Re: UKNM: Fast Summit

[Ray Taylor]

Ross Sleight <

ross [dot] sleightbmpinteraction [dot] com

> wrote:


>"Based on the numbers provided,

>Amazon.com's average order costs the company $40.81 to process, yet its

>average order size is $35.59--essentially creating a loss of $5.22 for each

>Amazon.com order processed."  This is because "most computer users

>believe--incorrectly--that online merchandise orders are cheaper to process

>than those placed through traditional distribution channels."  (see


Not true! Amazon's "cost to process an average order" in the report is in

fact a cost to run the whole company divided by number of orders and thus

includes administration of the company as well as advertising costs in the

"cost to process an order."


No figures are given in the report Ross quoted to allow a real order cost to

be determined but the chances are it is substantially less than processing

the equivalent telephone order.


And, of course, if the number of orders increases, the cost per order on the

above basis would decrease, since overhead is not proportional to sales.


It would be interesting to see how this $40.81 breaks down into company

administration, order administration and (Web) advertising.


The IceGroup report is amusing it its broad assumptions. No doubt we will be

seeing more of in in doom and gloom press reports.


Ray Taylor

NMC/Adplan