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Low profits are absolutely a problem for Amazon's plan. Profits != margins. Being in a low margin business means you need to make up the difference in volume.

Low profits are absolutely a problem for Amazon's plan. Profits != margins. Being in a low margin business means you need to make up the difference in volume. And volume actually hurts you if your margins are in the red. ;)

snambi 14y ago
Agree with you on this. AMZN was having a free ride on "no-tax" internet purchases for a long time. Now, many states are charging tax for online purchases. Suppose you buy $1000 TV on AMZN, we used to save ~ $85 on tax alone. This was main reason AMZN was doing better in the past. Now, why would someone buy a TV on AMZN, rather buy it locally on a store. This reduced their volume. AMZN has become a low-margin low-volume business.
- scarmig 14y ago
  AMZN is a low-volume business?
- chii 14y ago
  but being on the internet, what tax rate would it be if i purchased from another country that has no sales tax? I think taxing sales is the wrong thing to do - you must tax the entity recieving the money. So if amazon decides that the US is too high a tax rate, they can move their HQ to the caymen islands, and pay effectively no sales tax. This should lead to optimal tax rates across the board hopefully, whilest lowering prices.
  - snambi 14y ago
    it is the customer who the sales tax. Lets say I buy a $1000 tv on amazon. I used to get the TV for $1000 with free-shipping. Now the same TV will cost $1080 with free shipping. For buying expensive things amazon was a great place, because the buyer was not paying the sales tax. Now, they have to pay the sales tax, so there is no advantage of buying from amazon.
corresation 14y ago
Being in a low margin business means you need to make up the difference in volume. On the flip side, having low margins usually means it's more difficult for other people to come and eat your lunch. Apple's incredible success has little entrenchment (well, it did for a short period earlier in the cycle when every premiere app was iOS only), and investors have to consider the possibility that a single uncompelling product release can devastate the company. Amazon has no such threats.
- meric 14y ago
  Other external, non-competitor related events could seriously harm the business. E.g. a low margin steel manufacturer and sudden rise in price of iron ore with a slightly smaller increase in price of steel, or even rise in price of wrong type of steel.

snambi 14y ago

Agree with you on this. AMZN was having a free ride on "no-tax" internet purchases for a long time. Now, many states are charging tax for online purchases. Suppose you buy $1000 TV on AMZN, we used to save ~ $85 on tax alone. This was main reason AMZN was doing better in the past. Now, why would someone buy a TV on AMZN, rather buy it locally on a store. This reduced their volume. AMZN has become a low-margin low-volume business.

scarmig 14y ago
AMZN is a low-volume business?
chii 14y ago
but being on the internet, what tax rate would it be if i purchased from another country that has no sales tax? I think taxing sales is the wrong thing to do - you must tax the entity recieving the money. So if amazon decides that the US is too high a tax rate, they can move their HQ to the caymen islands, and pay effectively no sales tax. This should lead to optimal tax rates across the board hopefully, whilest lowering prices.
- snambi 14y ago
  it is the customer who the sales tax. Lets say I buy a $1000 tv on amazon. I used to get the TV for $1000 with free-shipping. Now the same TV will cost $1080 with free shipping. For buying expensive things amazon was a great place, because the buyer was not paying the sales tax. Now, they have to pay the sales tax, so there is no advantage of buying from amazon.

corresation 14y ago

Being in a low margin business means you need to make up the difference in volume. On the flip side, having low margins usually means it's more difficult for other people to come and eat your lunch. Apple's incredible success has little entrenchment (well, it did for a short period earlier in the cycle when every premiere app was iOS only), and investors have to consider the possibility that a single uncompelling product release can devastate the company. Amazon has no such threats.

meric 14y ago
Other external, non-competitor related events could seriously harm the business. E.g. a low margin steel manufacturer and sudden rise in price of iron ore with a slightly smaller increase in price of steel, or even rise in price of wrong type of steel.