Can Amazon Deliver?

Roger Roger said:
You don't know anything about amazon or bezos-ebub if you think they have SF, we love our people BS even now.
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It's one thing for Bob in accouting to quit, it's a whole other thing when 200 planes don't move. I wonder what margin UPS and FedEx makes on a Amazon packages, that is about what Amazon will save.
 
For those of you who have gone to Atlas how is QOL and pay compared with your previous regional? Is it worth it?
 
z987k said:
With first year take home of less than 50k after per diem and a second year around 60, again after per diem... to fly a whale everywhere in the world. I can't see why anyone would apply. The 76 for Amazon is an even more abysmal rate.
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YGTBSM? I thought it was at least $80k to start. Guess I misinformed myself.
 
JOEFRIDAY2 said:
Amazon continues to hemorrhage money with their shipping operations.

There are a couple or reasons for this.

The main reason is that shipping is not free. Nobody gives Amazon free shipping. In fact no shipper (UPS, USPS, FedEx, DHL) gives anyone free shipping.
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Wait, what??!? Are you telling the internet generation and the internet masters of the universe that the physical world isn't FREE like all the stuff that happens on their little screens when they tickle their mice??!! Are you intimating repugnant acts of responsibility like planning ahead?!?
Apostate! Heretic! Freethinker! Iconoclast!
Burn, witch!!
 
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It's min guarantee more often than not on on the small plane. On the upside I only work about 15 days a month including travel to and from (I say upside because it was almost always 17 days + on the 74, I realize people on widebodies at legacy airlines probably work a lot less than that for double the money). $130k left seat on a 767 (w/ practically no retirement, 5% 401k match) isn't that good no matter how you slice it though. I made some bad life choices so here I am, better than an RJ but nothing close to a legacy job, not that I'd know from experience. 4th year F/O I just flew with said he made 73k last year, figures about right.

I made about 85k in my best years as a 145 captain so left seat there was a bit better than right seat on the small plane here, not as good as right seat on the big plane, and overall QOL better than being a jr. captain at a regional. Just some real numbers for those interested. The bottom line is we're making about half as much as pilots at FedEx, UPS and even ABX for doing similar work in the express freight industry. Also we're probably setup real nice for a Bedford Republic style perpetual wage suppression thanks to contract legalese but we're fighting it as much as possible.
 
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mikecweb said:
You can't compare min guarantee at one place with 40 days of OT at the other.
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Yet min guarantee is still 25k less than min at the other. I was just correcting Joe, that yes in fact it's there and it's not fuzzy math and it doesn't take working every day.
You also accused my math of being wrong at above min guarantee(only 2 months after OE were 50 hours), yet I, and I'd imagine yourself as well has a W2 coming to prove it. I know my pay stubs do, if you'd like to see them as well. Though, again, I'm fairly sure yours are pretty close.

Derg said:
His math and reasoning keep him happily occupied!
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My only reason for staying is I don't think it makes sense to leave while I have multiple job fairs lined up. Trust me, I'm doing something about it. Certainly not just bitching for the sake of it. I'd also like other people to have a realistic expectation of salary. I know the company is telling new hires they'll make 90k first year. But the only way that is possible is if they undermine the union and work all the OT they can find. I'd also like to show that the standard "take the hourly * 1000" metric does not work at Atlas.
 
JOEFRIDAY2 said:
Amazon continues to hemorrhage money with their shipping operations.

There are a couple or reasons for this.

The main reason is that shipping is not free. Nobody gives Amazon free shipping. In fact no shipper (UPS, USPS, FedEx, DHL) gives anyone free shipping.

On the other hand, Amazon insists on providing its customers free shipping. That is free shipping that Amazon must pay for. Amazon simply does not charge enough to cover the costs of the shipping and they lose money on many of the items they send out when you factor in the shipping and distribution costs. Amazon started this free shipping business model and now they have an absolute mess on their hands.

While, Amazon can possibly get more efficient with shipping and save 2-3%, they simply can not eliminate shipping as a real cost expense. Logistics has a cost. It is not free. It will always be there.

Amazon also has a distribution center network that is designed to be speed up delivery to the customer, but that speed comes with a price and Amazon is currently having cost issues with that part of the business. They are having a difficult time getting their hands around this. Rather than locate a few large distribution centers in locations centered to the US population (like Texas), Amazon has chosen to open many smaller distribution centers all over the United States They did this in order to get closer to their customer and be able to offer one or two day delivery.

Amazon raised their minimum order for "free shipping" to $49. They did this because they are trying to stop the red ink in the shipping area and encourage people to join Amazon Prime which gives free two day shipping with no minimum order.

This caused Amazon's customers to change their buying habits. In order to be eligible for free shipping, Amazon customers will wait to purchase something until they get an order of $49 or more that will quality for free shipping. This often involves purchasing multiple products one order.

The problem comes in when an Amazon distribution center does not have all of the products in one center. The order then must be shipped from multiple distribution centers. This doubles or triples Amazon's cost of shipping. This continues the cycle of red ink.

On the other hand, a Prime member has free shipping. We don't care about Amazon's costs. We don't have any incentive to be efficient. So this customer will order something anytime he needs it. For example my daughter needed a book for school the other day. Amazon had the book for $3.99 with free 2 day shipping because I am a prime member. The book came yesterday. It was shipped across the country and was delivered by the post office. My guess is that Amazon's shipping cost on this item was over $2. So that means that Amazon lost money selling this book to me. Multiply that by millions of small orders and you can see the problem as Amazon continues to lose money on shipping.

The distribution cost issue is much easier to solve than the shipping issue so I would expect Amazon will be able to solve this part of the puzzle first.

As for the pilots not getting paid enough, you all know how I feel about this. Pilots should be well paid for the job they perform. We are not to be discounted because someone can't run their business properly.
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I don't agree with most of this. Amazon is far from "hemorrhaging" on their shipping operations. For the last five years, shipping cost has been locked in at 5% of their net sales. Here's what they've reported:
upload_2016-12-20_5-56-58.png


Sure, shipping costs, but I believe it's part of their advantage. For traditional retail, store rent is 6%-10% of sales. That difference scaled globally is one of the reasons Amazon is so powerful. To me, Amazon appears to have contained shipping costs even with rather amazing growth.

The real challenge I see for Amazon is growth. As much as they're trying to be a data and new media company, they keep having incredible growth in North American retail. North American retail sales have grown about 25% year on year for the last three years. The data side has grown faster (holy crap...50% -70% growth in the data business!), but North American retail is still very much the engine. Their international side of their business is falling. Here's their sales data:
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If I were in the Amazon war room, I'd be highly concerned about the ability of shipping suppliers to handle 25% growth year on year. To me, they've obviously made the call that FedEx, UPS, DHL, USPS, etc may not have the capacity that Amazon needs in a few years. You can bet that there's an analyst somewhere reporting shipper capacity in Amazon HQ. The growth problem is why Amazon is putting energy into everything from drones to the ATSG deal... they likely see that their future growth may be limited by existing logistics suppliers.

In short, Amazon appears to be very much running their business properly.
 
hook_dupin said:
I don't agree with most of this. Amazon is far from "hemorrhaging" on their shipping operations. For the last five years, shipping cost has been locked in at 5% of their net sales. Here's what they've reported:
View attachment 37285

Sure, shipping costs, but I believe it's part of their advantage. For traditional retail, store rent is 6%-10% of sales. That difference scaled globally is one of the reasons Amazon is so powerful. To me, Amazon appears to have contained shipping costs even with rather amazing growth.

The real challenge I see for Amazon is growth. As much as they're trying to be a data and new media company, they keep having incredible growth in North American retail. North American retail sales have grown about 25% year on year for the last three years. The data side has grown faster (holy crap...50% -70% growth in the data business!), but North American retail is still very much the engine. Their international side of their business is falling. Here's their sales data:
View attachment 37286

If I were in the Amazon war room, I'd be highly concerned about the ability of shipping suppliers to handle 25% growth year on year. To me, they've obviously made the call that FedEx, UPS, DHL, USPS, etc may not have the capacity that Amazon needs in a few years. You can bet that there's an analyst somewhere reporting shipper capacity in Amazon HQ. The growth problem is why Amazon is putting energy into everything from drones to the ATSG deal... they likely see that their future growth may be limited by existing logistics suppliers.

In short, Amazon appears to be very much running their business properly.
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Seems to me like this is a classic case of trying to optimize a system that contains a crazy peak outlier (i.e. holiday shopping, especially last minute holiday shopping). That's a very tough nut to crack. If you add more capacity to the system to cover the peak period, then you're idling capacity during "normal" periods. From a labor standpoint, that smells like fickle temp jobs. Tax accountants and fisherman have a similar problem, but they get paid enough during peak to cover the idle. I know little about Amazon or their machinations, but at first blush, it seems they're wanting to pay normal rates for peak capacity and performance. And, I suppose, if one applies quantum thinking to real life, one could come to the conclusion that that could make sense. After all, electrons can be everywhere and nowhere all at the same time. Then again, electrons don't have to eat. But Amazon probably sees losing a few electrons as a good thing... it makes Amazon a more positive place.
 
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hook_dupin said:
I don't agree with most of this. Amazon is far from "hemorrhaging" on their shipping operations. For the last five years, shipping cost has been locked in at 5% of their net sales. Here's what they've reported:
View attachment 37285

Sure, shipping costs, but I believe it's part of their advantage. For traditional retail, store rent is 6%-10% of sales. That difference scaled globally is one of the reasons Amazon is so powerful. To me, Amazon appears to have contained shipping costs even with rather amazing growth.

The real challenge I see for Amazon is growth. As much as they're trying to be a data and new media company, they keep having incredible growth in North American retail. North American retail sales have grown about 25% year on year for the last three years. The data side has grown faster (holy crap...50% -70% growth in the data business!), but North American retail is still very much the engine. Their international side of their business is falling. Here's their sales data:
View attachment 37286

If I were in the Amazon war room, I'd be highly concerned about the ability of shipping suppliers to handle 25% growth year on year. To me, they've obviously made the call that FedEx, UPS, DHL, USPS, etc may not have the capacity that Amazon needs in a few years. You can bet that there's an analyst somewhere reporting shipper capacity in Amazon HQ. The growth problem is why Amazon is putting energy into everything from drones to the ATSG deal... they likely see that their future growth may be limited by existing logistics suppliers.

In short, Amazon appears to be very much running their business properly.
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Amazon's shipping revenue is not covering their shipping costs. That can not be disputed.

Amazon's shipping costs (losses) are increasing.

Amazon's net shipping costs are now at a 5.1% loss and are increasing. The real shipping cost is over 11%. That is not an unusual, or more efficient, shipping cost in the United States these days. Many companies are in this same range.

The main problem you must consider that is that Amazon has a 10% gross markup on many products. This means that over 50% of the gross markup is being lost on shipping. The other 4.9% must pay for employees, computers, insurance, buildings, etc.

Rent or occupancy cost has absolutely nothing to do with shipping cost and you can not "rob" from occupancy cost to pay for shipping. Amazon has huge occupancy costs these days with dozens of distribution centers, offices and call centers. There are tens of thousands of employees that must be housed somewhere and none of this occupancy cost is free. (Just like shipping is not free)
 
There's not even (actually) free shipping.

My wife has Amazon Prime. My account doesn't. The total costs on Amazon Prime (avec free shipping) are usually higher than non-Prime. Now I haven't computed the aprés shipping costs and compared them to the actual (fees plus increased unit costs) Prime costs, but I don't think a lot of people realize they have a tiered pricing system.

But overal I agree. Shipping is not free nor can it be and those costs are hidden in plain sight on the balance sheet.

Reminds me of the CVS model. "Buy six, get one free!" but the unit price for one is significantly higher than another brick and mortar retailer, but the ultimate cost of a unit gets hidden under "Buy X get 1 free", with CVS extra bucks, loyalty programs and whatnot. I've tried to talk about the economics of "How sales aren't sales and are actually marketing to drive unnecessary spending" but it's the equivalent of announcing, December 24th, on network television, that Santa is a figment of our imagination and does not exist.
 
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Derg said:
There's not even (actually) free shipping.

My wife has Amazon Prime. My account doesn't. The total costs on Amazon Prime (avec free shipping) are usually higher than non-Prime. Now I haven't computed the aprés shipping costs and compared them to the actual (fees plus increased unit costs) Prime costs, but I don't think a lot of people realize they have a tiered pricing system.

But overal I agree. Shipping is not free nor can it be and those costs are hidden in plain sight on the balance sheet.

Reminds me of the CVS model. "Buy six, get one free!" but the unit price for one is significantly higher than another brick and mortar retailer, but the ultimate cost of a unit gets hidden under "Buy X get 1 free", with CVS extra bucks, loyalty programs and whatnot. I've tried to talk about the economics of "How sales aren't sales and are actually marketing to drive unnecessary spending" but it's the equivalent of announcing, December 24th, on network television, that Santa is a figment of our imagination and does not exist.
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Shut your mouth...Santa is so real !1!!
 
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JOEFRIDAY2 said:
Amazon's shipping revenue is not covering their shipping costs. That can not be disputed.

Amazon's shipping costs (losses) are increasing.

Amazon's net shipping costs are now at a 5.1% loss and are increasing. The real shipping cost is over 11%. That is not an unusual, or more efficient, shipping cost in the United States these days. Many companies are in this same range.

The main problem you must consider that is that Amazon has a 10% gross markup on many products. This means that over 50% of the gross markup is being lost on shipping. The other 4.9% must pay for employees, computers, insurance, buildings, etc.

Rent or occupancy cost has absolutely nothing to do with shipping cost and you can not "rob" from occupancy cost to pay for shipping. Amazon has huge occupancy costs these days with dozens of distribution centers, offices and call centers. There are tens of thousands of employees that must be housed somewhere and none of this occupancy cost is free. (Just like shipping is not free)
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I propose that Amazon, as an electronic retailer, has chosen to use shipping in place of physical retail space (i.e...they very much have robbed occupancy to pay for shipping). Every retailer must have a distribution network... Amazon choses to own theirs, just as virtually all of the big retail chains in America do. There's no disputing that those costs are real. There's also an economy of scale to them that gives large retailers an advantage over small retailers. Sadly, Walmart didn't kill small-town America -the ability to create complex logistical systems using IT did.

Yes, Amazon has a distribution network that costs money to operate. Investors seem to think they're operating it pretty effectively. Over the last 5 years, their market valuation has gone up by about 4x. Also, as @Derg points out, they've been able to place a greater percentage of the shipping burden onto the purchaser. I see that trend continuing with nary a peep from consumers.


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To your point though, total shipping costs have risen while oil prices have slacked off. What will happen if oil gets above $100 a barrel? I believe Amazon can weather that storm better than Walmart just based on how their businesses are structured -Amazon is increasingly trying to be a content and cloud business.
 
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