Where is the Amazon Marketplace?

Uncategorized — kpw @ July 12, 2012

After listing to the incredible On Point show on the “Amazon Economy” and discovering Barney Jopson’s series on the same topic I decided to dig up this research project I put together on Amazon Marketplace.

This project was inspired by a series of confounding Amazon Prime purchases — purchases that clearly cost Amazon far more money to fullfil than I paid for the goods (in one case I estimated that Amazon spent $100+ just to ship a $30 purchase).

At the prompting of friends curating a gallery show in NYC on “work” I turned this curiosity into a small experiment: buying several of the same item in hopes of mapping out some of the internal dynamics of the Amazon Marketplace supplychain.

Not sure how successful I was but here’s the text I drafted for that show:

Questions:

How does Amazon Marketplace compare with physical marketplaces?

Where is the Amazon Marketplace?

How do sellers participate and how are they paid?

Who makes money and how much?

Approach:

Buy low-cost commodity item (HTC Micro-USB Charger U250), from multiple sources. Compare shipping times, postage and seller fees to understand the dynamics of Amazon Marketplace.

Price similar items from local retail outlets.

Results:

January 2nd: Purchased three new USB chargers from five vendors. One vendor sold a complete charger, others sold components (plug/adaptor and cable) separately. Vendor price included shipping.

Average price paid for complete charger including shipping and tax: $5.88. Total time spent selecting items and submitting order: 30 minutes.

January 4th: First shipment arrives via UPS. Amazon-fulfilled order from 11th Street Wireless. Cardboard box containing a used HTC plug. Scratches evident and one plug prong is bent. Will require minor repair before using. Checked order records look for notation that the item would be used condition. Could find no indication that the item would be used.

Researched Amazon Fulfillment service. Discovered that the seller, 11th Street Wireless, shipped its inventory to an Amazon warehouse (Lexington, KY). Although the item was “sold by 11th Street Wireless,” Amazon was responsible for storing, packing and shipping the item.

In return for this service the seller paid $2.40 in fees to Amazon ($1.00 per order fee + $0.75 pick & pack fee + $0.60 referral fee + estimated $0.05 per month storage fee). Amazon covered the shipping costs as part of their Amazon Prime program. Minimum estimated shipping charges for Amazon: $2.50 (UPS charges $10 retail for an equivalent shipment, estimating Amazon’s rates are 25% of retail).

Estimated that 11th Street Wireless made profit $2.59 on a $4.99 sale. Amazon lost, at minimum, $0.10 on the sale, however, the free shipping was available as a result of paying a $79 annual Amazon Prime membership fee.

January 6th: Received two envelopes via USPS: one contains a cable, the other a complete cable and charger set.

Cable received from Seller1on1 (Brooklyn, NY), used condition. Checked order records, no indication item would be used. Seller paid first-class postage ($0.44) plus an estimated $0.20 in fees to Amazon for listing the item. Seller made $1.86 profit on a $2.50 item.

Complete charger/cable set from item44less (Sunrise, FL), new condition in original packaging. Seller paid first class postage ($0.64) plus an estimated $0.36 in fees to Amazon for listing the item. Seller made a $3.51 profit item on a $4.51item.

January 8th: Still waiting on delivery of remaining plug (shipped from California, estimated delivery time: 5 business days) and cable (shipped from Hong Kong estimate delivery time: 3-4 weeks).

Priced equivalent items at local stores:

RadioShack does not carry the HTC charger. Found equivalent PointMobl™ Micro USB AC Charger for $19.79 + tax.

T-Mobile store does not carry the HTC charger. Lowest-price solution: T-Mobile 2-in-1 Wall/Car charge for $39.95 + tax. Equivalent charger: $39.95 for wall plug + $19.95 for USB cable + tax.

BestBuy does not carry the HTC charger. Found equivalent Rocketfish™ Wall Charger for $21.99 + tax.

Re-priced item on Amazon. Original lowest price of $4.51 from item44less is now $4.75 from same seller.

Addendum: Item from China arrived January 16th shipped from Shenzhen. Postage appeared to be less than $1. Tried and failed to understand Chinese postage rates. Curious how government postage rates are set: is there a subsidy for international shipments?

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