More economic news

[AtW]

£10 worth of VAT?

A large %-tage was VAT, the rest other taxes like hefty business rates on retail, PAYE/NIC on staff which Amazon could dodge by shipping from abroad.

Not defending HMV but taxes certainly hammered them hard.

[formant]

A large %-tage was VAT

VAT on £5 would have only add £1. Unless HMV were somehow subject to 300% VAT, there really is no justification for charging £15 rather than £5.

Amazon just have this whole 'doing business' thing down a bit better. (Which is remarkable, considering their corporate culture and lack of employee satisfaction - or maybe that's part of it).

Also, Amazon don't dodge paying tax, they pay everything they need to pay. They just don't pay it all in the UK. That's just how multinational corporations roll. (They have plenty of UK staff though, so I wouldn't be so worried about them not contributing to PAYE/NIC.)

[BrilloPad]

Amazon just have this whole 'doing business' thing down a bit better.

i.e. not having any shops?

[AtW]

VAT on £5 would have only add £1. Unless HMV were somehow subject to 300% VAT, there really is no justification for charging £15 rather than £5. .

I said VAT was big but not the only reason, given margins 20% difference can kill business on its own but they had to pay other taxes as well - business rates on prime retail isn't cheap.

Granted HMV was not very profitable (to say the least), but Amazon also holds advantage in this area (shifting earnings abroad) that allows them to keep prices even lower.

Digital distribution would have killed them anyway in 5 years, but it's totally unreasonable to expect to pay same prices in a store compared to online only channel.

[formant]

i.e. not having any shops?

That's no doubt part of it. Another part is 'being so big you can afford to make losses on many individual items so that you're generally perceived as the cheapest one-stop-destination for everything - even when for other items you're not.'
Most other retailers don't operate in that way, or rather, can't afford to.

[formant]

Digital distribution would have killed them anyway in 5 years, but it's totally unreasonable to expect to pay same prices in a store compared to online only channel.

Of course it is. But a £10+ difference isn't justifiable either, and that was - more often than not - precisely what HMV were charging. That's just not sustainable, no wonder people stopped buying.

[AtW]

Of course it is. But a £10+ difference isn't justifiable either, and that was - more often than not - precisely what HMV were charging. That's just not sustainable, no wonder people stopped buying.

Look, it was bollox example - do you think all Cds were 5 at Amazon and 15 at HMV? Bollox to that.

I used to buy a lot of VHS (10 years ago) from HMV and others, and they had deals - 2-3 for £10, totally new stuff is expensive even on Amazon - blu rays say £13-17.

People buying separate tracks that they like rather than full CDs for full price is the key reason for downturn in retail CD market, well that and MP3s that can be downloaded by anybody with half a brain.

[BrilloPad]

Of course it is. But a £10+ difference isn't justifiable either, and that was - more often than not - precisely what HMV were charging. That's just not sustainable, no wonder people stopped buying.

Its like Woolies. Everyone thinks its a shame its disappeared. But no-one shops there.

[NickFitz]

Amazon can often afford to sell at cost. I can't remember the figures, but the basic principle is that they get, say, 30 day payment terms from their suppliers. Then they sell the goods within 10 days. This gives them 20 days when they have the cash on hand, and by employing a lot of very clever financial folk, they can make enough return on that cash in that time to turn a small profit. Multiply a small profit by hundreds of millions of items and you have a stonking great profit, none of which actually came from the price charged to the customer.

[AtW]

Amazon can often afford to sell at cost

Amazon has got scale to get special pricing, so they may appear to be selling at cost but in reality they make profit: that's economics of scale for you.

CDs are dead anyway - digital downloads kill the idea, blu rays on the other hand require a lot more bandwidth and future 4K movies also, that's their only saving grace for physical media.