17 November 2014

Sweet Charity, From an Unlikely Source

One of the conundra of our times: Amazon can't manage to make a consistent profit, yet its share price seems to be always rising. Well, until this year where it's been bouncing around the $340 mark. And why is this? Once again: it costs a bunch more to ship one widget by aeroplane then it does to ship that one widget by the tonne in a train. Consumers won't pay the extra if they can avoid it, so the billing price of an Amazon widget has to come down such that the price + transport is in the ballpark of brick&mortar stores. Econ 101.

Today, the good folks at UPS fired yet another shot across the bow of Amazon, et al. Be wary. Be vewwwy, vewwwy wawwwy.
Managing those costs as e-commerce continues to grow is a priority, [UPS CEO David] Abney said. E-commerce accounts for about 45 percent of UPS' business, and should reach 50 percent within five years.

"I think anybody that's delivering directly to consumers is certainly going to be looking at those costs," he said.

It's now some hours later, and this piece came through the innterTubes. Amazon realizes, yet again, that it has to eat the transport costs. For now, at least. Another way to spend years not making any money.
E-commerce professionals polled by MarketWatch were more mixed in their views. Consumer World founder Edgar Dworsky said he was "not aware of that trend," and said ordering a bottle of Tide online could prove an "expensive proposition" if the consumer were responsible for shipping costs.

Yeah, we know: lose money on each widget shifted, but make it up on volume.

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