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Also recall Amazon purposely tries to “stay flush” with expenses and revenue, so naturally this article is true. Amazon sees to avoid taxes, and invests in aven

Also recall Amazon purposely tries to “stay flush” with expenses and revenue, so naturally this article is true. Amazon sees to avoid taxes, and invests in avenues of expense that benefit it rather than benefitting the tax man. The theory being “how much tax to you pay on net zero income?”

adventured 8y ago
Is that also why Walmart and Costco have 2% net income margins? Or why Best Buy makes a whopping $1 billion on $42 billion in sales? Or Target with their fat 4% net income margins. No, it's because mainstream retail notoriously has horrific margins. There is no scenario where Amazon's retail business will ever generate meaningful margins such that it could be a profit juggernaut. It is not a tax dodge such that they could be yielding massive profits on retail, there is never going to be much profit in that segment. Right now the only way Amazon is yielding consequential profit, is courtesy of AWS, which does have good margins and is producing nearly all of Amazon's net income. The retail business - which makes up most of their business - at a standard 2%-4% net income retail margin on ~$140 billion in retail sales, is worth an optimistic $100 to $120 billion; you could push it to $150 billion if you want to give them a larger growth multiplier. First quarter AWS operating income: $1.4 billion First quarter total Amazon operating income: $1.9 billion All the profit-based value in Amazon is in AWS. Retail will always suck, without exception. That $500m in operating income on the rest of Amazon's $45 billion in sales, is not very far away from the margin you would expect to see on a mainstream retailer. $1b for that segment would be closer to normal if Amazon's growth were more settled (as in the case of Walmart & Target). In this case, that tiny retail profit is still be plowed back into dramatically higher growth than what Walmart or Target have.
- Dwolb 8y ago
  Is your argument "Amazon is a retail business and Amazon doesn't yield high profits because retail businesses have low margins"? I guess that's true but so is OP's assertion that Amazon has a reputation for reinvesting would-be profits back into the business. By the way another way to look at Amazon is the retail business provides significant operating leverage to enable AWS to yield substantial profits.

adventured 8y ago

Is that also why Walmart and Costco have 2% net income margins? Or why Best Buy makes a whopping $1 billion on $42 billion in sales? Or Target with their fat 4% net income margins. No, it's because mainstream retail notoriously has horrific margins. There is no scenario where Amazon's retail business will ever generate meaningful margins such that it could be a profit juggernaut. It is not a tax dodge such that they could be yielding massive profits on retail, there is never going to be much profit in that segment. Right now the only way Amazon is yielding consequential profit, is courtesy of AWS, which does have good margins and is producing nearly all of Amazon's net income. The retail business - which makes up most of their business - at a standard 2%-4% net income retail margin on ~$140 billion in retail sales, is worth an optimistic $100 to $120 billion; you could push it to $150 billion if you want to give them a larger growth multiplier. First quarter AWS operating income: $1.4 billion First quarter total Amazon operating income: $1.9 billion All the profit-based value in Amazon is in AWS. Retail will always suck, without exception. That $500m in operating income on the rest of Amazon's $45 billion in sales, is not very far away from the margin you would expect to see on a mainstream retailer. $1b for that segment would be closer to normal if Amazon's growth were more settled (as in the case of Walmart & Target). In this case, that tiny retail profit is still be plowed back into dramatically higher growth than what Walmart or Target have.

Dwolb 8y ago
Is your argument "Amazon is a retail business and Amazon doesn't yield high profits because retail businesses have low margins"? I guess that's true but so is OP's assertion that Amazon has a reputation for reinvesting would-be profits back into the business. By the way another way to look at Amazon is the retail business provides significant operating leverage to enable AWS to yield substantial profits.