Why Isn't It Feasible For Woot To Sell Low Cost Items Anymore?

Having been someone who has spent most of his adult life working various roles in supply chain/materials management/distribution I'm always interested in looking at systems and understanding ways of approaching this field.

A while back when a bunch of old Woot folks left (What I suspect was the beginnings of Meh) there was the now fairly well known article on Tech Crunch that had quite a lot of info from "an anonymous source".

One part I found particularly interesting:
[quote]"The Woot method involved a big palette with the item able to be taken and thrown into a shipping box; the Amazon method was less simple, if perhaps more professional.
“The end result was that our variable costs quadrupled... but now we can’t profitably sell items under $10 because the variable cost for shipping got too high.”[/quote]

To me this seems odd. Economies of scale along with systems integration, process improvements, efficiency improvements etc should all drive costs down. Not to mention that Amazon regularly sells low priced items and seems to do so with an acceptable enough margin to continue to do so.

However Woot's prices and item selection seem to bear this out. I've seen prices there regularly climb to where it's not unusual to see $1,000 items there at all and I can't remember the last time I saw a sub-$20 item other than t-shirts.

What could cause such a huge increase in costs? I'm sure those that really know can't go into too many specifics but I'd think there are some generalities that wouldn't be inappropriate. Plus perhaps others have gone through similar things and can speak to their own experience.

This is exactly the sort of thing that intrigues the hell out of me and why I love tackling problems within our own distribution network.