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> 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

> 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.
hbosch 9y ago
The retail side is currently a very convenient place to generate losses to counterbalance those profits.
6ak74rfy 9y ago
One simple reason is that the Retail part of Amazon is a huge, probably the biggest, customer of AWS. I don't know true this is, but I could go one step further and say that they test a lot of new cloud technologies at scale internally before selling them to external customers.
- discodave 9y ago
  Some would say it's the reverse right now. Amazon retail is running some big projects to migrate to AWS. Some AWS services are used heavily, others are not. e.g. https://www.theinformation.com/articles/in-major-shift-amazon-salesforce-move-away-from-oracle https://www.theinformation.com/articles/in-major-shift-amazo...

> 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.

hbosch 9y ago

The retail side is currently a very convenient place to generate losses to counterbalance those profits.

6ak74rfy 9y ago

One simple reason is that the Retail part of Amazon is a huge, probably the biggest, customer of AWS. I don't know true this is, but I could go one step further and say that they test a lot of new cloud technologies at scale internally before selling them to external customers.

discodave 9y ago
Some would say it's the reverse right now. Amazon retail is running some big projects to migrate to AWS. Some AWS services are used heavily, others are not. e.g. https://www.theinformation.com/articles/in-major-shift-amazon-salesforce-move-away-from-oracle https://www.theinformation.com/articles/in-major-shift-amazo...