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Comment by kjhlkjh | Hacker News Reader

One fascinating niche are online retailers which fill market voids Amazon deliberately creates out of corporate policy. For instance in the US one can readily purchase firearms and ammunition through the internet. Due to various legal formalities, Amazon won't touch that particular market segment. Visiting sites like www.sgammo.com, www.palmettostatearmory.com, or www.midwayusa.com, is like stepping into an uncanny PHP laden alternate reality where Amazon never existed. This federation of specialized retailers offers a glimpse into what the online shopping experience _could_ have become, if it weren't for Amazon's hegemony.

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It doesn't sound that great, to be honest. None of those tiny institutions could ever reach the same amount of consumer trust that Amazon has engendered with its customer service/experience.

> It doesn't sound that great, to be honest. None of those tiny institutions could ever reach the same amount of consumer trust that Amazon has engendered with its customer service/experience.

You are paying for that trust.

For instance, right now, Amazon is charging $69.00 for a shoe we sell for $62.25 (including the item we list on their site, including shipping, etc.)

This is universally true for every item Amazon has cut us out on. It defaults to "Ships and Sold from Amazon.com" despite the fact they are the higher price.

Personally, at this point, I'd rather buy from smaller retailers. If you ever look outside of Amazon for "niche" items you'll start to notice Amazon stops being cheaper. Try looking at some of the clothing brands, the Guns&Ammo dystopia is unique to their industry. :P

To be honest, I'm surprised their valuation is what it is given I genuinely don't see how they can raise prices more than they have. Charging an extra 10% over your competitors is really already pushing the envelope as far as can be done.

I'm guessing over $200B of Amazon's $475B valuation is from AWS and Amazon's subsidiaries. They have [small] stakes in some companies too. To be fair, the subsidiaries are peanuts^ (let's be generous and give them a combined value of $10B).

Amazon has their Kindle product line of e-readers (along with their ebooks infrastructure and Kindle Unlimited), tablets, and smart tv sticks. Their Alexa ecosystem is thriving for now and its products are at 5 now.

Amazon has around 70M prime members. That's over $6B in revenue alone. Reports say these members spend more at Amazon too. They probably don't care about prices being a bit higher on Amazon either. That last sentence is my own hunch.

And who knows how the Whole Foods acquisition will shake out.

I'm not sure how much debt Amazon has, but their cash pile is over $20B.

^Like Audible, IMDB, Goodreads, Twitch, Zappos, Alexa, Kiva, and Souq. Woot went to shit. And they shut down Quidsi's sites like soap.com so that didn't matter anymore.

> I'm guessing over $200B of Amazon's $475B valuation is from AWS and Amazon's subsidiaries. They have [small] stakes in some companies too. To be fair, the subsidiaries are peanuts^ (let's be generous and give them a combined value of $10B).

I just believe (rightly or wrongly) that Amazon's customers are more price sensitive that is commonly believed and the merry-go-round of constant reinvestment isn't going to be something that can be stopped for that reason. I always thought Amazon was fairly valued around $300-400/share and pretty much dumped all my stock in Amazon accordingly.

Maybe I'm wrong but I have a suspicion I'm not.

Look at Alphabet's financials vs. Googles and I think you'll find one of these seems just a much more reasonable valuation than the other at ~$1000/share.

> I just believe (rightly or wrongly) that Amazon's customers are more price sensitive that is commonly believed and the merry-go-round of constant reinvestment isn't going to be something that can be stopped for that reason.

Maybe. But the 70M prime members whose numbers just keep going up and we will see that number break 100M at some point. They don't account for a majority of Amazon's revenue but Amazon is doing over $6B in subscription revenue alone on them right now. Those members aren't as price conscious. And there's many people who aren't willing to pay the $80-100 yearly fee but still use Amazon as a default like Prime members. Those two groups combined most likely account for a majority of Amazon's ecommerce revenue and profit.

> I always thought Amazon was fairly valued around $300-400/share

But you quoted my part saying AWS itself (and technically I included the subsidiaries) is worth that much in share value itself/themselves. At $300/share you're talking about just a $150B market cap. At that point, whose values are you killing off? Amazon retail, value of all the prime members, AWS, Alexa/Kindle/Fire ecosystem, subsidiaries?

Their PE would be at 60 at that point. People once balked at FB's PE for being in the hundreds. Now it's at a cool 40. PE of 60 is about double Google's. Who coincidentally have been going harder in recent years on cutting spending with their latest CFO and continue with trying to raise profits of their golden goose.

Putting that into context, your thinking of $300-400 a share is too low. AWS has a lot of competition. But it's currently still growing and profit margins are huge. Most business don't seem to mind AWS's high prices.

Amazon is still growing too. They bought Souq, the Amazon of Saudi/ME. They are investing billions to fight for India. Google I believe has already won south east Asia.

Their retail/ecommerce revenue alone is around $100B. Overall, they are going to top $150B this year. Without AWS which is their primary profit machine right now, they are still at $135B+ in revenue. Don't you think if they wanted to, they'd be able to eek out a few billion in profit from that remaining $100B+ in revenue if they decided to go that way? That would get their PE below 100. I will note I don't think PE matters that much for Amazon right now. Just look at Netflix's or Salesforce's PE ratios now and in recent years.

I agree, Google's profitability much like Facebook is extraordinary. But they are the two main internet advertising companies. Apple is even more insane, but they only intersect in certain aspects. Finally, Google and Amazon had around the same revenue at the beginning of this decade. By the end of it, Amazon will be double (or just about) Google's revenue. Comparing them isn't as simple as apples to apples.

> Their retail/ecommerce revenue alone is around $100B. Overall, they are going to top $150B this year. Without AWS which is their primary profit machine right now, they are still at $135B+ in revenue. Don't you think if they wanted to, they'd be able to eek out a few billion in profit from that remaining $100B+ in revenue if they decided to go that way? That would get their PE below 100.

Amazon can't actually compete with us on price without selling below their costs. That is the reason we are still alive despite Amazon moving into our market. They can't raise prices _at all_.

Their ability to do so _entirely depends_ on them becoming more efficient. I suspect they can't become substantially more efficient on the retail side than they already are.

Can they really not? I guess it really comes down to if people will shop at Amazon much less or at all if they raise prices by a few percent or don't decrease prices over the next few years (just an example). Both achieving the same thing. Not saying for all products, just some potentially.

I personally don't think they'd take that much of a hit. But i could be convinced by otherwise.

I think comparing online clothing retailers to firearms retailers is a bit of an apples to oranges comparison. Everyone needs clothing, firearms not so much... Because of this clothing retailers have a much larger client base to draw from, and thus there's more money pumped into their sites. Firearms are a niche good, so the base they draw from is much smaller. Many other niche goods have effectively been absorbed into the Amazon monolith. If Amazon (or equivalent) were to not exist, many of these goods would have their own small niche retailers. These small retailers would have minimal capital, cue PHP hell.

> I think comparing online clothing retailers to firearms retailers is a bit of an apples to oranges comparison. Everyone needs clothing, firearms not so much... Because of this clothing retailers have a much larger client base to draw from, and thus there's more money pumped into their sites. Firearms are a niche good, so the base they draw from is much smaller. Many other niche goods have effectively been absorbed into the Amazon monolith. If Amazon (or equivalent) were to not exist, many of these goods would have their own small niche retailers. These small retailers would have minimal capital, cue PHP hell.

The clothing I'm talking about is pretty niche as well. It isn't everyday clothes/shoes.

> despite the fact they are the higher price

As a consumer, most of the time the convenience, security, service and shipping speed is worth the trivial difference. I don't bother doing price comparisons anymore unless it's several hundred, and even then usually need about 10% delta to switch retailers.

> As a consumer, most of the time the convenience, security, service and shipping speed is worth the trivial difference. I don't bother doing price comparisons anymore unless it's several hundred, and even then usually need about 10% delta to switch retailers.

If you want to voluntarily pay a 10% tax most Americans can't afford, that is your choice.

Are you doing FBA for that shoe?

> Are you doing FBA for that shoe?

We would have to raise prices to use FBA for that shoe and Amazon doesn't allow us to sell a different price on Amazon than we do elsewhere.

That's a big part of the situation you left out. MFN 3rd-party is rarely going to beat any FBA for the buy box, even on a $7 difference.

Also, I'm pretty sure you're allowed to set different prices on different marketplaces. Your Amazon offer must be the lowest though right?

> That's a big part of the situation you left out. MFN 3rd-party is rarely going to beat any FBA for the buy box, even on a $7 difference.

The discussion was about comparison shopping. They can buy from our site or Amazon. We don't care.

So for purposes of the original comment it was irrelevant and it still isn't relevant really.

The original bit of the chain was this:

> One fascinating niche are online retailers which fill market voids Amazon deliberately creates out of corporate policy. For instance in the US one can readily purchase firearms and ammunition through the internet. Due to various legal formalities, Amazon won't touch that particular market segment. Visiting sites like www.sgammo.com, www.palmettostatearmory.com, or www.midwayusa.com, is like stepping into an uncanny PHP laden alternate reality where Amazon never existed. This federation of specialized retailers offers a glimpse into what the online shopping experience _could_ have become, if it weren't for Amazon's hegemony.

I was arguing that was absurd and is unique to that niche. Also, Amazon isn't benevolent.

I didn't argue that I cared about the mechanics of how Amazon screwed its customers.

> Also, I'm pretty sure you're allowed to set different prices on different marketplaces. Your Amazon offer must be the lowest though right?

Correct. And charging customers via FBA $62.25 is untenable for Amazon as well as us which is why they charge noticeably more.

We _could_ charge their customers $65 and ours $65 but:

1) Amazon will find compliance issues with our identical products.

1b) If we comply, Amazon will drop prices until we stop competing with them and/or use their size to pressure a manufacturer into obedience (a la Walmart).

2) We will be cannibalizing our own sales channel to drive more people to Amazon by lowering Amazon's price to the customer $4. This is objectively a terrible decision.

So why bother?

FBA is a _terrible_ idea if you are in competition with Amazon on any level. The sales they'll send you aren't worth selling MFN at a better price point.

Also, as an Amazon shopper, their fulfillment is a known quantity to me. If I buy from your shop with your shipping, I am taking on the risk of potentially longer shipping. And I also have an increased suspicion of fake or knock off goods. So, even if I saw both listings side by side, I'd pay 10% to Amazon for their fulfillment and a perceived lower risk of knock off (despite reading much about Amazon sold knock offs). In fact, I've often bypassed the buy box to buy the same item from amazon at a higher price for these reasons

> Amazon doesn't allow us to sell a different price on Amazon than we do elsewhere

Is this just for FBA items or for any items you sell on Amazon? I've definitely seen products selling for less on other websites than on Amazon.

> Is this just for FBA items or for any items you sell on Amazon? I've definitely seen products selling for less on other websites than on Amazon.

All I know is if we do that, we get de-listed and a warning.

Agreed, it's one of those "be careful what you wish for" scenarios. A bunch of smaller retailers with disjointed UX and idiosyncratic service policies is the alternative to a giant monolith such as Amazon.

Or, you know, we could work together to build a standard protocol so anyone could start an online retailing site and interop with any other online marketplace.

Lack of cooperation builds these monopolies like Google and Amazon.

> we could work together to build a standard protocol so anyone could start an online retailing site and interop with any other online marketplace.

https://xkcd.com/927/

If I recall correctly, US telcos couldn't even agree on which mobile payment system to use, because every company wanted to partner with someone and get a larger piece of the pie. Now it seems the only mobile payment system anyone actually uses is Apple Pay.

That anecdote aside, I agree it would be awesome if such a standard existed. I just don't see it working out since retail is such a cut throat business and everyone will be looking to undercut their competitors.

Remember, competition is good for the consumer and bad for companies.

I kind of like having a selection to choose from, like restaurants. I even still like the older, less-polished ones from time-to-time. (As long as the food checks out, which is pretty easy to handle.)

Same with online retailing – I like the choice and the good feeling that Amazon has to keep trying to earn my business. I don't want too much Amazon homogeny for the same reasons I wouldn't want too much, say, Walmart homogeny. Or Ford dominating autos.

Great just-so story. Here's a completely opposite one:

Every last online retailer would use shopping carts apps of the highest quality if Amazon didn't have such a huge market share. But the shopping cart developers saw the writing on the wall of an encroaching amazon and got out. If they hadn't, everyone who wanted to sell something online would have easy access to a multitude of of hosting platforms explicitly target merchants. And because they're in competition with eachother, the quaility of their platforms in this hypothetical is better than IRL-Amazon's local maximum.

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