4 ms·

As a Sales Director, I would often tell my guys, a six-month old can capture the market., if you would eliminate your profit. But that is not what you are hired

by frade33 12y ago

As a Sales Director, I would often tell my guys, a six-month old can capture the market., if you would eliminate your profit. But that is not what you are hired for. or in our local phrase 'neither we will play nor we let any'. I love Amazon as a consumer, but as a sales person myself I know, what they are. They offer 40% wholesale margin to a retail customer for books. How many wholesalers and retailers they brought to death? but the even more tragic part is, they didn't earn any money themselves. They obviously succeeded in capturing the entire market, but so could my six month old too. My experience tells me which is no brainer, death (exit) of such a company is only matter of time, and when such a vendor dies, rest of the market lives on as they were living before this episode.

bequanna 12y ago
>but the even more tragic part is, they didn't earn any money themselves. I don't really follow your logic. The point isn't to 'earn money' now. It is to build the economies of scale, over time, so that no one else can hope to compete with them on price in the future. That is when the money will really be earned. As for Amazon not being profitable, it is a illusion. From what I understand, they have pretty high plowback. If mgmt observes great opportunities for investment, shouldn't they do that instead of paying out dividends? >My experience tells me which is no brainer, death (exit) of such a company is only matter of time, and when such a vendor dies, rest of the market lives on as they were living before this episode. Maybe if they were competing on price alone for a single product. This isn't one CRM product vs another. They are competitive on EVERY product. Few online retailers can compete with them on pricing/shipping/experience.
- frade33 12y ago
  >That is when the money will really be earned. That time is never going to come, others are not sitting idly either. :) - since I am not american I don't know the precise terms to define such situation. But as we would say 'more clients, more profits' but in the end, you start losing customers, when you charge even pennies more, and you become a victim of your own. >They are competitive on EVERY product This is the misconception, they are not being competitive at all. :) they are only being arsehole :) as I would call such competitor in my own industry. Being competitive means, they quote prices which has profit, however they blow away the competition by virtue of either their skills or costs.
  - bequanna 12y ago
    >But as we would say 'more clients, more profits' but in the end, you start losing customers, when you charge even pennies more, and you become a victim of your own. Huh? The whole point is that they won't have to raise prices, the future will yield infrastructure cost savings. Competitors will have higher costs vs Amazon. So, they can charge LESS and make MORE than their competitors. Seems like a pretty simple strategy; foregoing profit now for increased competitiveness later. >This is the misconception, they are not being competitive at all. :) they are only being arsehole :) How so? If their business practices make you upset, I suppose that is understandable. But your comment just sounds like sour grapes...
    - frade33 12y ago
      >infrastructure To run an ecommerce business, you need IT, Warehousing, Logistics, (funding obviously just like any other biz) If you can generate tons of turnovers, vendors will lay down before you. What sort of infrastructure you were referring to., which other can not save on?
- pdq 12y ago
  > I don't really follow your logic. The point isn't to 'earn money' now. It is to build the economies of scale, over time, so that no one else can hope to compete with them on price in the future. That is when the money will really be earned. Amazon has had this mythical idiom of "when the market want us to give them profits, we will turn on the spigots". In other words, they can just scale back their future investments, and the money will start rolling in. However, they have been running losses in general for 20 years. For a few quarters in their history, they made some small profits, but in general, even with all the dramatic scaling and efficiencies, they still regularly run losses. Investors have stuck with them for this long, but unless they really can start raking in the profits, I don't see how their stock can sustain such a high price. If you look at the financials and business model, Amazon is basically the Walmart of the internet. They are in a low margin business, with high capital costs. However, their stock is still priced as if they are a software company with high gross margins (ie software costs zero to produce each additional copy). Walmart understands the model and is able to produce nice profits, and Amazon either has to follow or hopefully the market will finally figure them out and price them accordingly.
  - srdev 12y ago
    Where is this "Amazon is unprofitable" thing coming from? I went onto google finance, and it looks like they've had profits for 3 out of the 4 years of data that they have. Maybe not enough to justify the stock price, but they're making money.
    - pdq 12y ago
      http://finance.yahoo.com/q/is?s=AMZN+Income+Statement&annual http://finance.yahoo.com/q/is?s=AMZN+Income+Statement&annual Year Revenue Net Profit % --------------------------------- 2013 $74B $275MM 0.3% 2012 $61B $-39MM -0.6% 2011 $48B $631MM 1.3% Their best return was a 1.3% profit, back in 2011.
      - srdev 12y ago
        The numbers provided by Yahoo are in kilo-dollars, so its actually $631 million (and 5000 Bay Area engineers) rather than $631 thousand. Yes, the margins are low, which may be an argument that they are overvalued, but in absolute terms they are profitable.
ghotli 12y ago
Personally, I don't feel like the Amazon store is at all it's main long term product. Amazon Web Services, the Kindle, the culture it has built to consistently create success. I could be wrong but I'm willing to bet on their ability to twist and turn in the face of market forces more effectively than their peers.

by frade33 12y ago

bequanna 12y ago

>but the even more tragic part is, they didn't earn any money themselves. I don't really follow your logic. The point isn't to 'earn money' now. It is to build the economies of scale, over time, so that no one else can hope to compete with them on price in the future. That is when the money will really be earned. As for Amazon not being profitable, it is a illusion. From what I understand, they have pretty high plowback. If mgmt observes great opportunities for investment, shouldn't they do that instead of paying out dividends? >My experience tells me which is no brainer, death (exit) of such a company is only matter of time, and when such a vendor dies, rest of the market lives on as they were living before this episode. Maybe if they were competing on price alone for a single product. This isn't one CRM product vs another. They are competitive on EVERY product. Few online retailers can compete with them on pricing/shipping/experience.

frade33 12y ago
>That is when the money will really be earned. That time is never going to come, others are not sitting idly either. :) - since I am not american I don't know the precise terms to define such situation. But as we would say 'more clients, more profits' but in the end, you start losing customers, when you charge even pennies more, and you become a victim of your own. >They are competitive on EVERY product This is the misconception, they are not being competitive at all. :) they are only being arsehole :) as I would call such competitor in my own industry. Being competitive means, they quote prices which has profit, however they blow away the competition by virtue of either their skills or costs.
- bequanna 12y ago
  >But as we would say 'more clients, more profits' but in the end, you start losing customers, when you charge even pennies more, and you become a victim of your own. Huh? The whole point is that they won't have to raise prices, the future will yield infrastructure cost savings. Competitors will have higher costs vs Amazon. So, they can charge LESS and make MORE than their competitors. Seems like a pretty simple strategy; foregoing profit now for increased competitiveness later. >This is the misconception, they are not being competitive at all. :) they are only being arsehole :) How so? If their business practices make you upset, I suppose that is understandable. But your comment just sounds like sour grapes...
  - frade33 12y ago
    >infrastructure To run an ecommerce business, you need IT, Warehousing, Logistics, (funding obviously just like any other biz) If you can generate tons of turnovers, vendors will lay down before you. What sort of infrastructure you were referring to., which other can not save on?
pdq 12y ago
> I don't really follow your logic. The point isn't to 'earn money' now. It is to build the economies of scale, over time, so that no one else can hope to compete with them on price in the future. That is when the money will really be earned. Amazon has had this mythical idiom of "when the market want us to give them profits, we will turn on the spigots". In other words, they can just scale back their future investments, and the money will start rolling in. However, they have been running losses in general for 20 years. For a few quarters in their history, they made some small profits, but in general, even with all the dramatic scaling and efficiencies, they still regularly run losses. Investors have stuck with them for this long, but unless they really can start raking in the profits, I don't see how their stock can sustain such a high price. If you look at the financials and business model, Amazon is basically the Walmart of the internet. They are in a low margin business, with high capital costs. However, their stock is still priced as if they are a software company with high gross margins (ie software costs zero to produce each additional copy). Walmart understands the model and is able to produce nice profits, and Amazon either has to follow or hopefully the market will finally figure them out and price them accordingly.
- srdev 12y ago
  Where is this "Amazon is unprofitable" thing coming from? I went onto google finance, and it looks like they've had profits for 3 out of the 4 years of data that they have. Maybe not enough to justify the stock price, but they're making money.
  - pdq 12y ago
    http://finance.yahoo.com/q/is?s=AMZN+Income+Statement&annual http://finance.yahoo.com/q/is?s=AMZN+Income+Statement&annual Year Revenue Net Profit % --------------------------------- 2013 $74B $275MM 0.3% 2012 $61B $-39MM -0.6% 2011 $48B $631MM 1.3% Their best return was a 1.3% profit, back in 2011.
    - srdev 12y ago
      The numbers provided by Yahoo are in kilo-dollars, so its actually $631 million (and 5000 Bay Area engineers) rather than $631 thousand. Yes, the margins are low, which may be an argument that they are overvalued, but in absolute terms they are profitable.

ghotli 12y ago

Personally, I don't feel like the Amazon store is at all it's main long term product. Amazon Web Services, the Kindle, the culture it has built to consistently create success. I could be wrong but I'm willing to bet on their ability to twist and turn in the face of market forces more effectively than their peers.