Amazon gives non-Prime members free shipping at $35 or more of eligible items. Instead of simply letting users get the product with free shipping, they’ve added a discount that prices it exactly one cent below the $35 limit, while only subsidizing the price with $3.38, which is about half of what they’ll then charge you for shipping.
I’m not sure that’s entirely true.
Most of their money comes from retail, either the site, subscriptions, or the seller services they provide. AWS, while massive, isn’t what’s keeping them afloat.
You’re entirely correct though that competition with Amazon is difficult because of those additional sources of revenue. Having additional stable sources of income gives them the ability to accept lower margins in retail with less risk.
The way they make money selling things with no profit or at a loss is to ensure that someone else is always paying the difference. “Free shipping” with a paid subscription means that rather than providing shipping for a loss, they just need to do it for less than the subscription. Turns out “guy with a van” can deliver a lot of packages for quite cheap. So many that he’ll be out delivering from 3am to 9pm, and for $5 they’ll drop your package off first and call it overnight.
In some cases they can get the seller to pay for shipping as a promotional incentive, since Amazons conditioned people to look for free shipping as a precondition to considering a product.
Only give away for free what you got someone else to pay for.
Revenue is not profit.
Yes, but revenue pays for things like salaries, advertising, etc.
It helps with cash flow sure, but if it’s not profit you’re going into debt to pay that.
What do you think profit is? It seems like you’re conflicting profit with income.
Profit is revenue - cost of goods.
If you make a widget and it costs you $100 to make, and you sell it for $110, you have $10 profit. Then you have all the other expenses that it takes to run a business, lets say that’s $200.
Your revenue is $110
You profit is $10
Additional Expenses: $200
You NET profit (AKA Net Income) is $-90
I mean, non profits exist. Of course it’s not the case for Amazon, but you don’t need to profit in order to exist as a company, and people still get to make money.
All companies have to earn a profit, not just to pay for the expense of the goods plus all of the overhead, but also to be able to reinvest and grow. There’s a difference between earning a livable wage while the company as a whole remains poor and earning barely enough to live on while the investors pull in massive gains year over year.
A company taking excess revenue and reinvesting it isn’t profit.
There may be phrases with the word profit in them that include that value, but the general accepted definition is profit is the money that gets distributed to the stakeholders after expenses are covered. This is things like dividends for publicly traded companies, or for private companies, it’s just straight up paying out the cash to stakeholders.
Non profit doesn’t mean no profit.
Non profits make enough profit to pay their employees, rent, and any other business needs, or they get money from other sources. They still need and make money to operate.
For a company to succeed, there must be profit, or have an outside source of funding.
You cannot pay rent, employees or other business expenses with revenue and no profit without going into debt.
Non profit means no profit. Salaries, rent, etc are not paid from profit.
That is fundamentally what profit is, revenue less expenses. By definition, profit is money that does not have anywhere to go in a business, and so gets distributed to stake holders of the company.
This is why you’re wrong
Profit is revenue minus cost of goods
NET profit or net income is after expenses unrelated to cost of goods.
If a widget costs you $100 to make and you sell it for $100 that’s $0 profit.
Tack on all the other expenses to run a business and now you’re in debt.
Profit is not NET profit.
Edit: Below shows some guidelines, on how they can earn profit.
NON PROFITS can earn profit, they’re just restrictions on it.
Now work in EBITDA and realize that not even net profit is really net profit. Understanding EBITDA really was a big lightbulb for me.
So a service company that only pays salaries has 100% profit?
This is splitting hairs and if all the people arguing about this took an actual class in uni a out this they would know that.
Gross profit typically includes cost of goods sold, COGS doesn’t have an explicit legal definition, it’s up to the business to decide what they include, they can include employee salaries or not, this is called abortion costing, a business which puts salaries, rent utilities, etc, under abortion cost would have a gross profit equal to their net profit.
When dealing with accounting, you can call things whatever you want, net profit isn’t something that has a legal definition.
For example, I just decided that my business doesn’t follow your definition of profit, and instead defines profit as only money I find in my pockets. There isn’t a legal definition of how I need to define profit, so it’s just as valid as all the other definitions.
And regardless of all that, I don’t understand how anything you said proves me wrong. Profit is net profit, just the same as profit is gross profit, you can put an arbitrary boundary at any point in a financial metric and it makes sense to do so, but it doesn’t change what the word profit means. But the claims that ‘if you don’t profit you have to go in debt’ is just silly and only makes since if you cherry pick a very narrow definition of profit that is used as one part of a general financial metric for a business.
A company that has revenue - all expenses = 0 does not need to be in debt, this is also how a non profit will look, 1 million in revenue, 500k in general expenses, 500k reinvestment into the company final result 0 dollars left over. The effective meaning and understanding of profit for practical purposes and lay people (not book keepers within a company that needs more refined and specific metrics) is the amount of money that gets distributed to stakeholders after a company has covered its expenses.
Your block about non profits is exactly my point. A non profit does not pay out the left over money to stakeholders but people who work for a non profit still make money.
Heh, “revenue is not profit”.
Non-profits are specifically not allowed to have revenue in excess of expenses. If they take in too much money, the excess has to be put back in for operational expenses in the future, an endowment or something like that.
(In the Netherlands) Non profits are allowed to make profit, they just need to pay tax above a certain amount of net profit. The thing that makes them “non-profit” is that they are prohibited to pay out that profit. Hence there is no incentive for (excessive) profit.
It’s like that pretty much everywhere including the USA. People just don’t understand.
Copying a bunch of unsourced text at someone without context is a great way to get them to not bother reading it. Why don’t you type the point you were hoping to make?