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Comment by thecollate | Hacker News Reader

I am surprised that there is so much margin. Is this because:

1. Amazon product delivery is so convenient that users don't mind paying little extra or

2. Walmart discounts products valuing their warehouse space more. Thus not realizing there was demand for the product elsewhere or at a different time.

Seems like it would be simple for Walmart to figure out this arbitrage and shelve products for longer time. Any thoughts ?

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I will occasionally search Amazon for things whose prices I know, like Trader Joe's items or something I bought at a local store. Sometimes Amazon sells it themselves, in which case the prices are reasonable. But often, somebody random will be selling it at a large markup.

My theory is that plenty of people are not particularly price sensitive and just want the thing to appear. I'm stubborn enough (or cheap enough) that I'm very reluctant to reward the arbitrageurs. But I'm sure many aren't.

I have a similar feeling when I look at houses to buy online.

If I see the house was bought for 40%+ less just a few years ago, I refuse to give an offer. Even if the price seemed reasonable and it interests me. I refuse to reward people who bought low and want to flip it for much higher (if it increased reasonably, fine)

Certainly those increases in price are because the person put significant time and money into improving the property. It's not any more of a "reward" than your salary is "reward".

Not certainly - it's very common for a neighborhood to shoot up in value (because of something that individual homeowners don't do, like a major employer moving in or getting successful, or a train station being built, or a nearby neighborhood getting full), and so the market value of the same home at the same condition can increase dramatically just because the neighborhood has more demand.

40% in 2-3 years is pretty unlikely, even in the hottest markets. But even still, does that mean you discontinue shopping in the neighborhood altogether? Because all the surrounding homes would have seen the same increase?

40% in 2-3 years is unlikely, but still happens. Small town + business taking off can quickly dry up all available housing.

I suspect if you look around say the Tesla Gigafactory, local housing prices had a massive spike at some point.

Yes, I said unlikely and I meant it?

Sorry, I mean yes it's uncommon, however it's also predictable. Iif you know where a new factory is going ahead of time that drastically alters the probabilities.

I have been looking at houses as well, and I do this too. My main reasoning though is that there is generally a lot less value left to capture in these houses because as the house trades hands, most of the 'low hanging' remodels/improvements get picked. And of course the other risk, is that there is some 'hidden' issue that is driving the turnover (noisy neighbors, under a common airplane flight path, or something like that).

How do you know they didn't invest a significant amount to fix issues? What they paid for it isn't a useful measure if you don't know the condition it was in.

Comparable sales prices for recently sold similar homes would seem a better measure.

We bought our house, lived in it for two years, moved and rented it out for a few years, then sold it for a 40% markup. Didn't do anything special.

So, either they put in a bunch of work to make the house more attractive or the overall market price rose 40%. In either case you just want to exclude the house because you don't want someone to make a profit?

I am ok with someone making a profit but not a 40% in a few years.

Yes that is probably irrational "caveman" thinking. Never said it was logical.

Better to find the cheapest house that fits your want list regardless of past ownership.

The house I bought doubled for the last owner during his 6 years here. It doubled for me in half of the time since. The past owner wasn't greedy the market moved on its own.

Amazon spent decades of building the brand of "if it's on Amazon it must be a good deal" and now Amazon marketplace allows third party sellers to exploit that image to the occasional buyer who does not really understand what Amazon marketplace is.

Or they just dont care. Walmart sets a price to move X amount of merchandise. This guy sells to a small fraction in comparison. Lets say 1% (as an example).

If Walmart increases the price, they could easily lose more than 1% of their other customers by attempting to capture this guys profits.

The margins can be big! I've compared Walmart or Target products on Amazon vs. in the store. Sometimes they are 200% higher, however it tends to be on low priced products.

A bottle of vitamins on Amazon might be $9, but you can order them right now and get them delivered to your door. In the store it's $5. A LOT of people are willing to buy from Amazon evening knowing it's more.

I follow this company and guy... they have a bunch of partnerships with distributors and manufacturers directly which result in higher margins. Saying they buy at Walmart and sell on Amazon is only part of the business.

Shelf space is valuable, and customers like full shelves. Walmart warehouses as little as possible — everything gets pushed out to the stores. So you’ll have regional and seasonal variations where a store will overstock to push more product.

When that season ends, it’s more useful for the store to unload the inventory for cash quickly and switchover to the next thing.

You can always spot a struggling general retailer when you see “holes” in the aisles or low-density merchandising... it’s a sign that the vendors are tightening credit terms.

Amazon has a less competitive market position because people are buying stuff for convenience and there’s a high transaction cost due to shipping. Every major retailer is launching subscribe and save programs to nip at those Amazon convenience shoppers. Amazon needs the job-lot people because they are the only folks who can get a tube of toothpaste for 1/3 the retail cost. It’s a great strategy, until some psycho tampers with product by putting poison in toothpaste or acid in shampoo.

3. When buying things from Amazon, if I don't meet the $25/$35 limit or whatever, I will sometimes, stupidly, search for something else I need from the store and will pay up to $5 more for it through Amazon. Things like folder separators, a pack of staples, etc.. You can get these things for $1 or $2 at Walmart, but on Amazon, maybe $4, $5.

> Things like folder separators, a pack of staples, etc.. You can get these things for $1 or $2 at Walmart, but on Amazon, maybe $4, $5.

In germany buying stuff in bulk sometimes requires to travel like 50km, I've seen people plenty of times make bulk buys over amazon, because it is more convenient.

Exactly both - this is a temporary sort of arbitrage but is great for both these entrepreneurs and the end consumer in the short term. I will be surprised if they survive in the long term, since most of their business model is designed around the lack of Walmart and Amazon talking to each other. I think it would take a relatively simple collaboration between the two (though that might never happen) to completely destroy this business.

I think pricing trends monitoring aka camelcamelcamel.com would be enough for Walmart to figure this out. They don't need to actually talk to each other IMO

Likely. They’ll probably stick some ML or data science person on it at Walmart Labs who ends up doing better at it than CamelCamelCamel because it’s his/her full time job and because they have a PhD in statistics or some similar field. Also because Walmart has near unlimited money to throw at these kinds of problems.

> relatively simple collaboration between the two

Wouldn't this fall foul to some kind of anti-collusion laws?

Maybe, I’m guessing it depends on the flavor-of-the-year government they would deal with when attempting such.

Or Walmart could just dump the stuff back into their own fulfillment system.

I doubt it amounts to enough merchandise for them to care about though, regardless of the margin. They make money on low costs and volume.

Indeed, which is why it has probably skated under the radar for this long. I imagine this company’s success will eventually be its downfall in that the second when Walmart and Amazon see how much money is being made over this kind of arbitrage and that kind of money becomes significant they will quash it like a fly on the wall.

I’m part of group one. I have two kids. Putting them in the car to go bargain shopping sounds awful.

Being able to order online and have it magically show up later that day or the next is worth the markup.

The article mentions him buying clearance items.

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