Is Amazon Good for the Long Term Economy?

Re: Long reply!

Larry Clinton At Frankfort, (Central) Indiana

Doubt it will be any different then the effect Sears and Roebucks had many years ago. Their tactics were almost exactly what you described in your post!

Back in the 60's I worked for a fairly large propane company. The company had over 25 local propane dealerships. We sold and installed a LOT of water heaters and other appliances.

At that time a fairly large producer of water heaters "AO smith" were producing a good quality water heater. It was located in Illinois near many of our dealerships.

Sears had given a huge order to them for a few years, then the next year they dictated the changes to be made to the units and what they would pay.

AO Smith had devoted the bulk of their production to Sears and would have had to lay off many employees if they didn't comply with their demands. However they would have to lower the quality with the changes Sears required and make very low profits if they took the order.

They contacted the company I worked for and offered to provide all of the units we sold at a good price! The owner of our company agreed to sell only their units and

Smith refused Sears order.

Ended up the company survived and gradually built up their business to pre Sears level. I later learned this was a common tactic for Sears.

I have seen many changes in businesses that sell products in my life. When I was child in the 1940's, there was a local general store in my small town. Most all the food sold in the area was through that store!

To purchase items you made a list and the storekeeper

picked the items from the shelves and put them in a box, then listed the items and prices on a ticket book that normally was paid at the end of the week or month.

That business model has disappeared along with the 5 and dime stores, local meat markets, and numerous other stores like shoe, dress and other specialty shops.

Yeah, people lost their jobs but ended up stocking shelves at Supermarkets, Walmart type stores etc. or driving UPS trucks. By the way the changes has resulted in a MUCH lower portion of families income being required for food, and a great deal of different produce etc. being sold than during the "general store" eras.

Re: Things happen no matter what..

David Weaver

I think in every generation, there is probably anxiety about change.

I also think that aside from some of the jobs held up as banner examples of the past, we often forget that there were a whole lot of people who weren't working those jobs.

As you mention, the small businesses had to cater to a smaller market and wider tastes (in general, vs. specialized businesses selling to a narrow market over a wide area on places like amazon or ebay), and have been pushed out by walmart, and now perhaps by amazon. But thinking of my childhood 70s and 80s, a lot of those businesses had one owner, and four or ten employees or whatever it may have been who paid no benefits (except to maybe one favored employee) and wages were often minimum wage, and things like labor law were completely skirted. We, as captive customers, often found very unfavorable selection and pricing (when walmart came to town, what they sold vs. what was sold at the local sporting goods store - exact same item - was often half the price that it had typically been where I grew up. Great for the owner, but generally no good for anyone else).

Things will continue to change. It was walmart 20 years ago, before that, who knows what. It's amazon now, and it'll probably be something else in 20 years, but i think we have to take a real accounting (as customers) of things that we can sustain that are preferably different than the amazon machine, vs. things that are going to go out of business, anyway, where amazon is just better.

I know a few people at home who have made a lifetime career out of working at walmart. Maybe the audience here is more highbrow, but they probably make about $13 or $14 an hour there and some have benefits. Their lot in life 40 years ago may have been working for the local greenhouse (a friend's mother worked there) for minimum wage, working to finish something after their regular working time and getting no pay for the extra.

Before my time, my grandparents were farmers. They thought the idea of working for anyone else at all was unstable, so the fact that most of the income generation moved off of the farm seemed to them to be a very negative change. But it's occurred, and we generally live better now than they did most of their lives even though they were more successful than the generation before them.

Some things that amazon and walmart (and sears - this one was local for me: https://www.youtube.com/watch?v=48JTh6ZStfI) may do that are predatory are just a new version of the same trick that's been going on for centuries - I think the change is less of a change than we may think, and the notion that there was ever really long-term stability is sort of a false notion because we view things maybe through the lens of a segment of our own lives and don't want to see change from life as we learned it growing up.

I wouldn't personally have any interest in picking orders at amazon, or driving the package truck, but those two jobs are definitely better than some that I worked in the town where I grew up - including a tile factory job that paid about the same as either of those, but was a 100% hustle the entire day without proper breaks, skirting of labor laws, and it was extremely dangerous on top of that.

Too late to worry now, damage is done

Re: Things happen no matter what..

Bill Howatt

According to an Amazon recruiting ad on TV here in Canada, they pay good benefits and will pay for secondary education even if you don't plan on staying with Amazon forever. Don't know any of the details but that's the gist.

When we first got Kindle readers the books seem to have been cheaper but I think the publishers got into the act and now a lot of them appear to cost more and have a "price set by the publisher" notice with them. One company with some clout controlling things is by no means new.

Nothing stays the same whether we like it or not. We do a lot of hand-wringing about the loss of WWing machine production to off-shore but how many of us would own as many large tools if the cheaper off-shore prices weren't available. When I was a kid sometime ago, having an electric drill was a sign of affluence.

Bill

Re: Is Amazon Good for the Long Term Economy?

Barry Irby

I wonder the same thing.

My understanding is Amazon pays about $15 an hour and offers health benefits and also pays for some employees to get better educations. Not sure any of that is true, but I saw a discussion of it by some who were promoting the $15 minimum wage. They were being dismissive of Amazon, trying to say Amazon did not do it because they wanted to but because that's what it took to get decent workers. The panel seemed to imply Amazon was overreaching and this was the province of government or other public interest groups. It was like Amazon stole their thunder.

How did Sears let Walmart slip in and knock them for a loop?

How did family farms let Big Ag dominate them?

Why does the US let China dominate in manufacturing?

With more and more automation using fewer people to produce more, what are the displaced to do?

Sears vs Amazon

Brad Chenoweth

Hi Barry,

I've long wondered how Sears let Amazon take over a business that they had held for decades. Time was, you could order pretty much everything from toilet paper to a house from the Sears catalog. You would think that someone there would have realized the potential of the internet for this kind of thing and moved Sears into the digital age. Amazon may have never existed at all if they hadn't missed that opportunity!

P.S.

Brad Chenoweth

In which case brick and mortar Sears would have probably disappeared anyway...

Re: Sears vs Amazon

John in NM

That is the thing about innovation. Sears let it happen because they had no idea it was possible. They were caught napping. I remember Sears had troubles long before Amazon came around - big businesses tend to get complacent and they either correct themselves or go under.

There may have been a bright young person in Sears marketing with ideas about taking sales online, and the long chain of bosses dismissed the ideas as too risky, too weird. Nothing makes for inefficiency like management by committee!

For all the fretting over Amazon in the current pop culture, the kids don't understand that Amazon will get out innovated one day. The kids writing the news stories have just never seen that happen yet, and us older grouches have. Some one will beat them by coming up with a new game and Amazon will also be caught flat footed and either adapt to the new game or slowly decline by continuing with the old one they invented. One day whoever puts Amazon under will eventually suffer the same fate themselves (companies, not individuals of course).

The consumer will benefit however. Standards of living and working have improved drastically over my lifetime, as they had during my parents' and grandparents' lifetimes. The kids writing the news seem to be unaware of that too.

The company store

Ed Wozniak

I worry less about the impact Amazon will have on employment opportunities than the impact it will have on buying opportunities. I worry that Amazon will become the only place to buy products and they will set the price as well as what is available.

hand wringing... *LINK*

David Weaver

I have a weakness for guitars. I often hear about how terrible it is now to buy guitars because the guitars were made more by hand 50 years ago and the amps were wired point to point and could be fixed forever.

I looked at a fender price list from 1968 or so last year, and the equivalent cost for a fender stratocaster and twin amp was somewhere in the ballpark of $5k.

that's before accounting for the fact that average real wages are higher now than they were back then, and most of the lower market was absolute junk. An average person in those days was looking at two months of pay to pay for a single guitar and amplifier.

The bottom line is that most of the people doing the complaining don't show up when it's time to take action. Years ago, I was looking hard for beech to make moulding planes, and ultimately found some local (only to find out that the local guy had falled a lot of lumber for horizon and had larry williams as a customer at some point, too). I told the guy "I know about 15 people who are just dying for quartersawn beech. They message me constantly about it. If you can manage to get it posted on the internet in shippable lots, I think you'll sell all you can list".

When I pointed those folks to the listings from my local dealer, 2 actually bought wood. Most of the rest didn't respond at all.

Almost nobody would buy a $4-5k tablesaw now (which is probably about what a general tablesaw would be), and an 8" jointer for $2-$3k, etc. I wouldn't, either.

I think we're living in great times, even though I find myself getting caught in lamenting the loss of local hardware stores here in the city where the upstairs is like a typical hardware store, and the downstairs is more or less like a small fabrication shop - at one point, they had customers that needed to have things fabricated and would pay for it. That stuff all sits idle now. And I remind myself, there's no reason to wring hands. Those things were put in place because the market wanted them. When the market doesn't want them, we don't need an ever growing list of charity cases.

The local music stores here rely mostly on lessons and repairs now to survive, and many have closed. Truth is, lots of them were pretty hard on the consumer when the market was captive. High price, low trade values. This past week, I received in the mail, a "birth year" gibson les paul from japan. It took me two weeks to get it after I found it, and the shipping was $75 more than it would've been to get it from halfway across the country. I've never seen a 1976 les paul in person, but now I have the nicest one I've ever seen and at a relatively good price.

I'd like to copy it in limba. But I want limba wide enough for it to be one piece, and I want it to be quartered. I'd love to have honduran mahogany in the same thing, but it's more or less unobtanium because lighter weight honduran rarely grows in trees large enough to get a quartered blank like that. But ebay brings me, for the price that one guitar blank costs from a "music supplier", a limba board big enough for three les paul bodies. Pretty spectacular. the internet as it stands gives me the ability to sell the guitar when I'm done and recover my money if I decide i don't love it.


Quartered Limba

Local meat markets are big around here

Dick Coers

I buy all my meat at two local butchers. They only butcher hormone free, local livestock. Both have a great business, always have a nice crowd.

Sears used that same model against woodworking machinery. Emerson Electric had a long running contract, providing stationary machinery. Sears reduced the contract to 1 year, and specified pricing. Emerson refused and bought the Rigid name and moved into Home Depot.

Re: Is Amazon Good for the Long Term Economy?

jessecloud

Sad to say, but for many of us Amazon is often the only choice we have for a lot of stuff. When I need something out of the ordinary, I always try local stores first. No one wants to keep inventory any more. They offer to order it for me, but then explain that they do orders on Thursday and the lady who does that is out sick, so it might be a while. Then the lady gets back and needs more information so we play phone tag for a few days. If there's a problem when it comes I now have a long string of folks pointing the finger at each other, and in the end I still don't get exactly what I want. I'm not off in the boonies somewhere, but near a city of 600,000.

Meanwhile, Amazon has what I want, from multiple providers and can usually get it to me in two or three days. If there's a problem, go on line, get a return number right away, take it to UPS and Bob's my uncle.

I suspect local retail stores are pretty much doomed except for perishables, commodities, and ladies' fashion.

Re: Is Amazon Good for the Long Term Economy?

Walter Ahlgrim

“Is Amazon Good for the Long Term Economy?”

The answer depends on who you are some will be winners and other will be loser. Jeff Bezos is a winner as am I.

Jeff get a lot of money and I get more choices at lower prices conveniently delivered to my door.

Sure the mall and store owners plus the clerks that once worked at the mall need to adapt to today reality. The malls will be redeveloped and the land will find a productive use perhaps better than the mall was in many ways. Who’s to say the workers who are no longer mall clerks in dead end jobs will not find better more productive jobs that will likely pay more.

Change is good for most of us.

The good old day they were terrible.

The streets were sewers. You could not go further of faster than your hose could carry you.

Walt

Re: Sears vs Amazon

Barry Irby

Amazon is still fairly young and still lead by the founder who sees himself as a innovator and disrupter. They are going after UPS and Fedex and USPS to solve the "last mile" problem. Wan't long ago that UPS and Fedex were the upstart disrupters.

As companies get larger committees take over. Instead of one guy assessing the situation and making a decision The committee addresses it. We used to joke about two guys sharing a brain. A committee might be ten guys sharing a brain. The paralysis of analysis. Nobody wants to stick their neck out.

I go to the local government with a question. No answer. Pass the buck. If you give no answer, you can not be wrong. If you are not wrong, your job is secure. Not going to fire the founder, even if he is wrong, just correct the error and move on.

Just heard a story about the guys that started Bonobo. Their idea was to make mens pants that fit better. Sold out to Walmart for over $300 million. What???? Why didn't Levi or Dockers or some other pants company stomp them with men's pants that fit even better? Had to be stoggy management. Did not see them coming. I found this to be stunning, mentioned it to my son and he said he is about to buy some of the pants. I guess I am out of the know.

Another inflection point...

David Weaver

...for companies like amazon is when they go from growing and solving problems to getting more concerned with avoiding making them.

Same as the nasa conundrum - how do you keep a culture when you're large and have earnings where you don't have people deciding that their persistence in the company depends more on avoiding mistakes than innovating.

same problem..

David Weaver

" we don't have that, but we can order it (it'll take a half hour to figure out how to do it, and you can come back here and get it - drive again, second trip - and it'll be the low low price of 25% more than you can get it for online, and no returns on special orders. Thanks!)".

I hate talking on the phone, but I've gone to calling most local places before going. I think at some point, they'll stop suggesting that they can special order whatever you're asking for.

Re: Sears vs Amazon-Answer!

Larry Clinton At Frankfort, (Central) Indiana

Back in the (as I remember) Sears acquired a new young CEO. Apparently he had not researched markets, and had been taught that reducing cost was the only answer to being successful - This was during the era when Walmart was expanding in all the small city markets at a phenomenal rate.

This misguided CEO decided that by closing the small city stores he could reduce overhead by shipping from the warehouse to only selected larger cities. He believed the customers would travel to them and the overall business would remain the same.

Obviously convenience offered to the consumer to replace tools and select items near home was lost so they went to other stores!

I knew the local store manager and we talked about it - He said the local store had good sales and great profit and couldn't understand the decision to close it.

Inflection Point 2

David Weaver

A perhaps long period of sustained earnings, but a show that a business has nothing new to offer (often combined with the "not making mistakes is more important than risking new success") is when their boasts are about widening the gap between the cost of doing business and the cost paid by the customer.

Sounds great for the shareholder, but eventually the shareholder or a competitor sees the gap as too large.

Home depot was boasting half a decade or a decade ago that they had pretty much saturated the market, but had lots of ideas for increasing store profitability and would see sustained earnings growth due to that.

I don't find a whole lot that I can buy there these days. The premium driver bits and drill bits are made overseas, etc, and when I find something that's a typical house good (like 6 matching doorknob sets or some such thing), they're always cheaper on amazon and I can actually find the finish that the mrs. wants.

On something bulky and cheap like a common interior door knob set, I truly don't understand why HD needs to have such a big margin that amazon can ship me one cheaper than they can sell it off the floor. Years ago, they had nice store branded squirt bottles for a dollar. I'm sure that wasn't profitable, but that kind of stuff is handy for a woodworker or toolmaker (and they found their way into the mrs' supplies). All of the sudden, all of them disappeared and they were replaced by branded zep bottles for $4. Same thing, similar quality. That's a very conscious decision about perception and branding, and it really sucks.

Don't worry too much...

John in NM

Usually when it gets to the point that there is just one source for a product that is in demand and that one source prices the product high, the vendor is opening the door to other suppliers to enter the market. Absurdly high prices provide the opportunity to others to come in, figure out how to make whatever it is, and undercut the high price - I've done that with one grip I make.

The smart vendor instead uses their existing production capacity to keep the price low, discouraging competition and thus making 100% of the available sales at a reasonable price. I do that too with other grips I make.

So if Amazon ever becomes the sole supplier of a popular product, one of those two things will happen, and the consumer will likely get a good deal regardless.

Re: Inflection Point 2

John in NM

I would have guessed that HD would be far better off moving to a dividend model to attract investors, then focus on sustainable sales to drive the profits that pay the dividend - no one is ever going to order 2x4's from Amazon, or sheetrock.

Then I looked it up - they started dividends last year Now all they need to do is keep the various layers of managers from screwing up their bread and butter and they will be around for a long time. Trouble is that there seem to be more managerial idiots than clever ones.

I see that where I work too - everyone wants to work on the sexy projects, no one wants to do the grunt work of keeping things humming along nice and smooth. Its the nice and smooth that will keep outfits like Home Depot alive for the long haul though.

Re: Sears vs Amazon

jessecloud

My career was in the computer business. With the rapid speed of the "dominate the market then go bust" cycle, there were many, many Sears-like companies - both in hardware and software. So I worked for a few of them, some early on when they were real innovators.

The one thing that led to so many failures is the inability to "kill the cash cow". DEC, for instance, was making a ton of money on mini computers and correctly saw PC's as a threat to that cash cow. They came into the PC market late and never got much market share while the minicomputer cash cow disappeared. I think if they had put their technical and manufacturing acumen to the PC market early on, we would have much better PCs now and DEC would still be around.

Back in the day, we felt about IBM like we feel about Amazon now.

What's good for the economy?

Bill Tindall, E.Tn.

The economy is what is good for the economy. And what is the economy, the bizillions of decisions buyers and suppliers make that set price and availability. When I was a child the milk man delivered milk to the door. Should we despair the unemployed milk men that no longer have jobs, as one of many examples?

We might discuss helping the small merchant find other work but them going out of business demonstrates that something better has come along. I live in a rural area. Were it not for mail order availability I would be doing without or substantially warming the planet with fossil fuel by shopping afar.

Re: What's good for the economy?

Dick Coers

I'm starting to feel great about Peoria, IL reading this post. We have a dairy that will deliver to the door in glass bottles. They guarantee the milk will be at your door within 36 hours after it leaves the cow.

I've also been pretty impressed with Target lately. I buy from them occasionally and they always match their website price. But last time, instead of getting customer service in the store to price match, I paid for the item on line and picked it up in the store. Also saves me from hunting through the store for the item. They'll even bring it to my car. Did the same thing with Walmart when I bought a TV on black Friday. Sat in the van, and they brought the TV to me.

Re: What's good for the economy?

John in NM

Heh - I had two dairy cows for a while. Freshest milk ever, and about as rich as half and half right out of the cow. Probably cost a mere $40/gallon by the time we drove to town for hay and fed it to the cows Sure was good milk though.

Neat idea Target has there - that is a good example of how brick and mortar can outdo Amazon! I just read an article about the history of mass transit here in the US. The upshot was that when faced with competition the subways & rail lines cut services to economize. Just prolongs the inevitable. Doing what Target is doing shows some smarts - I hope it works, because everyone benefits if it does.