5 ms·

sales is kind of easy if you don't care about profit. also kills off competition, which in turn makes sales easier. but what happens once profits are needed? o

sales is kind of easy if you don't care about profit. also kills off competition, which in turn makes sales easier. but what happens once profits are needed? or is amazon the largest NPO on earth?

frank_boyd 13y ago
Correct. 1. Give away profit, to increase market share 2. Repeat 3. Enjoy your new monopoly 4. With competition gone and customers additionally locked in via your technology platform: Set your prices as you wish
- _red 13y ago
  5. Watch competitors instantly spring up. *Note: there is no such thing as a non-government enforced monopoly. Marketshare != Monopoly
  - Ygg2 13y ago
    True, but what if for some reason government considers Amazon too big to fail. It's not that far fetched.
  - GFischer 13y ago
    There's no such thing as a country without government, unless Amazon sets up on (and only sells to) Somalia or Eritrea :P
  - njs12345 13y ago
    That's a fairly contentious assertion to make and not one that is universally held by mainstream economists by any means.
    - lemma 13y ago
      To back you up: http://en.wikipedia.org/wiki/Natural_monopoly http://en.wikipedia.org/wiki/Natural_monopoly
  - beagle3 13y ago
    Counterexamples: Microsoft (desktop OS), standard oil.
    - brianlweiner 13y ago
      It's not such a slam dunk case. "Some economic historians have observed that Standard Oil was in the process of losing its monopoly at the time of its breakup in 1911. Although Standard had 90 percent of American refining capacity in 1880, by 1911 that had shrunk to between 60 and 65 percent, due to the expansion in capacity by competitors.[41] Numerous regional competitors (such as Pure Oil in the East, Texaco and Gulf Oil in the Gulf Coast, Cities Service and Sun in the Midcontinent, Union in California, and Shell overseas) had organized themselves into competitive vertically integrated oil companies, the industry structure pioneered years earlier by Standard itself. In addition, demand for petroleum products was increasing more rapidly than the ability of Standard to expand. The result was that although in 1911 Standard still controlled most production in the older US regions of the Appalachian Basin (78 percent share, down from 92 percent in 1880), Lima-Indiana (90 percent, down from 95 percent in 1906), and the Illinois Basin (83 percent, down from 100 percent in 1906), its share was much lower in the rapidly expanding new regions that would dominate US oil production in the 20th century. In 1911 Standard controlled only 44 percent of production in the Midcontinent, 29 percent in California, and 10 percent on the Gulf Coast.[42]" http://en.wikipedia.org/wiki/Standard_Oil#Monopoly_charges_and_anti-trust_legislation http://en.wikipedia.org/wiki/Standard_Oil#Monopoly_charges_a... There's also no great evidence that Standard Oil raised prices once they had established such large market share. http://research.stlouisfed.org/fred2/graph/?id=M04182US000NYM264NNBR http://research.stlouisfed.org/fred2/graph/?id=M04182US000NY...
      - beagle3 13y ago
        I don't have time to research the numbers right now, but from your quote it sounds like 1870 to 1900 it did enjoy some 80% control. That's long enough to be considered a monopoly for most purposes.
    - icebraining 13y ago
      Microsoft has a government-enforced monopoly (copyright and patents).
  - jbooth 13y ago
    I agree that in Amazon's business it's hard or impossible to establish monopoly pricing practices. That does not mean there's no such thing as a non-government enforced monopoly. http://en.wikipedia.org/wiki/Natural_monopoly http://en.wikipedia.org/wiki/Natural_monopoly
  - mattlutze 13y ago
    My history knowledge is shaky, but I don't recall Standard Oil being "government enforced".
    - _red 13y ago
      Your historical knowledge is ok. But it wasn't a monopoly. At its peak it had 90% market-share. It was never "illegal" or "impossible" to sell petroleum in competition to it -- just highly very difficult to compete with them. In the same vein, google has 9-1 share of the internet search market....should we call it a "monopoly"?
      - jbooth 13y ago
        Totally different. Google has mindshare and a seemingly-insurmountable lead, but they do not have a monopoly on internet search results. I could put up the worlds crappiest search engine next weekend and theoretically be 'competing' with them. Spider a few million websites and link to them in some order and you're in the same business. Standard Oil, at its peak, had an actual near-monopoly on most discovered sources of oil. You can't even get into the oil business unless you discover more oil -- in theory, they could have used their resources to stay on top of each oil source as it was discovered. No amount of old-fashioned ingenuity can compete with that.
      - mabhatter 13y ago
        I get so sick of this. Monopoly economics is based on statistics of a random buyer wanting to buy stuff from a random seller. With NO INTERFERENCE. Statistitions consider 25% chance to be "unlikely", and 75% chance to be "very likely". So a 90% chance of doing business with ONE company is as Statistically close to 100% that it might as well BE 100% for economic purposes. Once a company hits 75% or so they have no "economic need" to write restrictive exclusive contracts as they basically control the market. Remember, the RULES OF FREE MARKETS assume there are ALWAYS enough buyers and sellers that NEITHER side has a group large enough to independently affect the market prices. As soon as a buyer or seller hits about 25% they aren't following the rules of the "Free Market system" they are Capitalists attempting to REMOVE the RIGHTS of the Free Market system from others using aggregation of capital resources.
  - iMark 13y ago
    Amazon have been steadily building their infrastructure and supply chain for years, things that aren't easily built from scratch.
  - josephlord 13y ago
    In the general cases there can be non-government controlled monopolies. In this particular case of online retail and "cloud" services the barriers to entry are quite low so your conclusion may be right although exposure is tricky for online retailing if everyone just searches Amazon.
- deleted 13y ago
  [deleted]
hershel 13y ago
Since amazon invests all it's got in expansions and new offerings, It's really hard to talk about how much profit they make. And it's part of their advantage to keep this secret.
- jacques_chester 13y ago
  It's not a secret and it's easy to talk about. Investments is in their cashflow statement. Per their 2012 Annual Report, with units in millions of dollars: Purchases of property and equipment, including internal-use software and website development (3,785) Which also booked elsewhere under Investing Activities in their cashflow statement. And profit: Net income (loss) (39) Amazon's free cashflow with investment would be about 4 billion dollars on the 2012 figures. In fact after investment they still booked $395M of free cashflow. Anyone can read these figures. You, me, Amazon's competitors. The Annual Report doesn't give the raw numbers, it gives a detailed discussion of what the numbers mean, how they are evolving and so on. This kind of disclosure is required by law so that investors aren't punished by unhappy surprises. There are some good books around on reading these kinds of figures, I recommend Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean.
pjc50 13y ago
Profit is taxable, whereas share price rise incurs taxes that are easier to avoid.
- VLM 13y ago
  More precisely stated, a company that issues dividends decides when I'll be paying income taxes, whereas a company that grows share value/price lets me decide when I'd like to pay the income tax. Or another way to put it is the company decides when I pay dividend tax and how much, which kinda sucks, but I decide when I pay long term cap gains tax, which is pretty cool.

sales is kind of easy if you don't care about profit. also kills off competition, which in turn makes sales easier. but what happens once profits are needed? or is amazon the largest NPO on earth?

frank_boyd 13y ago

Correct. 1. Give away profit, to increase market share 2. Repeat 3. Enjoy your new monopoly 4. With competition gone and customers additionally locked in via your technology platform: Set your prices as you wish

_red 13y ago
5. Watch competitors instantly spring up. *Note: there is no such thing as a non-government enforced monopoly. Marketshare != Monopoly
- Ygg2 13y ago
  True, but what if for some reason government considers Amazon too big to fail. It's not that far fetched.
- GFischer 13y ago
  There's no such thing as a country without government, unless Amazon sets up on (and only sells to) Somalia or Eritrea :P
- njs12345 13y ago
  That's a fairly contentious assertion to make and not one that is universally held by mainstream economists by any means.
  - lemma 13y ago
    To back you up: http://en.wikipedia.org/wiki/Natural_monopoly http://en.wikipedia.org/wiki/Natural_monopoly
- beagle3 13y ago
  Counterexamples: Microsoft (desktop OS), standard oil.
  - brianlweiner 13y ago
    It's not such a slam dunk case. "Some economic historians have observed that Standard Oil was in the process of losing its monopoly at the time of its breakup in 1911. Although Standard had 90 percent of American refining capacity in 1880, by 1911 that had shrunk to between 60 and 65 percent, due to the expansion in capacity by competitors.[41] Numerous regional competitors (such as Pure Oil in the East, Texaco and Gulf Oil in the Gulf Coast, Cities Service and Sun in the Midcontinent, Union in California, and Shell overseas) had organized themselves into competitive vertically integrated oil companies, the industry structure pioneered years earlier by Standard itself. In addition, demand for petroleum products was increasing more rapidly than the ability of Standard to expand. The result was that although in 1911 Standard still controlled most production in the older US regions of the Appalachian Basin (78 percent share, down from 92 percent in 1880), Lima-Indiana (90 percent, down from 95 percent in 1906), and the Illinois Basin (83 percent, down from 100 percent in 1906), its share was much lower in the rapidly expanding new regions that would dominate US oil production in the 20th century. In 1911 Standard controlled only 44 percent of production in the Midcontinent, 29 percent in California, and 10 percent on the Gulf Coast.[42]" http://en.wikipedia.org/wiki/Standard_Oil#Monopoly_charges_and_anti-trust_legislation http://en.wikipedia.org/wiki/Standard_Oil#Monopoly_charges_a... There's also no great evidence that Standard Oil raised prices once they had established such large market share. http://research.stlouisfed.org/fred2/graph/?id=M04182US000NYM264NNBR http://research.stlouisfed.org/fred2/graph/?id=M04182US000NY...
    - beagle3 13y ago
      I don't have time to research the numbers right now, but from your quote it sounds like 1870 to 1900 it did enjoy some 80% control. That's long enough to be considered a monopoly for most purposes.
  - icebraining 13y ago
    Microsoft has a government-enforced monopoly (copyright and patents).
- jbooth 13y ago
  I agree that in Amazon's business it's hard or impossible to establish monopoly pricing practices. That does not mean there's no such thing as a non-government enforced monopoly. http://en.wikipedia.org/wiki/Natural_monopoly http://en.wikipedia.org/wiki/Natural_monopoly
- mattlutze 13y ago
  My history knowledge is shaky, but I don't recall Standard Oil being "government enforced".
  - _red 13y ago
    Your historical knowledge is ok. But it wasn't a monopoly. At its peak it had 90% market-share. It was never "illegal" or "impossible" to sell petroleum in competition to it -- just highly very difficult to compete with them. In the same vein, google has 9-1 share of the internet search market....should we call it a "monopoly"?
    - jbooth 13y ago
      Totally different. Google has mindshare and a seemingly-insurmountable lead, but they do not have a monopoly on internet search results. I could put up the worlds crappiest search engine next weekend and theoretically be 'competing' with them. Spider a few million websites and link to them in some order and you're in the same business. Standard Oil, at its peak, had an actual near-monopoly on most discovered sources of oil. You can't even get into the oil business unless you discover more oil -- in theory, they could have used their resources to stay on top of each oil source as it was discovered. No amount of old-fashioned ingenuity can compete with that.
    - mabhatter 13y ago
      I get so sick of this. Monopoly economics is based on statistics of a random buyer wanting to buy stuff from a random seller. With NO INTERFERENCE. Statistitions consider 25% chance to be "unlikely", and 75% chance to be "very likely". So a 90% chance of doing business with ONE company is as Statistically close to 100% that it might as well BE 100% for economic purposes. Once a company hits 75% or so they have no "economic need" to write restrictive exclusive contracts as they basically control the market. Remember, the RULES OF FREE MARKETS assume there are ALWAYS enough buyers and sellers that NEITHER side has a group large enough to independently affect the market prices. As soon as a buyer or seller hits about 25% they aren't following the rules of the "Free Market system" they are Capitalists attempting to REMOVE the RIGHTS of the Free Market system from others using aggregation of capital resources.
- iMark 13y ago
  Amazon have been steadily building their infrastructure and supply chain for years, things that aren't easily built from scratch.
- josephlord 13y ago
  In the general cases there can be non-government controlled monopolies. In this particular case of online retail and "cloud" services the barriers to entry are quite low so your conclusion may be right although exposure is tricky for online retailing if everyone just searches Amazon.
deleted 13y ago
[deleted]

hershel 13y ago

Since amazon invests all it's got in expansions and new offerings, It's really hard to talk about how much profit they make. And it's part of their advantage to keep this secret.

jacques_chester 13y ago
It's not a secret and it's easy to talk about. Investments is in their cashflow statement. Per their 2012 Annual Report, with units in millions of dollars: Purchases of property and equipment, including internal-use software and website development (3,785) Which also booked elsewhere under Investing Activities in their cashflow statement. And profit: Net income (loss) (39) Amazon's free cashflow with investment would be about 4 billion dollars on the 2012 figures. In fact after investment they still booked $395M of free cashflow. Anyone can read these figures. You, me, Amazon's competitors. The Annual Report doesn't give the raw numbers, it gives a detailed discussion of what the numbers mean, how they are evolving and so on. This kind of disclosure is required by law so that investors aren't punished by unhappy surprises. There are some good books around on reading these kinds of figures, I recommend Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean.

pjc50 13y ago

Profit is taxable, whereas share price rise incurs taxes that are easier to avoid.

VLM 13y ago
More precisely stated, a company that issues dividends decides when I'll be paying income taxes, whereas a company that grows share value/price lets me decide when I'd like to pay the income tax. Or another way to put it is the company decides when I pay dividend tax and how much, which kinda sucks, but I decide when I pay long term cap gains tax, which is pretty cool.