Explain Like I'm Five

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ELI5: How is Amazon able to sell me books so much cheaper than brick and mortar book stores in my area (self.explainlikeimfive)

submitted 1 year ago by DrMango to c/explainlikeimfive

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I like shopping in book stores. There's something about wandering the aisles and waiting for a book to jump out at you that I can't get shopping online. Unfortunately, whenever I compare the price of a book Amazon has every in-person store beat, often pricing their offerings 30%-50% lower (or around $10/book in my experience) even when I go to a large chain like Barnes and Noble.

How is it that Amazon is able to afford to offer the books so much cheaper and also support all of the infrastructure involved in shipping it to my doorstep compared with in-person stores?

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[–] Rade0nfighter 8 points 1 year ago (1 children)

At a guess:

Volume discount: Amazon will buy a hell of a lot more books than a single mom and pop store
Retail rule of thirds: (very loosely) a third of the price you it goes to manufacturing, a third to distribution/logistics, and a third to the retailer. Amazon vertically integrates the second two.
Online only: website capacity costs a lot less than running a brick and mortar store
Margin: amazon will make less per book but sells more books because people prefer to buy them cheaper. There’s a separate discussion here about anti competitive practices (eg undercutting competition to put them out of business, then raising prices later) but that is a whole other debate

[–] DrMango 2 points 1 year ago

I'm not just talking about mom and pop stores though. Even Barnes and Noble is out priced, and, although it wasn't in my initial question, other smaller online-only retailers like thriftbooks and bookshop are also handily undercut by Amazon.

I'm not implying you're wrong, just that there's probably more to the picture here. I think volume and slim margins probably have a lot to do with it here as Amazon probably makes a handy profit on sales of non-book goods (and let's not forget that their product sales aren't even what makes them money, it's their cloud services) and as another commenter said Amazon passes some of the infrastructure costs on to the sellers.