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Given the razor thin margins that Amazon runs with, I am not surprised. This is a company that is struggling to make any money even after people bought hundreds
by barista 13y ago
Given the razor thin margins that Amazon runs with, I am not surprised. This is a company that is struggling to make any money even after people bought hundreds of Billions of dollars worth of stuff from them. They are bound to cut corners to stay alive.
- xyzzyz 13y agoAmazon works hard to have a minuscule profit. If they have no profit, they don't have any tax liability. The business they're in lets them adjust their profits in real time -- whenever they expect to have large profit, they just lower their prices to eat it. Consumers love this, so they have huge turnover, and thanks to this, small increase of prices earns them big profit, if they ever need cash to fund acquisition, or new warehouse, or whatever.
- sopooneo 13y agoI don't understand why you'd want to minimize profit just because of tax liability. Even if I paid 60% in taxes, I'd still be better off keeping 40% of a higher salary. What's the rational?
- xyzzyz 13y agoThe reason is that it's not the money you actually want. You want the stuff that you can exchange money for -- you want food, shelter, entertainment etc. If you had a choice, get a $10k pay rise, or $10k reimbursement for shopping, you'd obviously go with the second option, since the first one would only give you a certain percentage of that $10k. There's no reason for a company to pay tax on money it does not need. If they need some money for some current expenses, they can obtain it any time and spend it as an operating expense, which gets them no tax liability. Think of Apple, which has a basically untaxed huge wad of cash outside of the US -- they will keep it there for as long as they don't need more money in the US, to avoid the tax liability. They only keep in the US the money they need, hoping that future changes in tax law will let them save on bringing that pile of cash home.
- regal 13y agoLower prices (and hence, profits) don't just save on taxes monies - they also drive out the competition, expanding Amazon's footprint in the marketplace. Growth first, money later.
- saalweachter 13y agoIt's the difference between a business and an individual. Individuals pay taxes on incomes. Corporations pay taxes on profits, so they can have arbitrarily large incomes while maintaing zero profits. "Profit" is either "money you haven't spent yet" or "money you need to return to investors". Modern corporations have been telling investors to eat a bag of salted peanuts lately, so they really don't care about returning profits to investors. So if "profit" is just "money you haven't spent yet", you're better off spending it before you pay taxes, because then you get to spend X% more. The individuals running the company are presumably compensating themselves lavishly to run a company with no profits.
- Filligree 13y agoSo.. hold on. If the companies have no profits, and investors get no return. ..why would you want to invest?
- lrobb 13y agoIndeed... Why?
- tlarkworthy 13y agoCoz the value of the company is still increasing as more warehouses are bought
- vasilipupkin 13y agoBecause if the company is spending that potential profit on something that will increase its future value - you as an investor will get a piece of that increase in the future
- Colliwinks 13y agoBecause they get no immediate return from profit (from dividends), but the value of the stock still increases (hopefully moreso if they are reinvesting more of their profit into future growth).
- saalweachter 13y ago
- fauigerzigerk 13y agoThey're not fighting for survival, they're optimizing for market share.
- jellicle 13y agoHa! Funny. Actually Amazon makes plenty of money, they're just recording their income in other countries as a tax dodge, like every other megacorp nowadays. http://www.guardian.co.uk/technology/2012/apr/04/amazon-british-operation-corporation-tax http://www.guardian.co.uk/technology/2012/apr/04/amazon-brit...