Is Amazon Doomed?

[jaudette3]

I like to package my high performance and LED signal bulb kits in the little 5 compartment plastic boxes that all of us fishermen are familiar with. I just bought 48 of them and you might find the purchases interesting.

Purchase #1 - Container Store (comparable pricing at Amazon)
24 @ $3.49 each = $83.76 with free shipping

Purchase #2 - Ali Express
24 @ $0.15 each (!) = $3.60 with free shipping

The entire order of 24 boxes from Ali Express costs 11 cents more than one box from the poor Container Store.

It takes longer to get things from China but the Ali Express order came in today. To my eye the containers from the two sources look identical. How can anyone make money at Ali Express pricing? And how can anyone compete?

Cheers,
John

[LiveFromNY]

Shipping from China is being subsidized by our tax dollars. It won't last forever and Amazon will be first in line to take advantage when it ends.

[jaudette3]

Why is shipping from China being subsidized by the U.S.? And if and when it ends the Chinese government could, and probably would, subsidize it for infinity. I suspect we might see duty on Chinese goods at some point. But for now the bargains are incredible.

[LiveFromNY]

Why is shipping from China being subsidized by the U.S.? And if and when it ends the Chinese government could, and probably would, subsidize it for infinity. I suspect we might see duty on Chinese goods at some point. But for now the bargains are incredible.

It's been being subsidized for many years. "Why?" our tax dollars are subsidizing Chinese sellers is a great question. It's all part of a UN program called the Universal Postal Union. There were changes to the union in 2020 that allow rate hikes but they have not - as of yet - happened significantly. China is on record stating that they will not subsidize packages to the U.S. should rates increase or should the U.S. pull out of the UPU as Trump threatened to do.

[LiveFromNY]

I suspect we might see duty on Chinese goods at some point. But for now the bargains are incredible.

Yes, great deals to be had but not competitive wit U.S. companies from an ecommerce perspective. Amazon has proven that fast shipping and superior customer service trumps all.

[NorthernThrux]

The Container Store has to pay for web, marketing and bricks and mortar stores and warehouse costs in North America at North American rental and labour rates. Plus they have deals with Marie Kondo, Custom Closet Solutions and Netflix. Ali Express doesn't have any of that overhead. And The Container store has to make a profit based on only a billion dollars a year in sales (profit is currently 8% or so). Ali Express sells that much in a few days I suspect. In both cases, the product are made in China, but there are a lot of middlemen and women in the supply chain when you buy from The Container Store.

It's not the shipping that's the problem.

[LiveFromNY]

The Container Store has to pay for web, marketing and bricks and mortar stores and warehouse costs in North America at North American rental and labour rates. Plus they have deals with Marie Kondo, Custom Closet Solutions and Netflix. Ali Express doesn't have any of that overhead. And The Container store has to make a profit based on only a billion dollars a year in sales (profit is currently 8% or so). Ali Express sells that much in a few days I suspect. In both cases, the product are made in China, but there are a lot of middlemen and women in the supply chain when you buy from The Container Store.

It's not the shipping that's the problem.

It is here. U.S. consumers are spoiled. Ali Express is not a significant player here. Their reach is concentrated in Asia and Europe.

[RSTarga]

Bezos has to make a living!

[NorthernThrux]

Amazon has bulk carrier deals with every major postal service and delivery service around the globe. They pay pennies on the dollar for many of these agencies to deliver, compared to what you and I pay, because they are the big gorilla and USPS doesn't want to lose delivery business to Fed Ex, who doesn't want to lose business to UPS, who doesn't want to lose business to DHL etc. etc. etc. You and I pay higher prices on our packages to subsidize this giveaway to Amazon in the case of Fed Ex, UPS etc. and you and I also pay to underwrite USPS, Canada Post etc. because Amazon pays a marginal tax rate of 1.2% on their 13 billion in profits (and that was last year! Imagine what this fiscal year will look like).

So Amazon wins on two accounts. The big bully of shipping and the big bully of not paying taxes. Most of us don't have those advantages.

[LiveFromNY]

Amazon has bulk carrier deals with every major postal service and delivery service around the globe. They pay pennies on the dollar for many of these agencies to deliver, compared to what you and I pay, because they are the big gorilla and USPS doesn't want to lose delivery business to Fed Ex, who doesn't want to lose business to UPS, who doesn't want to lose business to DHL etc. etc. etc. You and I pay higher prices on our packages to subsidize this giveaway to Amazon in the case of Fed Ex, UPS etc. and you and I also pay to underwrite USPS, Canada Post etc. because Amazon pays a marginal tax rate of 1.2% on their 13 billion in profits (and that was last year! Imagine what this fiscal year will look like).

Not in the U.S. Here in the states the vast majority of Amazon deliveries are made by their own carriers. Less than 20% are made by third parties and Amazon should reach 100% self-delivery in early 2022.