptions, and AWS subscriptions as free money, even though they may be costly in terms of upkeep.

Amazon buys its wealth / growth. This part I don't really understand. My friend tried to explain it to me but I don't get it. They also operate on credit, which I don't understand either.

 

[@M]

I typically do buy way more than the minimum for free shipping. Walmart's threshold is $35, but, I spent about $227 on this particular order, counting sales tax. I'd guesstimate that they're probably going to be paying out around $35, or more, to ship me everything though.

 

[terry.330]

I know from being a shipping clerk years ago that Amazon has to be eating a lot on certain items. I ordered a full Odessy Flight Case turntable coffin and it shipped free and showed up the next day. The thing is the size of a door and weighs like 75 lbs. Dimensional shipping alone on an item like that should have been about 2x the cost of the item itself.

Best not to question these things, someone somewhere in the chain is getting royal fucked even if the companies are doing all sorts of tax right off voodoo.

 

[@M]

I've seen some companies add like an extra $20 bulky shipping fee for large/long/heavy items on top of the regular shipping, which is fair.

I know a big company like Walmart or Amazon would never share that information with me, but, it'd be interesting to see a spreadsheet breakdown of all the costs, and profits, on one of my orders, and if it ends up in the black or red by the end.

The inner conspiracy nut in me has to wonder if the real reason that I didn't get that Poison CD I bitched about was because it had to be shipped separately and they were already in the red on shipping that order (I think I did the max 32 items on that one), not an "unfixable processing error" like they claimed.

And on this order, it is suspicious to me that seven of those toys, all from a failed toy line that they cut the prices on by 50%, are being shipped individually, rather than all together or in two boxes--I have to wonder if Walmart can recoup some of the items' slashed costs by writing off all that inefficient shipping?

 

[LoneSage]

logistics brah

 

[racecar]

I don't know anything about money or shipping or finance, but here are my guesses...

If Amazon is making a few bucks on each item, and persuades a lot of people to buy more stuff so that they get free shipping, it offsets the price and they just about break even or make a very small profit (across all orders, not just one given order - I'm sure a ton of them result in loss).

They buy stuff in bulk for less. Amazon can strong-arm brands / manufacturers into selling an item for $35 a piece that would cost Mom & Pop $50 a piece.

Amazon is diversified and probably cares less about its consumer arm and more about its corporate arm. They're probably willing to take a loss on Amazon.com since AWS is so successful. AWS generates "63% of Amazon's operating income in 2019 despite only generating 12.5% of Amazon's revenue."

Big companies like Amazon don't care about net profits – they care about revenue. If they make 500 billion, that's great, even if they had to spend 700 billion to make it - because if they hadn't spent that money, they would have only made 100 billion. They also see recurring revenue from Prime subscriptions, Pantry subscriptions, and AWS subscriptions as free money, even though they may be costly in terms of upkeep.

Amazon buys its wealth / growth. This part I don't really understand. My friend tried to explain it to me but I don't get it. They also operate on credit, which I don't understand either.

pretty much this !! for accounting/invester its ok to spend money( net lost), if its justified by growth , everything works on credits via the stock market. amazon always lost money for it entire existance until the last couple of year , but their growth and marketshare is what all the invester look at and thorws money at . over that span of time they have growth their customers and service ecosystem ...like if they have billion customer to monetized it they just have to make $1 of each via prime , ring, aws, marketplace etc...

 

[Neo Alec]

Some retailers like Target seem to be selling certain items online at a loss to compete with Amazon and bolster their online presence. You can pull up items in their app while you're in the store and get a different (often cheaper) price.

 

[norton9478]

The strategy is simple: Lose a little bit of money on every transaction and make it up in volume.

 

[NeoSneth]

There is ridiculous margins on stuff. especially cheap tat. it costs pennies to buy in bulk, and china subsidizes most shipping leaving it's borders.

 

[@M]

Some retailers like Target seem to be selling certain items online at a loss to compete with Amazon and bolster their online presence. You can pull up items in their app while you're in the store and get a different (often cheaper) price.

Will they match the online price, in-store, if you show the cashier on your phone?

 

[NeoSneth]

Will they match the online price, in-store, if you show the cashier on your phone?

cashiers usually can't do this. Only customer service.
Some products are loss-leaders where they are sold at a loss to get your attention.

 

[norton9478]

UBER loses about a dollar on every ride. Something like 5+ Billion a year.

It is like the worst race to the bottom ever.

 

[Lagduf]

UBER loses about a dollar on every ride. Something like 5+ Billion a year.

It is like the worst race to the bottom ever.

Please explain.

How do they lose money? The revenue they take in doesn’t cover their operating costs? What are their costs? Servers and Insurance payouts?

 

[@M]

FedEx just dropped off my shit. The tracking said 9 packages, but, someone at Wal-Mart grew a brain and put the 8 toys in one large box instead, so, I only got two packages, one for the toys and one for the CDs and DVDs, which is how it should be done. Much cheaper to mail two boxes than nine!

 

[fake]

Please explain.

How do they lose money? The revenue they take in doesn’t cover their operating costs? What are their costs? Servers and Insurance payouts?

Over half of what you spend on an Uber ride goes to the driver in one form or another.

They spend a shitload on marketing, R&D, and even refunds for unhappy customers.

But it's seen as "fine" that Uber (and all ridesharing companies) lose billions per quarter because the people who invest are speculators and have enough money to blow on a very expensive scratch ticket. Their mindset is that Uber has yet to take advantage of its full potential. It started with customer ridesharing, branched out to include food deliver, and will continue to evolve until it does become profitable. I, personally, and I, ignorant in this field, don't see that happening, but in the meantime, it's a great service that I used to take advantage of frequently for work and for play before the pandemic. So I guess that's one good thing about rich fucks.

 

[Lagduf]

Over half of what you spend on an Uber ride goes to the driver in one form or another.

They spend a shitload on marketing, R&D, and even refunds for unhappy customers.

But it's seen as "fine" that Uber (and all ridesharing companies) lose billions per quarter because the people who invest are speculators and have enough money to blow on a very expensive scratch ticket. Their mindset is that Uber has yet to take advantage of its full potential. It started with customer ridesharing, branched out to include food deliver, and will continue to evolve until it does become profitable. I, personally, and I, ignorant in this field, don't see that happening, but in the meantime, it's a great service that I used to take advantage of frequently for work and for play before the pandemic. So I guess that's one good thing about rich fucks.

Speculators propping the company I understand but I would have assumed UBER as a company was making money hand over fist.

How many employees do they even have? (Excluding CA’s redefinition of gig workers as employees.) Guess it takes more money to run a company then I thought. Or maybe it’s just employees passing their pockets til the investments dry up.

 

[norton9478]

Uber and Lyft are awful. Everyone loses money except for the customer.

If they just could create a price floor, they could make money.

The Livery (I don't want to use the word TAXI) industry pre-Uber had lots of problems and BS. But it at least functioned on some basic economic level.

 

[fake]

Speculators propping the company I understand but I would have assumed UBER as a company was making money hand over fist.

How many employees do they even have? (Excluding CA’s redefinition of gig workers as employees.) Guess it takes more money to run a company then I thought. Or maybe it’s just employees passing their pockets til the investments dry up.

They have under 300 employees according to Crunchbase (they've been laying people off left and right - including almost all of its customer support teams). Keep in mind they've spent billions on acquiring their competition (Postmates), companies that will help them branch out (Drizly, Jump bikes), and companies that improve their tech. They're spending a lot on R&D for driverless cars – and in their minds / investors' minds, means they won't have to pay humans down the line and they'll get all their money back and then some. Billions also go into the non-descript "contra revenue" black hole. That does include payments to drivers, but also whatever else they feel like putting in there – they used to reveal what was in there but no longer.

 

[Lagduf]

It’s bonkers to me because they fundamentally are a middleman. They make an app which connects drivers and passengers. That’s it.

 

[Heinz]

Australia introduced a 10% GST on all online orders to compensate for cheaper overseas prices and completely or partly subsidised international shipping costs.

Can't say I like it very much...

 

[wyo]

Tesla isn't profitable either. All these artificially inflated tech companies will crash and burn in due course. Their business models are built on hype and speculation. Same goes for crypto. All intrinsically worthless shit.

 

[racecar]

Tesla isn't profitable either. All these artificially inflated tech companies will crash and burn in due course. Their business models are built on hype and speculation. Same goes for crypto. All intrinsically worthless shit.

until then Elon musk is still second richest man in the world... all that stimulus money will find its way into the stockmarket and the whales are going to be eatin good for a while .

 

[Xavier]

Tesla isn't profitable either. All these artificially inflated tech companies will crash and burn in due course. Their business models are built on hype and speculation. Same goes for crypto. All intrinsically worthless shit.

Just made a profit of $440M for Q1, 100M of it being from bitcoin speculation. It's respectable. They've been ahead of bonds due for over a year now it seems like as well. They are in a good place right now.

Nothing new to add.

Silicon Valley seems like a big ponze scheme, they start a company and can lose money for decades. Investors come along and pump massive amounts of cash into them diluting the ownership of other investors. The dream is to one day get an initial public offering and sell even billions more in stocks. All the meanwhile the founders, CEO and executive make massive salaries and bonuses.

Amazon has been making a profit for a bit now. They lost money hand over fist for twenty something years though, During all this time though they've put out of business the rest of the mom and pop shops and then created the retail apocalypse.
Think about Sears, 100 year ago it's was they shiznit. You could order anything imaginable and it would show up at your doorstep anywhere in the country(even a house itself). Then retail came along and it made the transition was a donminant force for a bit and then got replaced by a service that could deliver almost anything to your doorstep.

Yeah Uber/Lyft mystify me. 14b in revenue. I don't understand why they can't setup a budget of say $1 per transaction as a profit, pay the drivers and everything else goes back into the business & R&D. Im sure all those people they laid off make $60k a year and live beyong their means. the CEO of Uber, Khosrowshahi reportedly earned a base salary of $1 million in 2018. However, his total compensation package was around $45 million, which included a $2 million bonus, $40 million of equity, and another $2 million for reimbursement of work-related expenses, according to Observe

Remember WeWork about a year and a half ago? ....Mindblown
In 2018, WeWork's losses and revenue both doubled. According to the Financial Times, the company lost $219,000 each hour of each day from March 2018 to March 2019

Your purchases might be at four different distribution centers, they have a guy allready coming from a different one bring some things to another one. You get three packages, or they just really don't care.