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How Amazon’s Bottomless Appetite Became Corporate America’s Nightmare

• frgtpsswrdlame 9y ago
  I think Amazon illustrates that our understanding of 'monopoly' is lacking. It is not just a company which owns 95%+ of the market which is dangerous, but just normal old large companies that own 20% or 40% or so of markets. Oligopolies have their own effect on markets - the econ 101 explanation is a kinked demand model where there is no incentive for the companies to lower their price.
  • icebraining 9y ago
    Whose understanding of monopoly? For example, the EU antitrust law cares about whether the firm is dominant in the market - a large share is only one way to show that. (And it's not conclusive evidence! A firm can still dispute that they have dominance, despite the large share)
    • frgtpsswrdlame 9y ago
      The understanding of US law and those who enforce it. We've dramatically weakened antitrust enforcement in the past 50-60 years.
    • emodendroket 9y ago
      US antitrust enforcement has basically settled on "if it's not directly leading to higher costs for consumers leave it alone." This is kind of Matt Stoller's signature issue that he's always writing about.
      • echosmith 9y ago
        I actually like that definition. If it's causing harm to customers - prove it. Efficiency is not a crime.
        • emodendroket 9y ago
          The problem with it is twofold: one, it ignores indirect harms to consumers from monopoly power (for instance, maybe they're not engaging in all-out price gouging but they are keeping competitors or new services out of the market). Two, it ignores other externalities, like regulatory capture or systemic risk, that result from having huge business interests.
  • whoisjuan 9y ago
    "It is not just a company which owns 95%+" Lol! What? Where did you get that ridiculous number form?
    • rossdavidh 9y ago
      "A situation, by legal privilege or other agreement, in which solely one party (company, cartel etc.) exclusively provides a particular product or service, dominating that market and generally exerting powerful control over it." That was wiktionary.org, but it's not too different from other dictionary's definition, I bet, and that's because it's what most English-speaking people mean when they say "monopoly". That doesn't mean it's the right way to think about it, of course, but it's not uncommon, and the meaning of an English language word is defined by how the typical native speaker uses it.
  • Tyrek 9y ago
    A very old, classical definition of monopoly is >20% market share. The more modern 95+% definition is a fairly new concept that's emerged from trying to explain Economics to the masses.
• xiphias 9y ago
  It's sad that hard working companies get the bad press for a corrupt world financial system. U.S. was the special place for hosting the privilege of a reserve currency, but the trust in that currency (and all other currencies) is going away for a reason, and many people in U.S. start to feel the hard work that is normal in other (so called third-world) countries with high corruption.
• kercker 9y ago
  Now only Apple and Alphabet is more valuable than Amazon and it looks like Amazon will overtake Alphabet to be second only to Apple soon.
  • Apocryphon 9y ago
    Next up: Facebook to rename itself to also begin with the letter A.
    • GenericsMotors 9y ago
      Acebook?
      • wiz21c 9y ago
        I'd so much prefer SafeBook, but it won't happen soon...
      • deleted 9y ago
        [deleted]
      • kfriede 9y ago
        Assbook. Edit: wait....
        • ddorian43 9y ago
          That's for instagram
    • horsecaptin 9y ago
      Assbook - because that's where we all go to take a shit. Really wouldn't say half of it to someone's face anyway.
  • 0xFFC 9y ago
    I don’t agree with this. In long term data is most valuable thing in the world. And Google is best postioned to have more data than anyone.
• stcredzero 9y ago
  Amazon makes no sense. It’s the most befuddling, illogically sprawling, and—to a growing sea of competitors—flat-out terrifying company in the world. No. It makes perfect sense. All economic activity is going to be intermediated digitally. Riches to those who get there first. Jeff Bezos saw this, and knew books were a good way to get his toe in the door. However, his aim was the railroad baron money all along. When Amazon went from selling books to selling everything, people said it didn't make sense. Even I said that. However, in retrospect, it makes perfect sense. (In the industrial revolution, people with far sight could predict that all economic activity would be intermediated through mechanized means of transportation. The analogy is perfect.)
  • tboyd47 9y ago
    Yes, corporate America, it's terrifying when a company actually invests its profits in its own business instead of payouts to shareholders and stock buybacks, isn't it?
  • dalbasal 9y ago
    "selling books to selling everything" seemed a reasonable change to me, and I think it was articulated as a strategy by bezos early on. As you say, books were a starting point. Selling books to selling computing on demand... That was a big leap, and the most profit generating "pivot" I can think of. Alexa, video streaming, kindle and ono...these are really Amazon becoming like Google. They're now defined as a business by the skills/abilities they have, not the services they provide. Technology company, not search company. ..this justifies investing more on self driving cars or nuclear power and less on search engines. For most companies this would just be pr/hr-speak, and impossible in practice. Usually companies have to spend most of their money on core products, because it takes money to deliver those products. Tesla or Walmart could define themselves however they want, but they'll never be able to spare more than a penny or two of car dollars on stuff that isn't related to making cars. The margin isn't there. To be a Google, you need a legitimate cash cow. Amazon now have one, aws.
    • jeron 9y ago
      "Selling books to selling computing on demand... That was a big leap, and the most profit generating "pivot" I can think of." is it a pivot if that was the intention from the start?
• Analemma_ 9y ago
  The really terrifying thing about Amazon is that investors allowed them to operate at a loss for decades, which is a luxury afforded to nobody else. How are you supposed to compete with that? Even if you knew how to build a competitor to Amazon, the market would never give you enough time to do it.
  • AJ007 9y ago
    The “loss” was more akin to reinvesting margins for growth. The difference between this, and say Berkshire Hathaway, is how much of those investments were in to experiments.
  • take4 9y ago
    Amazon has not operated at a loss since 2001. They've had positive free cash flow every year since then.
    • azemetre 9y ago
      Apparently people (the investor class) are upset that a company has the audacity to the invest in itself rather than pay out dividends. The absolute horror.
      • dpark 9y ago
        Most actual investors in Amazon were never upset by this. They bought with the full knowledge that Bezos was playing a long game.
        • kevin_b_er 9y ago
          They also fended off any sort of corporate raiders/vulture capitalists who could leverage a billion in debt, buy it out, take it private, then strip it of assets.
      • maxerickson 9y ago
        Growing tech companies have never really been expected to pump out dividends. Microsoft didn't pay one until 2003, when it was 28 years old and sitting on $43 billion in cash (and then it declared an annual dividend totalling less than $1 billion).
• namlem 9y ago
  Amazon is winning because they have realized in the information age, central planning has become far easier and more effective. The bigger they get, the more they'll grow until they take over everything.
  • imtringued 9y ago
    And then they will outsource their core competencies to dubious third parties as they did with the amazon marketplace.
  • mattmanser 9y ago
    The bigger they get, the more the chorus for anti-trust will grow. Look at this article for example: https://www.ft.com/content/aba8d444-fb94-11e7-a492-2c9be7f3120a https://www.ft.com/content/aba8d444-fb94-11e7-a492-2c9be7f31... Which cites this too: https://www.yalelawjournal.org/note/amazons-antitrust-paradox https://www.yalelawjournal.org/note/amazons-antitrust-parado... The problem for some of their competitors too is that if they do suddenly trigger a slew of new laws, then Google Play and the Apple Store will probably get caught up in it too. The other thing that could happen is the balkanization of the internet, where heavy trade tariffs will start being applied to America's dominant internet firms. It's already effectively happened in China. They've certainly not engendered any positive will in the rest of the world either for all their tax dodging.
    • gxs 9y ago
      Unlike most accusations of a monopoly (see Apple) this is actually approaching something close to being applicable. One piece of anti-trust law is that you can't leverage one monopoly to create another. Can definitely see this become an issue as Amazon gets bigger and bigger.
  • irrational 9y ago
    When I first saw the movie Wall-E, I assumed the mega-corporation Buy-N-Large was a thinly disguised Amazon. Every year that goes by reinforces that assumption.
• glup 9y ago
  Given the outsized role that AWS has on the bottom line (mentioned in this article and elsewhere), what is publicly known about which parts of AWS are the most lucrative?
• soniman 9y ago
  Maybe someone can explain the unit economics of how Amazon makes a profit. Identify the product category (outside of the marketplace business and AWS) where Amazon has a cost advantage versus the most direct competitor - Best Buy, Petsmart, Netflix, Costco, etc. It's hard to do.
  • petra 9y ago
    Most people don't buy at Amazon because it is the cheapest.
    • reaperducer 9y ago
      People on the internet tend to ignore the value of a quality item, and of one-day Prime shipping. And even within Amazon, I'll buy something marked "sold and shipped by Amazon" before I'll be a similar product from "ReallyGoodOverSeasNumberOneCo." And I've had incredible luck with the Amazon Basics line of goods. So far, just batteries and headphones and other miscellany, but the quality is far superior to any of the Eastern drop-shippers. Then again, it was AT&T that ran commercials in the 80's saying "You get what you pay for" and "Be the best and you'll never go out of business." AT&T is now out of business, with its name bought by Southwestern Bell after its death in order to cash in on the brand.
      • kevin_b_er 9y ago
        I'll warn you right now that even if you buy something "sold and shipped by Amazon" you can get one of the items sold by 3rd party as new. Amazon dumps them all in the same box. I believe they call it "co-mingling". You may still get junk/counterfeit for all your work. The only things actually protected properly are direct Amazon brands. So you are already fully deceived by "sold and shipped by Amazon". It may not be.
        • reaperducer 9y ago
          I've heard about co-mingling, but taking a chance with "sold and shipped by Amazon" is about the best I can do.
• AndrewKemendo 9y ago
  I think what people don't understand about Amazon, is that internally it's not one big company, it's a thousand little companies that serve each other through what amount to API's. In that sense it's much more like a conglomerate. This confused me when I went to meet with some of the teams because it didn't seem like they even talked - and that was kind of the point, they weren't supposed to really talk. Each stove-pipe had to "sell" their services to each other or build them from scratch. So in that sense it's always competitive because every group is basically fending for themselves like a startup, but has fantastic resources and access to services backing them up. That also means they can "move" into any industry that there is margin in, and rapidly grow inside of it. Pretty genius really.
  • deleted 9y ago
    [deleted]
  • simsla 9y ago
    I think that's definitely part of it. It's very interesting to observe the lifecycle of many of these services. - The company has a business need. - Because of the economics of scale, it often makes sense to develop an internal solution. This is true both for fullfilment centres, and for purely internal problems: e.g. a video conferencing system for half a million employees. - As the product matures, the team or leadership recognises how people beyond Amazon might benefit from it. (think fullfilment, AWS, etc) - The internal service becomes a public product.
• zerostar07 9y ago
  > In 2015, AWS was responsible for two-thirds of total operating profit. Last year it was more than 100 percent wait, so why doesn't amazon ditch the online shopping business?
  • kardos 9y ago
    Because they can switch on a 30% profit margin at a moments notice once the competition is sufficiently demolished
    • zerostar07 9y ago
      doesnt their history indicate that they can't have so large margins in online sales?
      • kardos 9y ago
        With vibrant competition, no
    • echosmith 9y ago
      Not quite. Firstly, retail is not a huge loss maker like people make it seem. Amazon has shown in the past that it can make a 6.6% margin on retail (which is fairly huge). Even right now North American retail makes about as big a profit as AWS, losses are coming from international retail. So in the end you can imagine Amazon being something like 6-7% margin on retail (that's not assuming any technological paradigm shifts like fully automated warehouses, amazon owned banking and payments, fully amazon owned logistics) and 25% margins on AWS. On top of that you have a fast growing ads business that is destined to rival Google and Facebook (if not displace them) with fat margins, and a big chunk of the smarthome/IoT market via Alexa and AWS.
      • jacksmith21006 9y ago
        Doubt you will see Amazon compete in ads at a competitive level with Google or even fb. Big problem is media buyers knowledge of their platform and willing to.learn it as well as integration with the ad ecosystem.
• cm2012 9y ago
  FYI - Amazon is a huge driver of small businesses. More than 50% of all the revenue from their whole e-commerce business is from 3rd party sellers, who are generally small operators.
  • dwc 9y ago
    This can be true and still be not so great at the same time. What any company like Amazon tries to do is capture revenue, typically by taking it away from someone else rather than create something new. In the short term that can mean a boon for small business as large competitors to Amazon are undermined. In fact, Amazon uses small sellers to do the undermining. Once everyone in a market segment essentially works for Amazon then they are free to tighten down the screws and extract more profits.
    • dusing 9y ago
      In my experience when we brought our small (10yr old) brand to Amazon prime it doubled our revenue in the first year. Albeit at a lower margin, but still higher that wholesale. The customer crossover is surprisingly minimal, so it is not stealing from our traditional online business. I know this through extensive promotions on our direct website that do not seem to sway demand on amazon.com for the same thing at a much higher price.
      • dwc 9y ago
        Yes, this is true. I have bought things on Amazon from small sellers that were difficult or impossible to find otherwise, or that were only available on a custom site where I was hesitant to give my payment info.
      • sah2ed 9y ago
        Wait, are those products listed at higher prices on Amazon or your website? If I can get an item cheaper from the seller directly, assuming paying them securely is not a problem and shipping costs stay constant, of course I'll switch to buying from the seller's website directly. Unless if the seller's website is harder to use or their business/domain is name not that memorable/trustworthy.
• avoutthere 9y ago
  I wonder when Amazon will break itself apart (a la Alphabet) in order to lessen regulatory scrutiny?
  • 6ak74rfy 9y ago
    I have been wondering the same thing. How would that affect employees though? For instance, employee movement within Amazon is straightforward today, but will that still be the case if Amazon went the Alphabet way?
    • rifung 9y ago
      Employee movement between companies in Alphabet is not really different than movement within Google. I would consider movement within Amazon to be more difficult than movement within Alphabet as you have to interview again for your new team at Amazon, or at least this was the case when I was there. (I work at Google and previously worked at AWS)
      • simsla 9y ago
        Does the recipient team of an internal transfer at Google not conduct any kind of interview? (I'm not talking about your traditional whiteboard interview, but surely people meet up and make sure that the transfer meets the bar of the new team?) I've noticed that expected skill for a job level depends strongly on location, so trying to sync up with a transfer doesn't feel strange to me.
        • rifung 9y ago
          Sorry I should have been more precise. The manager has to approve the transfer so presumably they would talk to you first to make sure you're a good fit and give you more context into the role. So I suppose although it's not called an interview, it basically is one.
  • zombieprocesses 9y ago
    Alphabet didn't break itself apart. It reorganized. There is a big difference. Standard Oil was broken apart into different companies.
• j-c-hewitt 9y ago
  Walmart also sells everything, and it actually sells more of everything than Amazon by quite a lot. Just not online. The gap is not even close. Walmart sells almost $500 billion in goods every year in the US alone. Amazon sold less than $200 billion in 2017. You could fit more than 2 Amazon.com's into Walmart. This is admitted by the article halfway down but a lot of people don't really take this into account when they think about Amazon. Amazon may be a very exciting stock, but it is not the leading retailer. It is only the dominant retail website online, and that dominance in market share is actually quite misleading because the Amazon Marketplace is not a 1:1 comparison with how Walmart retail stores work. The Amazon Marketplace is hundreds of thousands of independent retailers daisy chained together to supply the website with valid, high quality offers combined with a small number of conventional vendor suppliers. Walmart is Walmart. When you buy from Walmart you buy from Walmart (unless it's through the online Walmart Marketplace which aspires to be an Amazon Marketplace clone). Amazon has had some breakout successes in entirely different markets from retail, like their leading cloud business.
  • SandersAK 9y ago
    Amazon will do about 50% of online sales this year. Regardless of whether it's marketplace or not, it means that they see 50% of online sales in the US. If you think Amazon is competing on just "goods sold" then yes, at this fixed point in time, Walmart is much bigger and better at that. If you are thinking that online sales will eclipse retail in the near future (even groceries: http://www.nielsen.com/tz/en/insights/news/2017/grocery-e-commerce-sales-growth-set-to-eclipse-offline.html http://www.nielsen.com/tz/en/insights/news/2017/grocery-e-co...), and that this is an inflection point in buyer behavior, then Walmart is a leader who will run out of gas soon, and Amazon is just hitting their stride.
    • j-c-hewitt 9y ago
      Yes it does do roughly half of online sales. >If you are thinking that online sales will eclipse retail in the near future (even groceries: http://www.nielsen.com/tz/en/insights/news/2017/grocery-e-co... http://www.nielsen.com/tz/en/insights/news/2017/grocery-e-co...), and that this is an inflection point in buyer behavior, then Walmart is a leader who will run out of gas soon, and Amazon is just hitting their stride. That is not likely. The report you are citing does not support the projection you are making. >then Walmart is a leader who will run out of gas soon, and Amazon is just hitting their stride. This kind of fantasy is almost ubiquitous among people who write articles about tech-y business or who run non-ecommerce internet businesses. However it is not supported by actual breakdown of online vs. physical retail sales. See Nielson on what that breakdown is: http://www.nielsen.com/us/en/insights/news/2017/as-us-retail-shifts-continue-e-commerce-thrives.html http://www.nielsen.com/us/en/insights/news/2017/as-us-retail... You can't necessarily draw a straight line based on the growth or even compare the US directly to China which has a much greater proportion of online vs. retail sales. There are various complications across many different product types that make it challenging for pure online mail order to completely displace physical retail. The complete lockstep faith in this 'inflection point' stuff that I have seen and heard from people leads me to be extra-skeptical of it. Just because Marc Andreessen said it doesn't make it so. Pretty much every dollar my household brings in comes directly or indirectly from ecommerce. I am very personally invested in the continued growth of ecommerce. But I am also quite aware of the many difficulties and risks that the industry faces.
• itissid 9y ago
  How can anyone justify in a P/E ratio of > 250 is beyond me. Math and logic seem both out the window. For investors who want to invest on the scale of decades - like you and I- this will become either a cautionary tale or the greatest returns on an ecommerce stock - ever(Only by then it will be much more than ecommerce).
  • Veelox 9y ago
    It is because Amazon purposefully depressing the earnings part of P/E by outlaying massive amounts into capex and R&D. They have a gross profit of ~$66b but a operating income of ~$4b. If they halved their operating expenses that ~$4b becomes ~$34b and the P/E becomes ~30 which is much more reasonable.
  • deleted 9y ago
    [deleted]
• baybal2 9y ago
  It isn't, but Mr. Bezos wants everybody to think that it does, and it appears that it works for him.
• crb002 9y ago
  The Fortune 500 have an alternative. Build a nonprofit cooperative for their own data centers. Offer only S3, in memory S3, RDS, Lambda (with GPU/FPGA instances too), and SQS equivalents as generic compute services. KISS. Beat AWS on price and simplicity.
  • crb002 9y ago
    IBM/Lenovo can do it too. Custom fabric for affinity of Lambdas and in memory S3 on the same rack for insanely low latency. Killer is an MPI Broadcast primitive over a tree network and other bare bone equivalents of fundamental MPI operations. DOE alone will stop buying CRAY when they can use commodity low latency racks for HPC.
  • debt 9y ago
    idk, it'll be curious when a $5.99 video rental online will actually mean a near instant delivery to your door. Amazon is trying to do instant deliveries. Then all these services won't be as valuable. My point is, might it be smarter to make a coop logistics company? Consumers may favor slower(but not too slow) delivery of a higher quality product for the same price as it's digital equivalent.
• bitL 9y ago
  Amazon is just one scalability improvement in blockchain away from getting a major DApp-based competitor with the potential to obliterate its e-commerce side (while keeping cloud one) within a decade.
  • ztratar 9y ago
    What part of a decentralized app gives such a market advantage? To think that centralization is Amazon's main weakness is, pardon me, quite comical. At the end of the day, much of their power stems from efficient centralization of supply chain, purchaser-side negotiations, economies of scale, and team coordination. Just because an app is on the blockchain doesn't innately make it a winner. It has to deliver the same value to customers at a cheaper price. Amazon doesn't make much money on most transactions, so saying the "cut out the middle-man to save money" argument doesn't really work. So where's the logic? I'm genuinely interested, but just not seeing it.
    • bitL 9y ago
      First, as you say Amazon is a middleman charging from 3-15% per sale, making many small 3rd party sellers unable to compete (if they pay shipping themselves etc.) Moreover, they often abuse their position by insta-banning sellers e.g. upon very first listing etc. due to faulty machine learning fraud detection, so using their platform is increasingly risky even for quality sellers. The main advantages of Amazon are centralization of payment information without the need to enter CC etc. at different shops for every single purchase (which blockchain has no issues with by design), fast shipping times with Prime (this might be tricky to reproduce; here is the supply chain efficiency advantage you mention; nevertheless a drop-shipping idea with generic warehouse robotics would commodize it) and returns for any reason (this is people-intense unfortunately and not so easy to automate right now). For us programmers, they also supply state-of-art merchant API services with some interesting things like real-time repricing possibility, observing top sellers for any category to duplicate etc. yet there are quite a few flaws and their API feels dated and could be made much better. Amazon as a brand name is also trustworthy; here trust-less approach in DApps and observing any seller/buyer's transaction history can obliterate this advantage, though some implications are quite scary. To replace Amazon, you'd need a marketplace, which seems like the easiest thing for a DApp; another DApp for background checks on sellers/buyers; for Prime you'd need additional robotics (which is no longer so difficult to be honest due to advancements in the past 3 years, especially in confined areas with known environment map), cheap land with pre-fab warehouses that could be owned and ran by individual communities. Obviously, human nature would be biggest risk here (trading illegal goods and services via chains of fully-automated companies, referencing each other), and you might argue that orchestrating all of this might require something like Amazon to exist anyway; I believe though that it only takes for Amazon to make a few hundred capable single programmers to become upset to solve many of coordination problems in automated fashion. Legal and political requirements might be much higher hurdle.
• matthewmacleod 9y ago
  It’s a shame in some ways. Setting aside the rest of it, the core Amazon experience is kinda annoying. Trying to find anything in its morass of Bad metadata is increasingly challenging. The marketplace aspect is comprehensively shitty, to the point that I will entirely avoid anything that isn’t actually shipped by Amazon. Haven’t you ever hit a product page for say, a pair of shoes, and the “colour” options are things like “Blue”, “Green”, “EXTRA LARGE”, “pair”, “SHOE”, “red” - each of which actually turn out to be different products from different sellers with different delivery terms. Or a listing for an SD card that combines different manufacturers for different sizes, except some of them are actually SSDs and other ones are 3.5” hard disks? I’m full of rage just thinking about it. And it’s a shame because ordering from Amazon is great. Fast and reliable delivery, easy returns, that kinda stuff. If it was easier to find things on it, I’d use it even more. As it is, I barely tolerate it, and there are other options that are actually pretty appealing.
  • Paperweight 9y ago
    This absolutely enrages me, too. Especially when other big retailers are copying the same model. It's made shopping for computer parts an absolute nightmare. I swear the plan is to maximize the time it takes to find anything and thus have more time to try to sell you more junk.
    • kaybe 9y ago
      There is a shop in my city that will just sell you computer parts. You walk in there, tell them 'I want a basic mouse' or whatever, they will hand you one they approve of, you give them money and walk out. By now this is faster than trying to find one online, including the ride there. It will not even be significantly more expensive.
    • Slansitartop 9y ago
      > It's made shopping for computer parts an absolute nightmare. Give Newegg a try, they get it right.
      • 9y ago
• baybal2 9y ago
  Well, Mr. Bezos' own nightmare is Alibaba for obvious reasons - when most of what he does is reselling stuff from China, how he is gonna compete if he has to sell Chinese stuff cheaper than Chinese do themselves? That does not compute... Btw: Alibaba is still slowly picking at US market, teaspoon at a time https://news.cgtn.com/news/3d677a4e77517a4d/share.html https://news.cgtn.com/news/3d677a4e77517a4d/share.html
  • jes5199 9y ago
    until they have warehouses in the US, it’s worth it to me to pay the amazon premium to get stuff delivered quickly
• joshamania 9y ago
  I don't see why so few people seem to understand that Amazon's key feature is as a payment processing facilitator. People don't shop at Amazon because they have the best deals or have the best logistics or whatever. They shop at Amazon because they can generally find almost anything on there and have it on its way within seconds. People use Amazon because they don't have to think about it. They don't have to get out their credit card or even think about credit/debit cards. It's so damn simple I really don't see how anyone else is really going to compete. The absolute number one reason I don't go to Amazon competitors to buy things is having to deal with payment processing (from a customer standpoint). The only time I don't use Amazon is that rare occasion when Amazon (or one of their "partners") doesn't have what I want.
  • _rpd 9y ago
    I disagree. Their core feature is rapid, reliable delivery of the ordered item. Other sites are cheaper than Amazon, but I don't trust them to actually deliver what I order in a timely manner. When I do shop elsewhere, I don't mind entering payment details as long as I'm not required to save them (I don't trust most sites not to be hacked and leak my payment details). But if I ever get a delivery time over a week or a 'back ordered' status, I cancel the order immediately, because I know that they don't really have the item on hand and are just gambling that they can broker the sale at a profit. I've had merchants outright admit that they can't fulfill an order unless they can add some high margin accessories to an order. Not a game I'm interested in playing.
  • hutzlibu 9y ago
    Also returning things and knowing, that they deliver on time (mostly). At a random online shop: are they trustworthy? do they really deliver on time? Are those reviews legit? etc. etc. Before I deal with that, I just order from Amazon. Convinience. And yes, once you are in prime, you are even more bound and inclined to it.
• borgel 9y ago
  If anyone is interested, the original Amazon letter to the shareholders (reproduced with every succeeding letter) is worth a read [1]. In some ways it pretty much explains all of Amazon. [1] http://media.corporate-ir.net/media_files/irol/97/97664/reports/Shareholderletter97.pdf http://media.corporate-ir.net/media_files/irol/97/97664/repo...
• reddog 9y ago
  As just a customer, Amazon is the closest I've gotten to Star Trek level technology. I tell Alexa what I want and two hours later a set of headphones, a box of Tide and a package of Earl Grey tea materializes on my front porch. Not quite as fast as Picard's replicator but for all practical purposes, the same thing.
  • vadimberman 9y ago
    Sci-fi wise, Amazon is the closest to Wall-E's Buy n Large. (Even though Buy n Large started as a frozen yogurt company.)
  • _rpd 9y ago
    Yeah, any retailer that requires me to fight traffic, parking and morose customer service just to obtain an item that I can instead have delivered to my porch is at a severe disadvantage.
• digitalzombie 9y ago
  I dislike how I can't get prime for just shipping without the video services. Isn't this just bullying Netflix and other video streaming services? Not only they sell stuff online but they also have a video service. Which is fine but it's not a la carte. It feels monopolistic. But I'm not sure if that's fair or not of a comparison but I personally don't think it's fair.
• austincheney 9y ago
  > It’s the third-most-valuable company on Earth, with smaller annual profits than Southwest Airlines Co., which as of this writing ranks 426th. Would somebody mind explaining this to those of us who are not investors? Is this saying Amazon's stock is super inflated by investment speculation?
  • cybersol 9y ago
    It could mean that, but in Amazon's case it means they are reinvesting all of their earnings back into new internal investments, which leads to small annual profits.
    • austincheney 9y ago
      In that case is the high value still justified speaking strictly in terms of revenue alone?
      • stordoff 9y ago
        Also not an investor, but intuitively reinvesting revenue to grow future revenues seems more valuable than being profitable without taking steps to (substantially) grow revenues. Can anyone to speak whether this intuition is reasonable or not?
        • _rpd 9y ago
          Exactly. Profits lead to dividends, but also to taxes. As an investor, it is preferable to reinvest and keep growing the business. The trick is that mature companies have a very difficult time achieving double digit growth. Amazon (still) doesn't have that problem.
  • usaar333 9y ago
    Investors are credibly speculating that Amazon will continue to have very high revenue growth rates. Southwest last year grew revenue 4% Amazon grew revenue 38% (!!) If you believe that pattern will continue for a very long time, it makes sense to give Amazon an enormous valuation. As a practical example, if you discount the future by 10%, Amazon is growing discounted yearly revenue by 28%; Southwest by -6%. Now stocks follow (the sum of) discounted future profits, not current. If Amazon's revenue increase continued indefinitely, while holding fixed profits, Amazon would be worth an infinite amount, while Southwest's value is actually bounded. Of course Amazon certainly will slow revenue growth at some point - but it isn't too hard to see why it could very well be worth an order of magnitude more than Southwest.
• rweba 9y ago
  Eh, I still don't buy the hyperventilating. The breathless narrative is that Amazon is some all-consuming all dominating monster that is just going to crush everyone everywhere. I don't see any justification for this. (1) Walmart is much bigger. Not to mention Tencent and Alibaba who. (2) They have well-funded competition and no monopoly power in any of their sectors. (3) They only have 4% of all retail (online and off) hardly a stranglehold. Yes, they will do well and grow, but I don't think they will just effortlessly win in every market like this article is implying.
• stretchwithme 9y ago
  The author seems prone to exaggeration. Everything was going wrong for Amazon in 2014? Amazon makes no sense. Working at Amazon is like a Dickens novel. Amazon breaks all the rules.
• jhoechtl 9y ago
  How can a company the size and market dominance as Amazon not be subject to monopoly discussion? They have grown far to big. Unfortunately with Alibaba there is no more alternative than to allow companies to become as dominant.
• candiodari 9y ago
  Unfortunately, this is merely Bezos cashing in on the US government's ignorance on sales tax and the internet and winning [1]. If you see Bezos' history you can see that he is a financial engineer and he engineered it well [2]. That's not to say it isn't ridiculously impressive regardless of that and there were many other points that could have been missed, and weren't. But the amount of money that was, essentially accidentally, injected into Amazon this way, accelerating it's revenue by double-digit percentages in a way inaccessible to it's competitors is staggering. The problem with mail order has always been that they can never match Walmart's prices on logistics, because of the economies of scale. Because Walmart's customers bridge the expensive last mile for Amazon. Amazon has worked very hard to make the cost difference for the last mile less, but even now it's not a match. So how could Amazon ever become competitive ? Tax optimization. And then Bezos' figured he could make sales tax pay for last mile : that despite having local state infrastructure he would not have either pay sales tax himself or force his customers to, which was a big gamble, and frankly questionable in legality, a clear advantage over his shop-based competition. But he won, despite a few incidents. This was the main, but not the only successful "tax optimization" Amazon successfully executed. This is the same hole Alibaba exploited and quite a few others. Cheap toys from China work because they 1) don't pay fair price for delivery due to international postal agreements [3] 2) don't pay taxes like their US based competitors do. They don't pay sales tax, nor do they pay quite a few other taxes. (I'm going to assume this is well known) Now there are plenty of other companies that were extremely well positioned to do the same, above all perhaps Ebay, but they ... well they screwed up royally. Perhaps this did not need to lead directly to Amazon and Alibaba/"China inc" perse, but something like them are the result of government "planning" (between quotes because this is how a whole host of negotiations by lots of people interested in other things turned out, not the result of anyone's plan, it is a series of accidents (and mostly costly mistakes) cemented in international and interstate agreements). So the great accomplishment of Amazon and Bezos is to (a) be new, and able to construct their companies around the holes in these agreements (b) to know about the holes in the agreements in the first place. The greatest threat to Amazon is China. But sadly, and despite that I agree that Amazon's technical and organizational structure are a remarkable feat, the company is the result of Bezos exploiting accidental governmental financial engineering to a large extent. [1] http://money.cnn.com/2017/03/29/technology/amazon-sales-tax/index.html http://money.cnn.com/2017/03/29/technology/amazon-sales-tax/... [2] https://en.wikipedia.org/wiki/Jeff_Bezos#Early_career https://en.wikipedia.org/wiki/Jeff_Bezos#Early_career [3] https://www.washingtonpost.com/news/storyline/wp/2014/09/12/the-postal-service-is-losing-millions-a-year-to-help-you-buy-cheap-stuff-from-china/?utm_term=.44bcf4113384 https://www.washingtonpost.com/news/storyline/wp/2014/09/12/...
• deleted 9y ago
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• ZeikJT 9y ago
  "In 2015, AWS was responsible for two-thirds of total operating profit. Last year it was more than 100 percent." AWS was responsible for more than 100% of the operating profit? Despite being impossible statistically, is this a sensationalist way of saying that it accounted for all of the profit and covered some or all deficit as well?
• Jerry64545 9y ago
  Jeff Bezos is a star trek fan. May be this explains his desire to create a society free of labour which means eradicating the middle men as the first process.
• jacksmith21006 9y ago
  My biggest issue is the anti competitive behavior by Amazon in banning all companies on their marketplace from being allowed to sell competing products from companies like Google. Fine do not sell yourself from not allowing anyone else is going too far.