Why Amazon Is Profitless Only By Choice

An anonymous reader writes "Eugene Wei, a former employee at Amazon and Hulu, explains why Amazon continues to post quarterly earnings statements with lots of revenue but no actual profit. Many of Amazon's retail businesses and platforms are quite profitable by themselves, Wei says, a fact that is hidden by large expenditures on investment for the future. He writes, 'If Amazon has so many businesses that do make a profit, then why is it still showing quarterly losses, and why has even free cash flow decreased in recent years? Because Amazon has boundless ambition. It wants to eat global retail. This is one area where the press and pundits accept Amazon's statements at face value. Given that giant mission, Amazon has decided to continue to invest to arm itself for a much larger scale of business. If it were purely a software business, its fixed cost investments for this journey would be lower, but the amount of capital required to grow a business that has to ship millions of packages to customers all over the world quickly is something only a handful of companies in the world could even afford. ... I'm convinced Amazon could easily turn a quarterly profit now. Many times in its history, it could have been content to stop investing in new product lines, new fulfillment centers, new countries. The fixed cost base would flatten out, its sales would continue growing for some period of time and then flatten out, and it would harvest some annuity of profits. Even the first year I joined Amazon in 1997, when it was just a domestic book business, it could have been content to rest on its laurels. But Jeff is not wired that way. There are very few people in technology and business who are what I'd call apex predators. Jeff is one of them, the most patient and intelligent one I've met in my life.'"

Comments

"apex predators"

[Anonymous Coward]

In the moral confusion promoted by global capitalism, "apex predator" became a term of approval - even among the prey.

Re:"apex predators"

[Anonymous Coward]

I always read it as "total psychopath".

Re:"apex predators"

[Swampash]

Apex predators are an essential part of any ecosystem. When apex predators start failing that means the ecosystem is failing.

So it's basically just another metaphor that doesn't work for business. When a Great White Shark dies, that's bad for the ocean. When a Sumatran Tiger dies, that's bad for the jungle. When a sociopathic CEO fails, I don't give a shit.

Re:"apex predators"

[bsolar]

Apex predators are "essential" in the sense that spontaneusly emerge in ecosystems. When apex predators starts failing it's bad only for the current equilibrium of the ecosystem, which will be replaced by a new equilibrium (not necessarly worse than the previous) in which there will be most likely another apex predator. Actually exactly the same applies in business.

Re:"apex predators"

[Anonymous Coward]

with all of the press and books lately about bezos.... what are they setting the stage for?

Re:"apex predators"

[__aaltlg1547]

Apex predators are an essential part of any ecosystem. When apex predators start failing that means the ecosystem is failing.

So it's basically just another metaphor that doesn't work for business. When a Great White Shark dies, that's bad for the ocean. When a Sumatran Tiger dies, that's bad for the jungle. When a sociopathic CEO fails, I don't give a shit.

Another way it doesn't apply is that the thing that is essential to the predator's survival is an animal that is totally destroyed when so used. Jeff Bezos is a businessman. The thing his business survives on is the fact that customers come to him with their business. He makes a margin on that business. the customer survives the transaction.

It is very un-predatory behavior.

Viewed at another level, you might say that his company is trying to take revenue away from competitors, and has an ambition to take all their business and thereby destroy them. Well fine, but that's not like what a predator does either. A predator tries to get its prey, but then it fills its belly and is satisfied and doesn't hunt for a while. It doesn't constantly invest energy in trying to expand its food supply. In fact, it invests no energy in that, beyond chasing competitors out of its territory. It never tries to increase its territory beyond what it needs to keep its belly full and its belly is not infinitely expansible.

So let's dispense with the bad metaphor. The behavior isn't predatory.

It's a distinctly human behavior: empire building.

Re:"apex predators"

[Anonymous Coward]

The great whites get the shit out of there when Orcas are around. Doesn't qualify as apex.

Re:"apex predators"

[dcollins]

"It's a distinctly human behavior: empire building."

This metaphor is no better. An empire is a bunch of kingdoms or geographic entities forged together into one institution. If Amazon were buying up/taking over existing brick-and-mortar stores, then empire-building would be a pretty good metaphor. But it's not -- it's consuming their custom and destroying those businesses entirely. So in that regard the predation metaphor is really better.

Re:"apex predators"

[Anonymous Coward]

Another way it doesn't apply is that the thing that is essential to the predator's survival is an animal that is totally destroyed when so used. Jeff Bezos is a businessman. The thing his business survives on is the fact that customers come to him with their business. He makes a margin on that business. the customer survives the transaction.

The predatory metaphor is not in relation to the customers. It is in relation to other businesses. The atoms in the prey animals survive just fine too, but we still call predators predators. Not that I necessarily think it's a very useful metaphor, but if it's a bad one, that's not because of the reason that you point out.

Re:"apex predators"

[Anonymous Coward]

And what happens if habitat destruction causes the total habitable area for that predator to the same or less than a single predators home range. You can think of globalization as that habitat destruction. So your nonsense about the noble predator not eating more than his fill is bullshit under the circumstances. The world is small enough that they will tear each other apart, and everyone suffers because we are more interested in playing a nasty game of capitalism than living in a decent world.

Re: "apex predators"

[Anonymous Coward]

You are of course correct. However, evolution is a poor model to emulate in our corporate management. A recent example is the banking industry, pure evolution and Darwinism for companies is fine if you're prepared for global economic collapse their 'drives" might create. I prefer to liken capitalism to fire, something useful when carefully regulated and carefully tended and watched. As a species we should use our intelligence to avoid the Darwinistic penalty for mistakes.

Re:"apex predators"

[Impy the Impiuos Imp]

In the moral confusion promoted by global capitalism, "apex predator" became a term of approval - even among the prey.

It should be -- he's a visionary seeing where things are going and is making it happen. In this sense, capitalism is doing its proper, beneficial job: providing better, cheaper, more convenient services and products.

People will find other things to do -- they always have. 150 years ago, if you had said only 2% of the population would be working farms instead of over 90, politicians would scream, "what the hell, what are they all gonna do, starve?". Yet populations skyrocketted as did health and food continued getting cheaper.

These same assholes now provide government price supports to keep it from getting too cheap -- apparently the remaining 2% is just right, and 1.5% or 1% is wrong.

These idiotic meme-virus ideas of propriety should be laughed at instead of giving controlling influence.

Re:"apex predators"

[Anonymous Coward]

But it's not -- it's consuming their custom and destroying those businesses entirely.

Except Amazon can't consume anyone's business. A customer decides where to spend money.

By that virtue, I propose the metaphor of: Brick and mortar stores are too busy making out with their Monroebots to adjust to an ever-changing marketplace.

DON'T. DATE. ROBOTS.

Re:"apex predators"

[StripedCow]

So let's dispense with the bad metaphor. The behavior isn't predatory.

Let me formulate it in this way then (sticking to biology):
Capitalism is analogous to evolution (survival of the fittest).
In this respect, the monopolist is analogous to humans (the species that conquers them all).

So, according to this reasoning, what Amazon is doing is completely "natural". (Not that I'm in favor of it).

Re:"apex predators"

[Notabadguy]

If I can hearken back to "The Neverending Story" which seems most appropriate given the discussion on reading...

It sounds like you're saying Amazon = "The Nothing"

Re:"apex predators"

[AK Marc]

Power is unstable. When everyone is equal (Animal Farm the day after the uprising, or 100 equal businesses), there is a power vacuum at the top. When one gets ahead, as one always will, for a variety of reasons, and the moment you have someone with any more power than the others, they will work to increase that gap. That's the "natural" way. People don't try to equal their peers, they try to dominate them. "All animals are equal, but some animals are more equal than others" Or the monopolistic practices all near-monopolies engage in.

Monopolistic abuse is the natural state, and why we have laws against it, to help balance against monopolistic abuses.

Re:"apex predators"

[93 Escort Wagon]

The guy picked the term "apex predator" not because it fit, but because it sounded cool.

Hopefully Bezos took a shower before this guy decided to so thoroughly kiss his ass.

Re:"apex predators"

[Sardaukar86]

The great whites get the shit out of there when Orcas are around. Doesn't qualify as apex.

That has nothing to do with predation; the great white and the orca are both apex predators and will naturally compete (sometimes directly, as you point out) for prey.

A large part of the definition for the term 'Apex Predator' is about no other creature considering an apex predator its prey.

Re:"apex predators"

[_UnderTow_]

150 years ago, ....

...These same assholes ...

Well to be fair, I doubt they're the exact same assholes.

Re:"apex predators"

[PlusFiveTroll]

>Except Amazon can't consume anyone's business. A customer decides where to spend money.

Yea. You don't understand how 'huge' business works.

Once you're big enough you can afford lobbying solely in your favor. With size you can use the 'walmart effect' by buying so much production the manufactures are more dependent on your then the smaller shops. When it comes down to it, the most powerful influence of consumers is price. If you have a huge enough amount of capitol you can find ways to sell your product cheaper then cost while remaining legal.

Re:"apex predators"

[PlusFiveTroll]

I like how you conveniently forgot about the great depression and the reason why we have price supports, oh and the reasons we supply social welfare. They almost did starve. There were riots and deaths on the capitol steps. Lets not do that again.

Re:"apex predators"

[game kid]

...and that is why you don't call business an "ecosystem".

Re:"apex predators"

[shutdown -p now]

If, in the end, consumers end up paying lower prices, why exactly is it bad?

Re:"apex predators"

[Anonymous Coward]

Don't you dare say change is just change ... we have to keep things just as they are NOW ! Exactly as they are NOW! Whatever that NOW represents.

Re:"apex predators"

[Anonymous Coward]

moral confusion promoted by global capitalism

Why would capitalism aspire to anything higher than ethical behavior?

The real confusion is that you would even try to bind morality and capitalism or politics.

To extend Einstein, "God does not play dice with the universe, or maintain a portfolio."

Re:"apex predators"

[tibit]

They also lose the jobs that were paying them to consume in the first place. Walmart-like corporations, and I'm not necessarily claiming that Amazon qualifies as one just yet, are leveraging the short term social inertia. They literally bleed their customers dry by undercutting their own customers' sources of income. Such changes take time, so the effect is seemingly muted and out of the sphere of comprehension of the executives. The success of big Walmart-like corporations comes with costs that every one of us bears. Costs that are, essentially, deferred expenses for the corporations. The time to pay up will eventually come, when their business starts collapsing due to failure of the very consumers they were so dependent on.

Re:"apex predators"

[shutdown -p now]

This is only reasonable within the traditional capitalist framework where everyone has to work to earn their living. When you cling to that framework, as automation and other technological advances reduce the number of people required to efficiently create some product or perform some service, you have to introduce artificial inefficiency into the market so as to "create jobs". This is basically a form of the broken window fallacy, and, as such, bullshit. We need more efficient processes, and if that results in less workforce being utilized, well, perhaps it's time for universal basic income guarantee?

Re: "apex predators"

[mattack2]

Why shouldn't there be a penalty for mistakes? Those who *made* the mistakes should be penalized. In the banking industry, that should be *both* the banks *AND* the consumers that took out fraudulent loans (falsified paperwork saying they made more money than they do, etc.) There should have been no mortgage refinancing for them.

Re:"apex predators"

[mattack2]

Even if that's true, how did Amazon get the size it did with competitors able to use the 'walmart effect'? By BEING BETTER. I don't even argue with the 'walmart effect' being a bad thing. The companies it/others using the effect are buying things FROM are complicit in the business, of course.

Re:"apex predators"

[mattack2]

We need more efficient processes,

Agreed.

perhaps it's time for universal basic income guarantee?

Heck no, learn something new and get a new job. Or pick up trash, do anything. (Welfare recipients should pick up trash along the roads, or do the "jobs that Americans don't do".)

Re:"apex predators"

[shutdown -p now]

If robots can pick up trash, why humans should be forced to do so?

Re:"apex predators"

[mattack2]

I agree with that too. But we haven't gotten that far yet. (Heck, even what I've seen/heard of Roomba and similar, they end up getting clogged easily.. Still, it may be better than vacuuming manually.) But picking up random trash on roadways/in plants/etc., seems much much harder without wrecking the plants.

Regardless, even if EVERYTHING ends up being automated (except programming the automation machines), that doesn't mean there should be wealth distribution to give away one's money to another for doing nothing.

Re:"apex predators"

[shutdown -p now]

Regardless, even if EVERYTHING ends up being automated (except programming the automation machines), that doesn't mean there should be wealth distribution to give away one's money to another for doing nothing.

When everything is automated, the notion of money becomes rather nebulous to begin with. Money represents scarcity of resources, including productive labor. If labor is no longer scarce, it cannot be tied to money in any meaningful way anymore.

Re:"apex predators"

[dcollins]

In principle, I agree with you. But in America, which is seriously more likely to happen: (a) widespread socialist safety net, or (b) imprisoning tens of millions of people that can't support themselves? The "technology will free us from work" prayer has utterly failed in our economic context for over 100 years now.

Re:"apex predators"

[shutdown -p now]

What will most likely happen is (b) followed by a revolution followed by (a). The transition to a post-scarcity society is a fundamental economic change, and it will inevitably have to lead to a radical transformation of the political system, as well.

Re:"apex predators"

[Anonymous Coward]

"It's a distinctly human behavior: empire building."

Only for you white folks. Other cultures were happy just living with the land.

Another one that has turned evil

[gweihir]

For anybody that disagrees: The holy grail of capitalism, the "market" only works if there is competition. Amazon is aiming squarely at a monopoly and that is the most evil construct capitalism knows as it negates all positive effects that capitalism can have.

Re:Another one that has turned evil

[EmagGeek]

Last I checked I could buy things online from thousands and thousands of different online retailers.

That sounds an awful lot like competition to me (and there are browser addons that automatically search competitive online retailers for items you're looking at).

Re:Another one that has turned evil

[wisnoskij]

It is hard to hate someone who provides such a great service.

And I do not see any Monopoly like actions, like MS has done in the past. just peerless competition.

I have not seen them stifling other competing services, just competing and winning against retail. It is not their fault that retail does not seem willing to change to compete, and that no one is decent launching Amazon-like services.

It is like Steam, sure they have a monopoly, but it is not their fault.

Re:Another one that has turned evil

[pikine]

Trying to be the monopoly of the everything store is very difficult. Jeff Bezos likes to play the predatory strategy where price is lowered to a loss in order to drive competitor out of market. But you can't do that to every market simultaneously all the times, and given enough incentive, someone will always figure out how to enter the market by adding more value. Amazon will eventually crumble under its own weight if it continues down that strategy.

A good strategy is to deliver exceptional value in a market, but you can only do that if you focus on only a few things.

Re:Another one that has turned evil

[Anonymous Coward]

So now a business trying to expand is considered a bad thing? Would the world somehow be a better place if Amazon had simply been satisfied with selling books and stopped there? I think in your twisted mind, "utopia" would be everyone living as a subsistence farmer for fear of someone "aiming squarely at a monopoly" if they dared to do more.

Re:Another one that has turned evil

[Anonymous Coward]

It is hard to hate someone who provides such a great service.

This. Amazon has changed business for the better. When I was a kid anything bought via phone or mail was "allow 4 to 6 weeks for delivery". Only with Amazon did this finally change to 2 or 3 days. Now Amazon is investing heavily to provide same day delivery. What a gigantic difference. Others now provide delivery this quickly but only because they can't compete with Amazon otherwise.

So far Amazon has been a great example of Capitalism's good points (except for maybe refusing to collect state sales tax until recently). I'm surprised to see all this hate.

Re:Another one that has turned evil

[Anonymous Coward]

Yeah I'd have to agree with you on this. Plus, there's so many dickhead retail joints, like the grand fucking tumor on the world's ass, Walmart, that I really just can't summon the will to give a shit about them getting eaten alive.

Re:Another one that has turned evil

[Anonymous Coward]

However, capitalism seems to breed monopolies. Strange contradiction of theory and practice.

Re:Another one that has turned evil

[BitZtream]

Great service? Are you fucking kidding? They allow businesses to masquerade as Amazon, but sell you shit from some other random fuck and they do their best to hide it, they do everything the can to avoid paying taxes until it benefits them and hurts others to do so.

Amazon is an absolutely shitty company and if you had half a clue you wouldn't deal with them at all. Bezos is a fucking pig that needs to be shot in the knee caps and left to suffer for the damage he's doing to the nation.

Stop being such a short sighted selfish fuck, there is nothing good about Amazon.

Re:Another one that has turned evil

[__aaltlg1547]

With same day delivery, Amazon is looking to be the replacement for your local retailer. Or rather, to make it work, maybe what they really need to be is the delivery service for your local retailer. They find the best price they can get for the item you want from a local retailer and deliver it the same day. No need to stock anything at all.

Re:Another one that has turned evil

[houghi]

The problem is that nobody can become competition, unless you have enough money already.
Competition is always explained with a 19th century business model in mind where you talk about many bakeries in a city that will keep prices down.

This is true if there are several parameters true.
1) There is competition to start with and/or it is easy to start a new competitor. e.g. I can start making bread myself and start selling it.
Reinheitsgebot in Germany was a law to prevent competition, not just high quality beer.
2) You talk about only a minority of items. So not the whole chain from beginning till end and no crossover products.
4) You need to have a big enough sample of competitions to prevent price fixing between competitors. When you have only a few competitors, they will devide the market into shares without any real incentive to rock the boat, thus no need of lowering the prices anymore.

When your customer base a a few hundred or a few thousand people in a city, you can easily say that having say 10 or 100 bakeries for bread is enough to keep the competition going.

When your customer base is 1.000.000.000+ people, having 10 companies means in reality not having real competition.

I agree that it is not their fault (other than trying to be a monopoly is almost naturally for a company.) that does not make it right nor should it stop people from preventing this from happening.

That however needs government rules and the people who pay the government are not willing to let that happen.

One of the advantages of being a monopoly is that during the race towards the moment that they are a monopoly, you pay less. The moment it becomes a monopoly, not only will they be able to dictate the price (and that still might be low) they also dictate the product. So perhaps YOU are interested in price, I might be interested in other things.

Look at the ISPs that are unwilling to invest in faster Internet for over a long period of time. Google will take over, because what they are interested in is selling your data and the more data you give them, the more they can sell.

Having not enough competition will slow down innovation. And when I think of competition on a global scale, I imagine hundreds if not thousands of companies that I should be able to choose from.

If that comes at a slightly higher price overall, I am gladly willing to pay for that.

Re:Another one that has turned evil

[Attila Dimedici]

Yes, the evidence suggests that Amazon is aiming for a monopoly. However, history suggests that they will fail. My study of history says that monopolies only arise when the government intervenes to suppress competitors (there may be some industries which are an exception to this, but Amazon is not in one of those).

Re:Another one that has turned evil

[Attila Dimedici]

No, governments CREATE monopolies, without government intervention very few, if any, monopolies could come into existence.

Re:Another one that has turned evil

[XcepticZP]

If that comes at a slightly higher price overall, I am gladly willing to pay for that.

You might be, and you even might be in a position to do so. However, the vast majority of people out there are not willing to pay a higher price for their morals. The truth of the matter is that Amazon is doing exactly what people want it to do. Because most people aim squarely for a smaller price on the items they buy. I'd take a guess and say that that is predominately due to the consumer mindset that we as a society have been forced into breeding. Just listen to some of the leading Fed economists and how they talk about "boosting" "consumer spending" all the time. This is not a free market, it is not a natural market, and you can't blame a profit-seeking entity for trying to exploit it in whatever way they can. Instead, look at cause of such behavior.

Re:Another one that has turned evil

[cyber-vandal]

Oh piss off and read a dictionary you tedious libertard.

Re:Another one that has turned evil

[Anonymous Coward]

We're waiting for you to tell us how you really feel about them.

Re:Another one that has turned evil

[Anonymous Coward]

Amazon will never have a monopoly. It's far too convenient to pick up groceries on the way home. It's a simple matter to head to the local big box department store or home store. If you're really saucy, you might even try shopping at some local mom & pop stores. But Amazon can only capture the markets where it can box and ship. Many items are too bulky, or too large, or too volatile, to ship by common carrier.

They derive a benefit from the fact that they generally don't collect sales taxes, and their customers don't pay use taxes on those products. That practice will not live forever, and Amazon's market share will drop because of it.

Also, you don't seem to understand capitalism very well. You have apparently only learned the words uttered by the religion of socialism and the morally bereft tidings of the Occupy barbarians.

Re:Another one that has turned evil

[MightyYar]

Do you pay taxes that you don't have to?

Re:Another one that has turned evil

[MightyYar]

He has a point - could a monopoly exist without a government corporate charter?

Re:Another one that has turned evil

[srichard25]

You don't see any Monopoly like actions yet from Amazon because they are not truly a Monopoly yet. When MS was battling neck-and-neck with Apple, they were generally seen in a pretty positive light. It wasn't until they had destroyed all competition that they started abusing their monopoly status. I predict the same thing with Amazon. After Amazon has destroyed most of the local stores and there is no other alternative but to shop with them, will they still provide the same great service for the same low prices? History says that this is not likely.

Re:Another one that has turned evil

[gtall]

Microsoft.

Re:Another one that has turned evil

[larry bagina]

The government did intervene to suppress competitors -- look at the Apple eBooks anti-trust trial.

Re:Another one that has turned evil

[__aaltlg1547]

You're confused. The holy grail of capitalism isn't "the market." It's the accumulation of capital. Ask any capitalist if that isn't what he's trying to do.

Re:Another one that has turned evil

[gl4ss]

there's some businesses that would have enough money to start to compete, but they choose not to.

(walmart etc.)

Re:Another one that has turned evil

[Anonymous Coward]

Or rather, to make it work, maybe what they really need to be is the delivery service for your local retailer. They find the best price they can get for the item you want from a local retailer and deliver it the same day. No need to stock anything at all.

That idea sounds like what Google is trying with Google Shopping Express.

Re:Another one that has turned evil

[gweihir]

The current state is not a problem and in fact is good. But if the article describes their end-game accurately, this "good period" will be limited and followed by utter evil.

Re:Another one that has turned evil

[gweihir]

And wrong. The problem is that most people calling themselves "capitalists" are not capitalists at all. They are greedy evil scum that tries to exploit the loopholes in capitalism.

Re:Another one that has turned evil

[Anonymous Coward]

The result of that case (which was settled and never went to trial) was to create competition, not suppress it.

Re:Another one that has turned evil

[Anonymous Coward]

Walmart bailed. About a year ago, they were really trying to compete with Amazon. 45 pounds of dog food with free shipping to Alaska. Like that was going to last. And it didn't.

Amazon followed suite. For a bit. Then they got smart. So now, Amazon does pretty much the same thing except they are a tad sneakier "I'm sorry, that item isn't available at your location, please select a different delivery location". I don't begrudge either Amazon or Walmart for not wanting to ship bulk items to the end of the planet for free. Just interesting who blinks first.

Re:Another one that has turned evil

[dryeo]

Most people do because it costs more to avoid paying those taxes. I could run purple gas in my lawn mower saving a couple of bucks a year but the hassle and cost to go get the purple gas makes it not worth it.
If I was running a turf farm and used hundreds of gallons of gas a year then it would be worth using purple gas.
I could also create a bunch of corporations in various countries and save a few dollars in taxes but once again the hassle and cost out weigh simply paying the tax. If I was much richer then the tax savings of multiple corporations would be cost effective.

Re:Another one that has turned evil

[Anonymous Coward]

I think you are dead wrong about the potential for Amazon to compete with local grocers. I know from my own experience, 90% of the groceries I pick up at my local supermarket are pretty much the same every week. I get bread, milk, juice, coffee, etc, pretty much the same all of the time. If Amazon could deliver these to my door at a competitive price every week with a few clicks from my computer, why would I need to waste my time going to the supermarket anymore and rolling around a shopping cart and waiting in checkout lines? I would happily give them my business.

Re: Another one that has turned evil

[Anonymous Coward]

Standard Oil
AT&T
etc.

Re:Another one that has turned evil

[PvtVoid]

It is hard to hate someone who provides such a great service.

Yes, yes, yes.

I buy pretty much everything at Amazon these days, except for food and building materials. Brick-and-mortar retail is circling the drain at this point: every once in a great while, I attempt to buy something at a store in a local strip mall, and nine times out of ten, I come back empty-handed and horrified by how bad it's gotten out there. I'm beginning to suspect that Bezos has infiltrated retail stores with irritating morons purely to drive you to Amazon.

Even more important, Amazon mediates the online purchase experience with small retailers. It doesn't take many times having to file a dispute with American Express to drive one away from corrupt indie electronics retailers, but even the worst of them won't fuck with you if the order is mediated through Amazon.

I'll take evil over incompetent almost all the time.

Re:Another one that has turned evil

[Anonymous Coward]

When I was a kid anything bought via phone or mail was "allow 4 to 6 weeks for delivery". Only with Amazon did this finally change to 2 or 3 days.

How much of this is Amazon and how much of this is UPS and FedEx modernizing their services with the advent of newer technology? Amazon doesn't actually deliver anything, though they've made great strides in minimizing the time spent preparing the order. They certainly have a symbiotic relationship with shippers and the two have worked together to streamline the process, but a good bit of that 4-6 weeks was spent in transit, and eliminating much of that time is none of Amazon's doing.

Re:Another one that has turned evil

[Anonymous Coward]

Any good deals on music from Amazon lately? No... Amazon's routine 30-35 discounts on CDs ended after Tower Records, HMV and the other bigbox music retailers collapsed 6-7 years ago. Well, maybe not on Katy Perry music, I haven't checked.

Re:Another one that has turned evil

[AlphaWolf_HK]

It's fine and all to bash amazon for not collecting sales tax until you actually look at the stupidly high sales taxes some states have. Where I live it is 9.1%. It's annoying as hell when, for example, you buy a new laptop and have to pay an extra $100 above the asking price. We still pay income taxes and real estate taxes, in addition to taxes on vehicle registration. We also pay the highest taxes of any state for having cell phone service.

Re:Another one that has turned evil

[Anonymous Coward]

First they came for the Incompetent and I said nothing....

Re:Another one that has turned evil

[Anonymous Coward]

Yes, why not?

Re:Another one that has turned evil

[Tom]

You have capitalism and free market theory confused. They have things in common, but they aren't the same.

Capitalism will always tend towards monopoly, because capitalism is about profit and monopoly rent is where the real profits are.

For the free market, a monopoly is a death spell.

But you can have a free market without capitalism, and capitalism withou a free market. It just happens that the synergies between them are such that you generally meet them together. But they don't have to, and that's why capitalists trying to abolish the free market in favour of private monopoly profits isn't a contradiction.

Re:Another one that has turned evil

[Anonymous Coward]

And what is the likelihood of this happening? I mean they aren't even close at the moment, but you people seem to be taking the position that they must be stopped NOW! based on nothing more than fear and a desire to predict a long off future that you don't actually know a thing about.

Re:Another one that has turned evil

[93 Escort Wagon]

Amazon has changed business for the better. When I was a kid anything bought via phone or mail was "allow 4 to 6 weeks for delivery". Only with Amazon did this finally change to 2 or 3 days.

This is incorrect. FedEx and UPS offered overnight service in the 1970s and 1980s. LL Bean (to pick just one example) used to offer free two day shipping on their catalog orders.

Let's not rewrite history. If anything, credit for this should go to the shipping companies that saw a huge hole and filled it.

Re:Another one that has turned evil

[MightyYar]

I'd like your theory on how that would work. Even better would be an example, but I don't think there is one.

Re:Another one that has turned evil

[Anonymous Coward]

Those taxes pay for services. It is amazing dumb fucks like yourself do not understand this concept.

Re:Another one that has turned evil

[turbidostato]

"Last I checked I could buy things online from thousands and thousands of different online retailers."

Last I checked, and I checked very recently, very many of retailers were in fact reselling Amazon products at a price locked to that of Amazon. This means that in the mid to long term that either Amazon, or an Amazon-like, most probably from China, will take all the cake.

When globalization works, long tail be damned, the winner takes all.

The article forgets *why* Bezos is doing this: it is out of sheer panic of Chinese giants the likes of Alibaba to eat his cake overnight.

Re:Another one that has turned evil

[__aaltlg1547]

If they own the means of production at which other people work, they're capitalists.

Re:Another one that has turned evil

[StripedCow]

I guess the monopoly would become the government.

Re:Another one that has turned evil

[turbidostato]

" The truth of the matter is that Amazon is doing exactly what people want it to do. Because most people aim squarely for a smaller price on the items they buy."

Absolutly wrong.

At least for the moment, what Amazon really brings is catalogue. While a reasonable price, that's not the main of it, but the fact that I gain access to products all over the world I otherwise wouldn't even know they exist.

And Amazon is not going for low prices if at all possible. An anecdotal example: I just bought a (quite expensive) fry pan. First, I couldn't find it in any local retailer, so that's what I most valued from Amazon, not the price. Second, I, just out of curiosity, looked for the same item at Amazon Italy instead on Spain, where I live in. Surprise! in Italy was like 40% cheaper. A second item was much cheaper in USA, even taking taxes into account: surprise! that item "couldn't" be sent to my country -but I was able to buy it at Amazon Spain at a much higher price.

Oh! and the fact that there are already web sites tracking prices on different subsidiaries of Amazon, as I discovered later, probes my anecdote is not just an anecdote but ongoing business.

Amazon is mangling prices as much as anyone else.

Re:Another one that has turned evil

[turbidostato]

"The problem is that most people calling themselves "capitalists" are not capitalists at all. They are greedy evil scum that tries to exploit the loopholes in capitalism."

And that's not the intended way for capitalism to work exactly how?

Re:Another one that has turned evil

[AlphaWolf_HK]

Yes, that's a great reason to have a high sales tax for services that are worse than the same ones that other states provide at lower cost.

Re:Another one that has turned evil

[afgam28]

In most places, when you buy something from a company in another state, the buyer is responsible for declaring and paying a "use tax". So I think a better question is: do you pay taxes for other people who were supposed to, but didn't?

Re:Another one that has turned evil

[gweihir]

Maybe read up on what capitalism is instead of listening to the leftist propaganda?

Re:Another one that has turned evil

[swillden]

The current state is not a problem and in fact is good. But if the article describes their end-game accurately, this "good period" will be limited and followed by utter evil.

At which point the door will be wide open for competition to come in. At the point the predatory monopoly raises their prices they lose the only thing deterring competition... this is especially true on the Internet, where competitors are just a click away.

Re:Another one that has turned evil

[swillden]

The problem is that nobody can become competition, unless you have enough money already.

Or unless you have access to capital markets, which everyone does if they bother to learn how, or hire someone who knows.

Re:Another one that has turned evil

[XcepticZP]

Wait, what? The free-market did, and is doing to Microsoft (or rather Windows), exactly what we expected to be done to a monopoly. Linux, android, OSX, and countless other OS's and distros have sprung up and have slowly been eating away at the "monopoly" market share that we so hate Microsoft for having and abusing. It may not be the best example, but it is indeed an example of the free market fixing a monopolistic situation. Contrast that with the countless examples of state-enforced or state-aided monopolies, and you'll quickly realize that the guy you are responding to is right for the most part.

Show me a long-standing monopoly or oligopoly and I'll show you the government regulations, laws and red-tape that are behind it.

Re:Another one that has turned evil

[XcepticZP]

Quit responding like a dick, and actually say something in retort. This is the second post of yours I've read now where you simply respond with childish remarks about "first week economics 101, study economics" or "read up on what capitalism is".

Re:Another one that has turned evil

[PlusFiveTroll]

If you look to deliver exceptional value in just one market you are going to get your lunch ate eventually. Microsoft dominated the desktop OS market for years, then all of a sudden Apple, and now Google have taken over the phone/tablet market while the desktop market continues to shrink. Microsoft didn't try to provide exceptional value to the phone market for years (WinCE and its 6 versions of the OS were total crap for that purpose). Microsoft has also spent billions in the console market and only has done marginally well, but it has kept Sony and other competitors from making inroads too far in to it's OS/gaming market because of it.

Re:Another one that has turned evil

[pikine]

The reason why Microsoft got their lunch ate is because they've gotten complacent, after securing monopoly of desktop operating systems and office productivity suite. But they could still get away with it for at least another decade precisely because they delivered exceptional value in what they did in that market. Past performance is no guarantee if they will continue to deliver exceptional value.

Microsoft's problem with mobile and gaming console is that they didn't deliver exceptional value, but they still decided to enter the market anyway. Even so, it would have been a fruitful experiment if they could have applied their experience in mobile and gaming to motivate for a real-time resource-constrained operating system that could help making their main flagship OS more nimble and responsive, but we've seen no progress in that regard because their departments apparently don't talk to each other.

Re:Another one that has turned evil

[turbidostato]

"Maybe read up on what capitalism is instead of listening to the leftist propaganda?"

Humm... I got my basic ideas about capitalism reading Adam Smith. Is he the kind of "leftist propaganda" I should avoid?

Re:Another one that has turned evil

[shutdown -p now]

Amazon doesn't actually deliver anything

They do - "Amazon Local Delivery" is their own thing. And that program is going - it started with just Seattle, and it was already 10 cities last year.

Also, I think that popularity of Amazon was in large part the reason why UPS and FedEx got their shit together, at last.

Re:Another one that has turned evil

[gweihir]

You cannot have a discussion if people do arbitrarily change definitions to suit their needs.

Re:Another one that has turned evil

[Attila Dimedici]

The only thing about your comment that I understand is that you do not like me. Are you saying that monopolies CAN easily exist without government intervention? Are you saying that thinking it requires government intervention to create monopolies is a liberal idea (the most common usage I have seen of the term "libertard" is to refer to those people who call themselves "liberals', but are actually psuedo-fascists)?

Re:Another one that has turned evil

[tibit]

While I agree that quick delivery is a nice thing to have, I still wonder: do we really, really need it? Is the cost worth the convenience?

Re:Another one that has turned evil

[tibit]

So, what's wrong with moving to another state?

Re:Another one that has turned evil

[ScottCooperDotNet]

When I was a kid anything bought via phone or mail was "allow 4 to 6 weeks for delivery". Only with Amazon did this finally change to 2 or 3 days.

How much of this is Amazon and how much of this is UPS and FedEx modernizing their services with the advent of newer technology? Amazon doesn't actually deliver anything, though they've made great strides in minimizing the time spent preparing the order. They certainly have a symbiotic relationship with shippers and the two have worked together to streamline the process, but a good bit of that 4-6 weeks was spent in transit, and eliminating much of that time is none of Amazon's doing.

AmazonFresh is one of their new direct delivery programs and growth of these programs is likely why Amazon became in favor of sales taxes for online purposes. They'll now have a physical presence in many states, so won't be able to duck local taxes. From the Boston Globe: 'A Massachusetts distribution center could allow Amazon to offer same-day delivery in New England, something it has been rolling out in other parts of the country, according to retail analysts.' The sales tax for Amazon purchases starts in November here. Even more strategically important, it adds a barrier to entry for anyone else looking to get into online retailing.

As for the 4-6 weeks, that was due in part to many of these catalog operations not having significant inventory in stock, they'd place their own order after receiving customer orders. For the ones that did have inventory in stock, sitting on your money made them interest, so the longer they took, the more 'free' money they made.

Re:Another one that has turned evil

[AK Marc]

You are right. The limiting size of companies before government charters was liability. If you were personally liable as the owner for every decision ( many you could provably have no knowledge of), then you'd voluntarily keep the company small enough that you'd have better visibility of every operational decision. When a company can have the right hand not know what the left is doing, then it requires government protections, or the money will leave. Doesn't have to be a full publicly traded corporate charter, but even an LLC is enough to shield the owners/directors from liability, leading to growth beyond personal responsibility, making it an amoral (and tus evil) institution.

Re:Another one that has turned evil

[drkoemans]

Agreed. What Amazon has provided me is literally hundreds of hours over the past decade where I don't have to drive around town to find the item I want. I am the problem, if it isn't on Amazon, it doesn't exist to me. I'm sorry it is at the expense of local businesses, I still say that is fair trade for a substantial amount of my life back not sitting in car driving around traffic hell we call Seattle.

Re:Another one that has turned evil

[vandamme]

Look how well it worked for Microsoft.

Re:Another one that has turned evil

[Anonymous Coward]

Wouldn't mind 9.1%. We've got 20% VAT (sales tax) here in the UK.

Two words

[Anonymous Coward]

Tax avoidance

Re:Two words

[CastrTroy]

Exactly. It makes very little sense for a business to post profits. Personally, I'd rather have a business hire more workers than pay money to the government (workers pay taxes anyway). Even if they aren't hiring people directly, they're usually using the money to create some kind of economic activity which will mean more jobs in some other company. If they post profits, it just means money is sitting in the bank doing nothing, while some of it is going to the government. If the government was smart, they'd tax revenues, and companies would have to figure out how to work the amount of taxes paid into their cost structure. Too bad human citizens can't just pay taxes on profits. I'd love to only pay taxes on money left in my account at the end of the year, regardless of what I chose to spend it on.

Re:Two words

[rtaylor]

You don't really think the majority of the funds in your bank account sit in a random bank vault do you?

Re:Two words

[kumanopuusan]

I say avoision.

Re:Two words

[Anonymous Coward]

"Tax avoidance"
Where should we begin...
Let's just list a few for now,.
Start with accountants that know how to cook-the-books.
Research methods to change the financial situation to cause lower tax owed or defer payment.
1. Tax shelters, the use of deductions and credits.
2. Transfer pricing manipulation
3. Legal vagueness of the distinction between "business expenses" and "personal expenses
4. Move assets to a tax havens.
And it could go on-and-on...

 

Re:Two words

[Anonymous Coward]

>> If the government was smart, they'd tax revenues

In the case of Amazon, this is known as "sales tax."

Re:Two words

[Anonymous Coward]

Except for all the ridiculously profitable companies that manage to pay close to zero in taxes. Seems like a problem to me. But you should rest assured. It is just as you want.

"Apex Predators" need to be put down

[gweihir]

They are a massive danger to society, as the basically consume everything, build monopolies, restrict choice, destroy the market. They are also fundamentally stupid, as they are unable to even perceive the massive damage they are doing.

Basically, the only thing these people can do is build empires. One of the best known fact about empires is that they all collapse sooner or later. The larger they are, the worse the damage when they collapse as they will have killed anything that could take over when they are gone. Any admiration for these people is completely misplaced. They are not part of anything good, they are part of the problem.

Re:"Apex Predators" need to be put down

[drinkypoo]

The good news is that Amazon is highly distributed, and what they operate (fulfillment centers) are in significant demand. If Amazon goes away, its assets can be sold to a variety of buyers and still be highly useful.

Re:"Apex Predators" need to be put down

[LWATCDR]

Amazon is just the 21st century version of Sears and Roebucks. You talk about the dangers but miss out on the benefits. How many stores are using Amazon for their fulfillment? As far as bookstores go Amazon is killed Boarders but then Boarders and B&N killed the mom and pop book store. But Amazon has allowed many authors to self publish ebooks for a much lower price than they could back in the day. When I was a kid and wanted to buy a model airplane or a book, or music I was limited to what the local stores had. I was lucky in the model department but books and music where really limited. Sorry but Amazon is doing well because it offers a service that people really like.

Re:"Apex Predators" need to be put down

[steelfood]

When they're about to collapse, they'll just ask the government for a bailout. Problem solved.

Simplified version.

[will_die]

The author is upset because Amazon has expanded beyond selling just books and invested earnings into expansion instead of giving back to the investors.

Re: Simplified version.

[antifoidulus]

Considering he worked at amazon during the boom years my guess is he has a significant stake in amazon...

Re:Simplified version.

[timeOday]

You call this 'not giving back to investors?'

So long as Amazon's re-investment in itself results in solid growth, the stock continues a steady climb, which isn't so much different from paying a dividend.

Re:Simplified version.

[John.Banister]

Mr. Wei doesn't seem to me to be upset about Amazon being on the path it's on. He seems to me to be pretty admiring of it. Also, I don't think Amazon is aiming at monopoly. I think they're aiming at ubiquity. You don't need to make obscene profits on any single item if you sell everything to everyone. As he said in the blog post, all Amazon will need to do to be really profitable is to stop expanding once they're done becoming as pervasive as it's possible for them to become. I reckon they've got a long ways to go yet.

Re:Simplified version.

[Anonymous Coward]

Trust me, it's different. The "steady growth" is mostly for reserved stock held by the executives and the board, not for stock in the market. The "growth" of stock in the open market mostly shows up in the profits of stock brokers, not common investors or people holding stock options.

And even better: if a company is constantly in the "buying another company" mode, the stock option holders are constantly being blocked by SEC regulations from cashing in those options. The *executives* can, and do, leak the informtion to family members or "friends" who will profit from the trading during the "lockout", but they themselves keep their hands clean of the clearly insider trading during those periods. And the stock option holders *cannot* sell those options during the lockouts.

Re:Simplified version.

[RawsonDR]

The author is upset because Amazon has expanded beyond selling just books and invested earnings into expansion instead of giving back to the investors.

Somehow you distilled the article down into something that it's not. Where does he come across as upset? He isn't even critical of Amazon.

The author gives a seemingly simple explanation as to how Amazon conducts its business differently than everyone else. This apparently is unique enough that it garners lots of wild speculation by other observers and financial analysts, many of the same reactions I'm seeing in the comments here. (My) Simplified version:

• Amazon happily accepts a lower average margin of profit than other companies would. A small subset of its products showcase this to an extreme, but they are the exception.
• The profit it does see, it uncompromisingly reinvests back into itself.

The above concepts are not unfamiliar in the least - any business that wanted to get ahead by being more efficient than the competition started by doing this first. You forgo the low hanging fruit to lift your business into a bigger marketshare, and reap the rewards at that level. The small but significant difference, in my opinion, is that Jeff Bezos does this on autopilot.. it's a mentality instead of a tactic, almost a philosophy. It is a tiny difference in human psychology, which amounts to a profoundly different company than would exist otherwise.

But the rest of us need an appropriate speculative explanation. It's this speculation to which the author is responding.

Duh

[Anonymous Coward]

The steps are pretty simple

1. Leverage the mostly tax-free shopping to take down offline competitors, while also establishing your online presence as THE online presence.
2. Use razor thin, or even negative profit, to wipe out your other online competitors.
3. Once states finally start to get their acts together, negotiate with the early (tax) adopters for tax credits and/or other favorable deals.
4. By the time taxes are everywhere, you have destroyed most of your offline competition and a good chunk of online competition, leaving you free to raise prices and reap profits.
5. Profit.

Who cares?

[DiamondGeezer]

The Slashdot questions are:

Does it run Linux?
Is it in direct competition with Microsoft?
Does it use Open Source?
Has the NSA been using its information to monitor domestic terrorism?
and
Can I get it all for free via torrent?

Another megalomaniac idiot

[mbone]

The venture capitalists sure do seem to love these guys.

Re:Another megalomaniac idiot

[JazzHarper]

Amazon went public 16 years ago. Any capital still invested in them at this point can no longer be considered "venture capital".

Apex predators.

[serviscope_minor]

People love to seem themelves as some sort of lion (apex predators, but sometimes killed by buffalo) or hawk or something. Excluding humans as predators, since humans will literally eat anything that moves, apparently no matter how toxic or dangerous, apex predators include a lot of things.

For example whale sharks which are huge, slow moving an harmless to anything larger than plankton.

Electric eels which while cool are small and live in muddy water has gills that don't work in water and eats small invertebrates.

The black backed gull which basically is a honking great seagull and about as annoying.

In Austrailia, cane toads are apex predators too. Too toxic to eat.

The small and exceptionally pretty poison frogs are apex predators too. Again, far too toxic to eat.

Murray Cod. Requires no further explanation.

And so on. Apex predators include more than just fast moving birds and large felines.

Re:Apex predators.

[ductonius]

Murray Cod. Requires no further explanation.

Bill Murray Cod. Requires further explanation, but it's hilarious.

ACtually ...

[Anonymous Coward]

Yes to just about all the above.

Re:ACtually ...

[Anonymous Coward]

Can I get it all for free via torrent?

Yes to just about all the above.

If you have the magnet link, please post it.

The problem being...

[Anonymous Coward]

Amazon opting to be flat, effectively at 0% margin, is a game other businesses don't have the will to do, and Amazon doesn't have the will to do so indefinitely. The idea is to endure long enough to starve out competitors until monopoly acheived. At that point, rather obscene profit can be reaped. This is critical because much of Amazon's businesses is very intensive in up front investment to get logistics or infrastructure going. Competitors currently can compete because the logistics and infrastructure they built is already there. If competitors are forced out over time, it's really hard for a *new* competitor to emerge.

I've seen it discussed in hosting versus EC2. While companies can operate cheaper or as cheap as EC2, they don't see money at that scale. I've seen at least one company talk very seriously about starting to close down hosting and reclaim investment in datacenter footprint since EC2 has made it impossible to profit. Once that move has been made, this company is unlikely to ever get back into the game again because it would mean having to build up a lot of expensive infrastructure with low likelihood of long term payoff.

Re:The problem being...

[MightyYar]

effectively at 0% margin, is a game other businesses don't have the will to do

One look at Amazon's share price should tell you why that is a simple mentality. The market rewards revenue growth handsomely. Amazon investors have won many times over. Amazon executives are paid handsomely. A company does not need to pay out dividends to be a good investment.

Re:The problem being...

[Anonymous Coward]

A company does not need to pay out dividends to be a good investment.

For institutional investors that can direct policy at a company because they have enough shares to have enough votes and/or seats on the board, I would agree with you.

For individual investors looking to buy 10, 100, or even 1000 shares: that's delusional. Small-scale investors pretty much require dividend payments for a stock to be a good investment, otherwise you are simply speculating (read: gambling) that the institutional investors are going to increase the value of your tiny ownership stake. I highly recommend reading Benjamin Graham before you toss your principal into the winds of non-dividend-paying equities.

Re:The problem being...

[gweihir]

Indeed. The classical strategy is this:
1. Kill all competitors, even if it brings you to the brink of death yourself.
2. Now that the competition is dead, raise prices arbitrarily high.

This is one of the reasons why a completely free market does not work.

Re:The problem being...

[Anonymous Coward]

They may very well have different goals but typically if the institutions shares increase in value so to have the stakes of the small scale investor as well.

and luckily most investors large or small scale have the similar goal of making money even if they have different strategies of doing it. so it really isn't that big of a gamble to assume the institutional investors want to increase the value of their shares and in most cases it means the company as a whole is more valuable so it also positively affects the smaller investors.

Re:The problem being...

[WaywardGeek]

I think it's dumb every time I hear we need to lower big business taxes to foster innovation and create jobs. Tech companies produce tons of high paying jobs, make investors rich, and often don't pay a dime in taxes, instead investing in growth, creating even more jobs.

As a public company, producing profits sucks to some extent. You have to pay taxes, investors ask for dividends or stock buy-backs, and you lose control over investing in growth as investors become addicted to taking your profits instead of letting you grow. Just look at Dell, for example. There are good reasons to take a company private. Among them is to gain the ability to spend your profits on improving the company rather than having investors leech off you.

Re:The problem being...

[MightyYar]

For individual investors looking to buy 10, 100, or even 1000 shares: that's delusional.

Look at the price history of the S&P 500 some time. Sure, it's even better with total returns, but letting a company reinvest money instead of returning it can most certainly be a good strategy for the small investor. If you have to consider taxes, then a growth strategy makes even more sense - I'd much rather pay the long-term capital gains rate (though the special qualified dividend rate kind of renders the point moot these days).

Re:The problem being...

[Anonymous Coward]

This is a frequent claim, but in commerce, it generally doesn't work that way. Even the robber barons didn't do that - Standard Oil driving everyone else out of business resulted in significantly lower prices than before they were a monopoly. Monopolies are only bad if there are barriers to entry - the threat of competition can restrain prices almost as much as actual competition.

Re:The problem being...

[bitt3n]

Amazon opting to be flat, effectively at 0% margin, is a game other businesses don't have the will to do

This is baffling to me. Why doesn't Walmart compete with Amazon? Walmart has the cash to fight it out with them, and they certainly have the incentive, but it seems like they're getting beaten badly. Their site sucks relative to Amazon's. If it were just a question of a relentless desire to expand and dominate, it seems like there would be more competition between them. Is it really just a question of taxation? Does Walmart compete effectually in states where Amazon gets taxed?

Re:The problem being...

[couchslug]

"Amazon opting to be flat, effectively at 0% margin, is a game other businesses don't have the will to do, and Amazon doesn't have the will to do so indefinitely."

Keyword, "will". Other businesses CAN do it, it could be greatly to their competitive advantage, but not doing it is their CHOICE.

I'd like to see more businesses compete to serve me.

Re:The problem being...

[Anonymous Coward]

Amazon opting to be flat, effectively at 0% margin, is a game other businesses don't have the will to do, and Amazon doesn't have the will to do so indefinitely.

You should try reading the article...Amazon is not operating at or near 0% margin. The whole point of the article is that they're operating at zero profit by choice despite their businesses being very profitable because they re-invest all that profit in their business. This is very different than operating unprofitable businesses at near 0% margins.

Re:The problem being...

[Jah-Wren Ryel]

Funny you should mention that:

To Catch Up, Walmart Moves to Amazon Turf

October 19, 2013
" The country's largest retailer, which for years didn't blink at would-be competitors, is now under such a threat from Amazon that it is frantically playing catch-up by learning the technology business, including starting @WalmartLabs at Walmart Global E-Commerce, its dot-com division.

The two retail behemoths, one the king of the physical store and the other the conqueror of the online world, are battling over e-commerce -- competing for the most talented engineers, trying to gain the upper hand in the new frontier of same-day delivery and warring over online pricing. "

Probably paywalled, but the NY Times paywall is like swiss cheese.

Re:The problem being...

[StripedCow]

The classical strategy of a pure liberal is this:
1. Simply ignore that argument.

This is one of the reasons why structural economic reform will never happen.

Re:The problem being...

[gweihir]

You are really stupid, are you? Monopolies are _always_ exceedingly bad, no exceptions. That is Economy 101, first week. Also, we are not talking about some general case, which seems to have escaped you, we are talking about Amazon.

Re:The problem being...

[XcepticZP]

2. Now that the competition is dead, raise prices arbitrarily high.

This is one of the reasons why a completely free market does not work.

And what happens when the sole entity in the market place raises their prices "arbitrarily high"? Yes, you guessed it, boys and girls, competition moves right back in, like cockroaches. Really, Economics 101...second week. Did you flunk-out early, or did you skip that week?

The only time the above is not true, is when the entity has a government-enforced or government-aided monopoly. Either that, or some other really weird and extreme scenario that people like you usually come up with. I've debated with statists too many times to not include this addendum.

Re:The problem being...

[swillden]

Amazon opting to be flat, effectively at 0% margin

No, Amazon is not operating at 0% margin. Amazon is generating healthy profits from its business. But it is choosing to reinvest those profits rather than either pay them out as dividends or pile them up in the bank.

The idea is to endure long enough to starve out competitors until monopoly acheived. At that point, rather obscene profit can be reaped.

Since the basis of your argument is factually incorrect, there's really no reason to go into this, but I want to. Your conclusion "At that point, rather obscene profit can be reaped" is a common assertion of predatory pricing theories... but one that doesn't really seem to actually exist. In the last few decades courts have added a test for predation that requires that there be a realistic prospect of recouping the losses due to predatory pricing in the ensuing period of monopoly rents. After courts adopted that test, no antitrust litigation based on a predation theory has succeeded, because it's extremely hard for anyone to rationally believe that losses will be recouped.

Why? Two reasons.

First, predatory pricing is ruinously expensive. Far more so for the would-be monopolist than its targets. This is because in order for a company to be in position to execute such a play it must already own most of the market, which means that the net effect of the below-cost prices it sets get multiplied by the volume it already does, plus the new share that it acquires from its targets.

Second, assuming the monopolist does manage to drive out all competition, and begins charging obscene prices, it becomes not only possible but very profitable for competitors to enter (or re-enter) the market. Actually, because of this, if the competitors have access to good capital markets it's unlikely that they'll be driven out of business at all, because everyone will recognize the higher prices which are to come and so capital will be available to enable the competitors to survive the price war.

So-called "post-Chicago" theorists have been able to construct some narrow scenarios in which predatory pricing is rational, but they're very narrow and ultimately boil down to circumstances in which the competitors can be successfully bluffed by the would-be monopolist.

Note that all of this is distinct from a different scenario, in which the big player isn't being anti-competitive at all, but is instead is just much more efficient, and therefore has much lower costs. That sort of "monopolist" can maintain healthy profit margins while pricing goods below what the competition can afford. This, however, is not harmful to consumers, in fact it's good for consumers. Of course there's the possibility that once the competition is driven out the monopolist will raise prices while retaining its low costs. Should that ever happen, then that would be an appropriate time for regulators to step in. I'm not aware of any real-world examples, though.

Re:The problem being...

[Shadow of Eternity]

Where's the competition in the ISP or Cellphone market then? Oh, right, it doesn't exist because of BARRIERS TO ENTRY.

Re:The problem being...

[Anonymous Coward]

No, monopolies aren't always bad (and first week Economics is not a complete picture). There is always a cost to monopolies *if* they are dedicated to profit maximization and there are barriers to entry for new players, but that's not the same thing as saying they are always bad, because there can also be downsides to competition, and you can also make a monopoly that is not dedicated to profit maximization. Depending on the environment (eg. the industry, etc.), and this might outweigh the costs of competition. However, there is good reason to be skeptical of monopolies by default, and I am not aware of any real reason to think Amazon would be a good one.

Re:The problem being...

[Anonymous Coward]

"Monopolies are _always_ exceedingly bad, no exceptions."

Bad for whom?
Monopolies in the past created immense wealth for the people who ran them. Speaking as the descendant of one of these, I can tell you that at least one monopoly did something wonderful: I don't have to work for a living.
Many people never took Econ 101, so it would be more appropriate to say that those who don't share your "knowledge" are ignorant, rather than stupid.

Re:The problem being...

[XcepticZP]

I agree with you. It's something that statists completely don't understand or get. Government's don't usually grant clear-cut monopolies. Instead, what they do is put rules, legislation, and all sorts of other barriers that nurture and protect monopolies. Even something as simple and innocuous as a "cellphone frequency" licence has the effect I mention above.

Re:The problem being...

[wisty]

> You are really stupid, are you? Monopolies are _always_ exceedingly bad, no exceptions. That is Economy 101, first week. Also, we are not talking about some general case, which seems to have escaped you, we are talking about Amazon.

If you are talking about a real world system, using the word "_always_", and calling someone else stupid, I hope you are being ironic.

Because there's _always_ exceptions to the rule, in real world systems.

Re:The problem being...

[Shadow of Eternity]

So you want how many companies digging up your lawn to lay their own cable? You're fine without building codes? We tried it your way before, in fact we tried things your way right up until the Guilded Age.

I think I'm going to start including "statist" in my list of phrases that automatically signify a wingnut, right up there next to ZOG and Chemtrails.

Re:The problem being...

[XcepticZP]

We obviously don't agree on this. However, you and the rest of the statists are perfectly content in not allowing me to be free to live the way I choose. I'm more than happy in letting you believe that your daddy government can protect you from everything. But as soon as you cross over and force that belief on me, you lose all moral standing and you're nothing more than a violent individual.

Oh, and before you think of suggesting Somalia, don't. We both know that's not a valid alternative to escaping a statis society, and if you suggest it you're just being facetious about the whole thing.

Re:The problem being...

[fulldecent]

Step 3: It is easy to start an online retail business and there are no fundamental legal hurdles or entrenchment, so competition comes from the woodwork and swallows your ability to overcharge customers.

Re:The problem being...

[tibit]

Note that all of this is distinct from a different scenario, in which the big player isn't being anti-competitive at all, but is instead is just much more efficient, and therefore has much lower costs. That sort of "monopolist" can maintain healthy profit margins while pricing goods below what the competition can afford. This, however, is not harmful to consumers, in fact it's good for consumers.

Of course, as we see with Walmart and its ilk, it is very harmful to consumers. Walmart employees are consumers too. For a while now, they haven't been paid a living wage. This is a widespread problem, not even specific to the U.S. or necessarily to big corporations. Labor markets are fucked up in a lot of the developed world. Europe is rolling along pretty much on inertia, just like the U.S. is. Once this inertia runs out, the consumers and the employers will be equally screwed.

Re:The problem being...

[swillden]

Note that all of this is distinct from a different scenario, in which the big player isn't being anti-competitive at all, but is instead is just much more efficient, and therefore has much lower costs. That sort of "monopolist" can maintain healthy profit margins while pricing goods below what the competition can afford. This, however, is not harmful to consumers, in fact it's good for consumers.

Of course, as we see with Walmart and its ilk, it is very harmful to consumers.

That's your opinion. Lots and lots of consumers disagree with you.

Walmart employees are consumers too. For a while now, they haven't been paid a living wage.

And yet they still choose to work there. I have a couple of relatives who work at Wal-mart, and it was an improvement over their previous jobs, which is why they took the Wal-mart jobs.

Re:The problem being...

[kaatochacha]

That's a subjective wonderful, and not an objective one.

Re:The problem being...

[Anonymous Coward]

effectively at 0% margin, is a game other businesses don't have the will to do

One look at Amazon's share price should tell you why that is a simple mentality. The market rewards revenue growth handsomely. Amazon investors have won many times over. Amazon executives are paid handsomely. A company does not need to pay out dividends to be a good investment.

Perhaps, but remember that in the end, those dividends (or the potential for them) are the only thing the market actually cares about. Yes, the market is willing to give a company a free ride on the basis that when it does start paying dividends they'll be potentially huge, but as soon as it starts to believe that the dividends will never be forthcoming, you can bet the price will crash catastrophically. Markets are fickle.

Re:The problem being...

[Anonymous Coward]

So, you want them to pay taxes, list them in their payables column, then charge you for them in the receivables column, multiplied by the price factor the retailer applies to their cost of goods sold?

Passive-aggressive little subbie-bitch, aren't you?

Re:The problem being...

[Gibgezr]

>Of course, as we see with Walmart and its ilk, it is very harmful to consumers.
Really? I prefer Penn & Teller's take on Walmart: https://www.youtube.com/watch?v=yHUqYfK5MDQ

Re:The problem being...

[MightyYar]

That is not really true. Amazon is growing it's book value, not just it's revenue. Look at it this way: an investor who is saving for retirement can take dividends in a company and then reinvest the money, or they can find a company that reinvests the income itself. The company has some advantages here... first, they probably know their market better than the investor does. At the very least, they will probably have more information than the investor does when they decide to invest. The other big advantage is taxes - the reinvestment that the growth company does is tax-free, whereas the company would get taxed on profits, the investor would get taxed on dividends, and only then would money be available for reinvestment.

Of course you are right... I mean, at some point Amazon cannot grow anymore. "Best case", they can't grow beyond monopoly. At that point, they had certainly better be profitable! Long before that, growth will slow and the stock will suffer. That said, they have a loooong way to grow in retail.

Re:The problem being...

[jwhitener]

First, predatory pricing is ruinously expensive.

But if your corporation has multiple divisions/products, you can let one take massive losses while the others support it, until your competition is gone.

Second, assuming the monopolist does manage to drive out all competition, and begins charging obscene prices, it becomes not only possible but very profitable for competitors to enter

Unless there are infrastructure and other barriers to entry that would need to be overcome in order to enter/re-enter the market. At the very least, those barriers would delay re-entry, all the while the monopoly is raking in profits. And the second you start to gain a bit of market share, the monopoly just drops prices again, or buys you out.

Re:The problem being...

[swillden]

First, predatory pricing is ruinously expensive.

But if your corporation has multiple divisions/products, you can let one take massive losses while the others support it, until your competition is gone.

That just means you don't have to raise outside capital, it doesn't reduce or change the cost.

Second, assuming the monopolist does manage to drive out all competition, and begins charging obscene prices, it becomes not only possible but very profitable for competitors to enter

Unless there are infrastructure and other barriers to entry that would need to be overcome in order to enter/re-enter the market

But the competitors already have that infrastructure and/or have overcome those barriers. They're already in the market. Even if they shut down, unless they are forced by some extra-market forces to stay shut down for so long their infrastructure decays, the infrastructure is available to be re-used by the competitors, or by whoever bought them out in the fire sale.

Also, those sorts of barriers provide incentive for capital markets to fund weathering the price war, because once the war ends the competitors won't be easily displaced.

Really, though, rather than theoretical analyses, what you really should focus on is trying to find an example of where predatory pricing has actually worked in the real world, including recoupment of the costs. What you'll find is that there aren't any clear-cut examples of the scheme working -- though there are cases of companies trying it. Predatory pricing is a losing strategy for the predator.

Re:The problem being...

[Shadow of Eternity]

Actually it's not, what you're demanding IS Somalia. It's not a facetious argument just because it happens to be inconvenient for your already-tried-and-failed ideology.

What explains Lasership?

[erroneus]

As far as I can tell, Amazon is the only company which keeps Lasership going. There is a long history of Lasership problems and complaints. They use "private contractors" to deliver the last mile in the pizza delivery model. They are untrained and unqualified and when they steal things Amazon just ships another or refunds money without any issue. It's not just my experience but the experience of thousands of others. (Just google Amazon Lasership Complaints) I suspect its Lasership's minority owned status which keeps them afloat. But even then, the problem of Lasership seems excessive. After I moved and discovered that I am once again in a Lasership delivery area I have stopped ordering from Amazon and I would encourage everyone who wants to ensure a hassle-free online shopping experience to read up on Lasership, its connection with Amazon and to make the decision which is best for you based on what you learn. If you are not in a Lasership last mile delivery area, then shop with Amazon 'til you drop. But if you are, I would hope understanding what goes on there will discourage you from shopping Amazon.

Re:What explains Lasership?

[Anonymous Coward]

You had me really confused as to what "Lasership" was. I guess they're not in my area, and I should be glad. Must just be hungry, since you said "pizza" and I thought to myself "oh, they deliver Pizzas for amazon?"

Re:What explains Lasership?

[Anonymous Coward]

Mmmm, pizza

Re:What explains Lasership?

[kumanopuusan]

I had never heard of Lasership, either, so I looked them up and found this video:
http://www.youtube.com/watch?v=oB38L2Znl34
The deliveryman doesn't even get out of his vehicle. He simply drops the package out of his window and onto the customer's driveway before driving off.

Re:What explains Lasership?

[Anonymous Coward]

WTF is lasership? And no I won't fucking google it just because you couldn't take 2 seconds to define it in your post.

Re:What explains Lasership?

[NJRoadfan]

Amazon Prime customer? They were likely the lowest bidder. That is how they keep costs down.

Re:What explains Lasership?

[Anonymous Coward]

so since amazon always refunds or ships another one, whats the problem?

Not just that...

[Anonymous Coward]

If it were just that, I'd be happy to see Amazon. What concerns me is that a great deal of what they do aims to not profit *now*, with an obvious implication of profitting obscenely later after forcing all competitors out of the market. For investors willing to wait, the payoff, if sucessful, would be huge.

Re:Not just that...

[Anonymous Coward]

There are so many possibilities between the current state and what you see as the "obvious implication" that I have to wonder why you would think your limited vision is somehow the basis for a compelling position.

I mean, you might get modded up around here, or on other reality-rejecting sites like reddit or gawker, but that doesn't really mean anything.

Like consider 3D printing and the disruptions such a technology might have on the retail model. Consider how small in reality Amazon's current market share is. Consider how many interesting innovations have been wrought by Amazon's ceaseless plowing of profits into R&D.

But no, we have to whine because maybe, possibly, some time in the future, they might be so good no one else can keep up with them. GET THE PITCHFORKS!!!

You people are so blinkered.

Tax "planning"

[Anonymous Coward]

I would wager Amazon never turns a profit because it pays outrageous licensing fees of it's own patents on a subsidiary in Caymans/Netherlands/somewhere. But that's just me..

Profitless by choice ...

[Anonymous Coward]

If Amazon doesn't make a profit, it doesn't have to pay taxes on a profit.

Profitless by choice, indeed.

Re:Profitless by choice ...

[Anonymous Coward]

you know, if they plow all that profit back into the business (which is what they do) then the taxes still get paid on where that money gets spent. Don't wring your hands too excessively for the poor gov't. They get their bite over and over and over again.

How long are shareholders willing to wait?

[JazzHarper]

The article does not really address the end-game. Will Bezos ever allow the company to return value to the shareholders or is he truly "not wired that way"? There is no value in holding shares in a company that NEVER shows a profit. Shareholders can have lots of fun trading them, as long as the promise--or at least the hope--of future earnings is out there, but that's just a "greater-fool" game that usually ends badly.

Re:How long are shareholders willing to wait?

[Anonymous Coward]

Sometimes, you need to be a dick to wall street and tell guys like Carl Icahn to go fuck themselves. There is a difference between returning profits to shareholders and gutting your entire company to give money to shareholders. Sometimes you need to think about longer term and not just about the next quarter, or even the next 3 years for that matter.

Re:How long are shareholders willing to wait?

[Anonymous Coward]

I'm confused by your post - a company does not need to turn a profit to "retuen value" to shareholders.
Indeed, since profits are taxed, it's actually quite smart not to declare any.
Instead, investors find avlue through share price growth, and dividends, (if any).
In many fical regimes, the first is by far the most favourably treated, and for good reason.

Re:How long are shareholders willing to wait?

[Anonymous Coward]

A company can choose to return free cash flow (profit) to its shareholders - or if it thinks it needs the money more - reinvest it in itself.

The shareprice reflects a 'wisdom of crowd' view on the combination of actual assets and how hard it is for someone else to duplicate.

No-one is being prevented from starting a 'nile' or 'yangtzee' or 'missouri'

Re:How long are shareholders willing to wait?

[Anonymous Coward]

right .. we'll see how that worked out for Yahoo in a few more years.

Re:How long are shareholders willing to wait?

[Bananenrepublik]

That's wrong. If a company buys assets, then it's profits decrease, but it definitely doesn't make your stake in the company any less valuable. Since stock prices reflect both the current assets of the company (after all stocks express owenrship on these assets) and the expectation of future gains (that's the speculative part), it is quite sensible for the stock price to go up for a company that invests instead of making profits.

Re:How long are shareholders willing to wait?

[demonlapin]

The end game is that you plow the profits back into the company until your growth tapers off, and then you start paying dividends. Call it the Microsoft Model.

Re:How long are shareholders willing to wait?

[Anonymous Coward]

Sure, ASSUMING IT IS EXPECTED TO MAKE PROFITS IN THE FUTURE.

There are only two basic uses for shares - dividends and control. Everything else is expectations for one those. If the company will never produce dividends, and if no takeover (using shares for control) will take place (defensive buys of shares for control is also an option, of course), the shares are useless. While the company succeeds, it invests and expand its assets, but the shareholders see no benefits. Once it starts to struggle, it spends and sells assets, and still the shareholders are unaffected. pointless, pointless, pointless.

Re:How long are shareholders willing to wait?

[u38cg]

People are still dumb enough to invest in gold. Happily, with increased population growth the supply of other fools is continually renewed.

Re:How long are shareholders willing to wait?

[Z00L00K]

The Amazon brand is just the oil in the machinery that makes a lot of other businesses profitable. The day someone comes up with a machinery that don't need oil then oil as lubrication is dead meat.

Another way of looking at it - by having low levels of profit you don't attract a lot of sharks trying to suck the money out of that business - and you avoid most of the competition too because they don't think it's a profitable business.

Yet another way to compare it - the Amazon brand is the railroad tracks for goods - the goods on the tracks and the businesses that get the goods carried on the tracks are the profitable parts. If you get competition then you will have a different network of tracks laid out and the value for the customers will be lower.

So I sense a business strategy with a greater picture in mind. Too many operators today are short-sighted and just see other shops around as competition instead of collateral business opportunities. "I sell fruit, damn that pastry shop down the road that takes all customers" instead of thinking that "OK someone buys pastries, but they may want a fruit as dessert".

Re:How long are shareholders willing to wait?

[JazzHarper]

Yes, that is the usual course of successful companies. The difference in this case is that Amazon's president, chairman and CEO all seem to be oblivious to the inevitable transition.

Re:How long are shareholders willing to wait?

[JazzHarper]

To an investor, the value of a share is the discounted sum of all future dividends. It is expected that companies will not pay dividends while they are in their growth phase. That does not detract from the valuation; it enhances it. However, if the company NEVER intends to pay any dividends, then one would purchase a share only with the intent of selling it to some greater fool. That is speculation, not investment.

Re:How long are shareholders willing to wait?

[Anonymous Coward]

> People are still dumb enough to invest in gold.

That doesn't make sense. As if there were times when it wasn't a good investment (relative to a savings account?) or as if it isn't a good idea now (with record unreported but obvious inflation). I guess you don't really price food year over year. But subsidizing gas to under $5/gal is cheap, right?

> Happily, with increased population growth the supply of other fools is continually renewed.

That does not make sense either. Population growth has been negative in the US for a short while.

Re:How long are shareholders willing to wait?

[Anonymous Coward]

Yes and no - if a company simply held the cash rather than paying dividends (and didn't lose value vs. other investments), there is not a big difference between holding and distributing the dividend. It is not speculation, it is increasing the valuation of the assets of the company.

Re:How long are shareholders willing to wait?

[kill-1]

That's wrong. If a company buys assets, then it's profits decrease, ...

No, the profit decreases only when the assets depreciate.

Re:How long are shareholders willing to wait?

[demonlapin]

Or they have a much bigger business in mind.

Re:How long are shareholders willing to wait?

[benjfowler]

Not to mention 1b+ Indians, who are notorious goldbugs.

Re:How long are shareholders willing to wait?

[John.Banister]

I think the growth rate of Amazon's customer base is faster than the growth rate of humanity, so there's an end point. Once everyone who might buy some manufactured deliverable item has the opportunity to buy it from Amazon, and Amazon is fairly competitive in selling most of the items that a member of any attention-worthy group of people buys on a regular basis, then the growth should slow down to a point where profitability will ensue.

However, if the company were to grow forever, then the value of shares of the company would grow forever. People don't have to speculate that some day the shares will pay dividends if they are instead speculating that Amazon will make wise enough use of the money so as to build more Amazon which gives more value to the shares. In fact, since dividends are taxed as income and increased share value is taxed as capital gains, infinite growth might actually be better than dividends. After it splits a few times, you can sell off a few percent of your holdings, confident that the remainder will continue to grow.

If Amazon made bad decisions with the money they get for the stock and lacked both profitability and growth, that would be a problem, but so far, it looks like they're making good enough decisions that those parts of the company that aren't growing are profitable.

Re:How long are shareholders willing to wait?

[Anonymous Coward]

The other way to return money to shareholders is stock buy backs. That gives investors the choice to either cash out or have an increased stake in the company.

Re:How long are shareholders willing to wait?

[Rich0]

Well, there is always the liquidation value of the company, which perhaps is the most real value a stock can actually have. However, few stocks trade anywhere near that value, and companies which probably should be liquidated tend to operate on in optimism slowly bleeding away even that value until nothing remains.

Re:How long are shareholders willing to wait?

[u38cg]

Past performance, blah, blah, blah. Gold does nothing, produces nothing, and is only worth what you can sell it for. Anyone discovers a few hundred tons of it lying around the Outback - not impossible - and you're done. But there are plenty of fools in the developing world.

sweatshop

[Anonymous Coward]

The Amazon warehouses are run like sweatshops. There are some other more detailed articles out there, if you can find them. The working conditions are horrendous and the pay abysmal, and nearly all of it temp work. So, while on the surface the service might be great, it comes at a cost. There is a reason they're able to undercut and drive out the local businesses which actually pay their employees and provide benefits.

Re:sweatshop

[Anonymous Coward]

The Amazon warehouses are run like sweatshops. There are some other more detailed articles out there, if you can find them. The working conditions are horrendous and the pay abysmal, and nearly all of it temp work. So, while on the surface the service might be great, it comes at a cost. There is a reason they're able to undercut and drive out the local businesses which actually pay their employees and provide benefits.

So those employees should file lawsuits regarding the OSHA violations that make their working conditions illegal.

Oh, they're not doing anything illegal? It's just a low-paying job for what they get accomplished? All those employees should quit working for Amazon then, and get another job.

There are no better jobs for people with their education level, you say? So if Amazon didn't exist they would be unemployed and even worse off, because they sure as hell wouldn't be able to find a job at those bookstores as the knowledgeable salespeople? Holy crap, Amazon should burn!

Right now we have a very large amount of unskilled workers in the US. While there are a lot of people who are actually competing for those crappy temp jobs because they're not qualified for anything, the environment and pay is going to suck. The solution isn't to bitch at Amazon, those people wouldn't be any better off if Amazon didn't exist, they'd definitely be worse off. The solution is to do a better job at education. Once there are less people who are willing to take those jobs, Amazon, Wal-Mart, and others will be forced to raise salaries and improve working conditions in order to get workers. Things will get more expensive for the consumer, and most people are going to bitch about it, but we're going to be better off for it in the long run.

Re:sweatshop

[nonnald8336]

The Amazon warehouses are run like sweatshops. There are some other more detailed articles out there, if you can find them. The working conditions are horrendous and the pay abysmal, and nearly all of it temp work. So, while on the surface the service might be great, it comes at a cost. There is a reason they're able to undercut and drive out the local businesses which actually pay their employees and provide benefits.

So those employees should file lawsuits regarding the OSHA violations that make their working conditions illegal.

Oh, they're not doing anything illegal? It's just a low-paying job for what they get accomplished? All those employees should quit working for Amazon then, and get another job.

There are no better jobs for people with their education level, you say? So if Amazon didn't exist they would be unemployed and even worse off, because they sure as hell wouldn't be able to find a job at those bookstores as the knowledgeable salespeople? Holy crap, Amazon should burn!

Right now we have a very large amount of unskilled workers in the US. While there are a lot of people who are actually competing for those crappy temp jobs because they're not qualified for anything, the environment and pay is going to suck. The solution isn't to bitch at Amazon, those people wouldn't be any better off if Amazon didn't exist, they'd definitely be worse off. The solution is to do a better job at education. Once there are less people who are willing to take those jobs, Amazon, Wal-Mart, and others will be forced to raise salaries and improve working conditions in order to get workers. Things will get more expensive for the consumer, and most people are going to bitch about it, but we're going to be better off for it in the long run.

So, let Amazon, Walmart etc. do whatever they want, since it's just a bunch of uneducated, unskilled workers we're talking about? You're right about one thing, the solution is for these people to get education/skills in order to rise above these types of jobs. Luckily for the big companies, there will always be a supply of unskilled, uneducated workers, and since we're not going to bitch at Amazon for treating employees like subhumans, they will continue to do so. The same way a big chunk of Walmart employees are on public assistance, because the pay/hours are not enough on their own. So, we - the taxpayers, are footing the bill for welfare/foodstamps etc. so that Walmart can make more profit. In essence, we're subsidizing Walmart family's fortune. There will never be a point where the big companies are forced to raise salaries, because there will always be a supply of people who are unable to get a better job.

Re:sweatshop

[Anonymous Coward]

Brother, have you ever worked as a clerk in a small store? Or as someone who actually unpacks and inventory? It's also underpaid, temporary work until people can finish a degree or find something better.

Just because it's a sweatshop doesn't automatically make it worse.

Re:sweatshop

[Anonymous Coward]

Right now we have a very large amount of unskilled workers in the US. While there are a lot of people who are actually competing for those crappy temp jobs because they're not qualified for anything, the environment and pay is going to suck.

It's worse than that. We also have a very large number of skilled workers who can't find employment in their fields, so they are also competing for those crappy temp jobs!

Re:sweatshop

[Anonymous Coward]

>So, let Amazon, Walmart etc. do whatever they want, since it's just a bunch of uneducated, unskilled workers we're talking about?

No, you let companies that AREN'T DOING ANYTHING ILLEGAL continue doing what they're doing. "I don't like this" or "I find this immoral" is a HORRIBLE justification for a law. That's how theocracies get started.

Re:sweatshop

[Anonymous Coward]

You're right about one thing, the solution is for these people to get education/skills in order to rise above these types of jobs.

Take a look at the following links. This program Amazon offers is exactly the solution you are talking about, offering a way to rise above unskilled labor.

Amazon Career Choice Program
Amazon Career Choice Program FAQ

Sounds like Amazon is offering a nice way to move up and out of the warehouses.

Re:sweatshop

[Anonymous Coward]

Don't worry, wait a number of years and there'll be far fewer "sweatshop" workers at Amazon. Amazon intends to replace them with robots. Amazon bought Kiva Systems: https://www.youtube.com/watch?v=CWNuaPE4DTc
Watch the video and realize that those "sweatshop" human walkers are replaceable by the robots AND that replacing the human picker in that video isn't impossible, just not so cheap now. However in the future that job is going to go too.

So eventually you'd have very few humans, maybe mostly security guards (supplemented by drones?) and some technicians.

What will the humans do then? Depends on your country I suppose.

Re:sweatshop

[Anonymous Coward]

problem is they picked the wrong skill. competition sucks for the losers, no doubt about it, but that doesn't make it the winners' job to make everyone happy.

Re:sweatshop

[Anonymous Coward]

That's how most warehouses are run. The business of logistics is to squeeze as much productivity out of every part of moving goods from one place to another, including the human parts of that machine.

Re:sweatshop

[d'baba]

"So, for people who've been with us as little as three years, we're offering to pre-pay 95% of"
"All Amazon full-time hourly associates in the U.S. who have been employed for three consecutive years "

And there's the catch.

When I worked in the Fernley warehouse there was a policy of salary increases for the first 3 years you were with them. After that there were no scheduled increases. If one did not make it out of the front line job into, most typically management, another non-associate job you have no incentive to stay. They find many ways to release those with years of on-the-job experience and replace them with other unskilled laborers from the currently vast pool.

Add to that the fact that the vast majority of workers there are hired and work for temporary agencies. When I was there it could take over 6 months to cross over to permanent form temp and again the vast majority did not make the cut.

So right now on any of their warehouse floors in Christmas-ized countries, a very small percentage of employees will be eligible for this marvelous program at their next review. Makes for great advertising if you don't read the fine print.

Re:sweatshop

[d'baba]

In America today there aren't enough 'better' jobs and a degree is becoming a thing for the wealth.

In America today underpaid, temp work is the norm.

Re:sweatshop

[Gavagai80]

What you do is you change the law so that what they're doing is illegal. Nothing else will make a difference anyway.

Re:sweatshop

[turbidostato]

"There are no better jobs for people with their education level, you say? So if Amazon didn't exist they would be unemployed and even worse off, because they sure as hell wouldn't be able to find a job at those bookstores as the knowledgeable salespeople?"

No, they would be having a decent pay doing basically the same for a local retailer, one of the very many there would be instead of Amazon as the one single behemoth.

"While there are a lot of people who are actually competing for those crappy temp jobs because they're not qualified for anything, the environment and pay is going to suck"

There was a time when companies did train their own people and then, these people would get qualified for something. Now, they prefer for others to cover for the costs of a perfect fit, or to scream, "we need more H1B visas!" or in other, lower markets, to hire illegal aliens while at the same time crying "illegal aliens are killing America!"

Re:sweatshop

[Waccoon]

I work in a warehouse that sends medical supplies to hospitals.

The thing that immediately astounded me about Amazon's warehouse is that everything is accessible by foot on shelves that are single-story. It's clean. They pick to totes and wheeled carts. That's amazing.

I work in a smaller building that's five stories tall (and the company now says they want to move to a new warehouse that is at least seven stories tall). It's impossible to access anything without a machine. Everything is dirty. Damages are everywhere.

Warehouse jobs, in general, are difficult. The way I see it, working for Amazon would probably get me less pay than I'm making now, but it looks like it would be a whole lot easier.

Re:sweatshop

[swillden]

What you do is you change the law so that what they're doing is illegal. Nothing else will make a difference anyway.

So then they'll replace the low-paid workers with robots. Or will you pass a law against that, too?

Re:sweatshop

[PlusFiveTroll]

>Or will you pass a law against that, too?

No, eventually you make all the businesses pay huge amounts in taxes for using robots to support social welfare, unless you want to end up in a Manna world. http://www.marshallbrain.com/manna1.htm

Unless of course, you want millions of unemployed hungry people to riot and burn your infrastructure down.

Re:sweatshop

[Rich0]

You're right about one thing, the solution is for these people to get education/skills in order to rise above these types of jobs.

I think that training budgets have the potential to take somebody who is successful in one high-skill job and make them successful in a different high-skill job, such as when an industry takes a downturn and there is more demand for software engineers than civil engineers, etc.

I don't think training budgets are likely to turn the average blue collar worker into the average white collar worker. Maybe some of them never had the opportunity to receive a decent education (primary education is a great place to invest), but many had access to such an education and simply didn't get much out of it. I'm still all for more access to training because the US makes much of its income on high-skill labor and such specialized jobs are very vulnerable to innovative disruption. Rather than trying to prop up careers that should die, we should instead support those in those careers so that they can switch to a more productive one.

I think basic income is a better solution for those who can't hold down a better job, as well as stronger work laws. Sure, many jobs will be eliminated in favor of robotics, and that is fine - those whose jobs are eliminated can live on basic income.

Re:sweatshop

[swillden]

Why do you assume that traditional employment and (government-based) social welfare are the only options?

Re:sweatshop

[kaatochacha]

When you take uneducated, unskilled people and present them with bad jobs paying little for large amounts of labor, history teaches us that it usually ends up a certain way--they storm the gates and hang the owners.
It's called revolution, and it screws up everything.
We should do our best to avoid it.
Keep in mind, not everyone is smart or creative.
There is a large population of people who are naturally unable to change that.

Re:sweatshop

[Anonymous Coward]

This sentence is where your logic breaks down --> There are no better jobs for people with their education level, you say? So if Amazon didn't exist they would be unemployed and even worse off, because they sure as hell wouldn't be able to find a job at those bookstores as the knowledgeable salespeople?

Amazon is not just displacing bookstore salesperson jobs. The books, diapers, electronics, etc. need to be shipped to the stores. Not to mention the 400 other things that need to happen along the supply pipeline.

I'm not calling Amazon evil. But a balanced accounting of The Amazon Effect must take into account the quality of the jobs displaced and those gained.

I would have so much less of a problem with this if Amazon's stock price reflected it's profitability. (And please spare me the efficient market hypothesis bull$hit.) I have my doubts that Amazon can become profitable at the blink of an eye. I don't think they make any money on the stuff they send to me with zero shipping and handling charge.

Also, we're not just talking about brick and mortar job displacement. Take the example of Zappos. Amazon did not just buy out Zappos. They first targeted the business by offering shoes at money-losing prices. Being an Amazon, they could do this pretty much forever. Zappos saw its revenue falling off and saw the writing on the wall.

As long as the stock is evaluated solely based on revenue, Amazon's "success" is a self-fulfilling prophecy. But, at what point should Wall Street expect profitability from Amazon? 1 year? 5 years? At some point, the business begins to resemble a Ponzi scheme. The promise of profits is just around the bend. What, you wanted a dividend, Dear Investor? We'll get you next year. Well, unless we need to build another mega-center or buy out widgets.com. Trust us.

Re:sweatshop

[jwhitener]

Or simply agree that the bottom of society needs to be a little bit higher and raise the minimum wage, and tie its growth to inflation (or tie it to something that grows over time, instead of letting the whims of the political climate dictate if someone has enough money to afford food).

Conservatives hate food stamps and housing assistance (well, the current bunch do) and also hate the idea of raising the minimum wage. The two notions are at odds with each other.

Beware of speculation

[TheloniousToady]

Although Amazon is a great business, it's a terrible stock. The reason is that its stock price is sky high. Compare Amazon's key statistics with those of Wal-Mart. Compare the "Valuation Measures" of the two, and you'll see two quite different stories.

Although the two businesses may seem quite different - notably by Wal-Mart being primarily a brick-and-mortar and Amazon being online - I believe there are more similarities than differences: both are retailers that operate on a massive scale, with highly efficient distribution, and sell to customers at the lowest possible price. And of course, Wal-Mart even sells online, with delivery to home or pickup at the nearest store.

Investors are taking on faith that Amazon's growth in revenue will eventually turn into growth in profits. The author of the linked article seems to believe it, and suggests that those of us who are skeptical just don't get it. However, he admits in the article:

Part of this problem comes from the limited visibility into the dynamics of its business finances. Why doesn't Amazon break out more detail in its financial reporting to help the external world understand all these intricacies? How many subscribers to Amazon Prime, how many Kindles have sold, what's the net income from different lines of business, how much of its asset base investment is for fulfillment centers versus technology infrastructure for AWS?

There may be solid business reasons why Amazon doesn't provide that, but from an investment point of view, a stock with a high valuation whose financials can't be fully understood is the very model of "speculation", as defined by Benjamin Graham, the dean of value investors. Those who invest in Amazon may eventually be rewarded, but the stock market has legions of less-speculative investment opportunities that offer a far better risk/reward ratio. There's no reason for any "intelligent investor" to be involved.

[Disclosure: I have no position in either Amazon or Wal-Mart]

Re:Beware of speculation

[the eric conspiracy]

The same could have been said of many other companies. Apple. Google. Intel. Microsoft.

Stocks are sold on the basis of a claim on future earnings. Earnings start with revenues. Amazon's revenue growth is spectacular. That is a rare attribute in the current economy.

Sure it's speculative. It might flop. But dayumm look at that growth.

Re:Beware of speculation

[TheloniousToady]

It's nice to hear that there still are folks who look only at growth and ignore valuation (which, when done properly, includes growth as a factor). Please accept my apologies in advance for picking your pocket. :-)

Who's on first?

[h8sg8s]

Not sure that Obama really appreciated what he hat in this surveillance by 2010, but I guarantee Hillary did.

FedEx Ground does the same thing

[Anonymous Coward]

They use "private contractors" to deliver the last mile in the pizza delivery model. They are untrained and unqualified

FedEx Ground is no different http://www.pennlive.com/midstate/index.ssf/2012/08/independent_truck_owners_carry.html

Re:FedEx Ground does the same thing

[Anonymous Coward]

Even the United States Postal Service does this.

Magical Thinking

[Anonymous Coward]

Hmm ... the new economics; normal monetary principals no longer apply. Where have I heard this before?

supposably "evil" but easy to buy stuff

[Anonymous Coward]

i.e. I wanted to purchase Ubiquiti Bullet2 transceivers, direct POE devices (use my own DC power) but finding sellers is difficult (it seems they are all weird websites) and could not find purchasing direct from Ubiquiti (damn that link if any is hard to find). Maybe it's me but I found a source, I think it was a Ubiquiti distributor, forgot details because horrible problems. i.e. Transceivers didn't work (they light up but typing in url had no response), POE was delivered by DHL while I was at work, since I wasn't there, it was sent back to distributor. Multiple emails to resend it but nothing happened. So took my losses (POE never were seen, tossed transceivers). Ordered same stuff on Amazon and were delivered promptly.

sigh

[tdoshea90]

everyone that is anti-amazon in this story needs to read over atlas shrugged. just sad.

Re:sigh

[shutdown -p now]

Why would anyone want to read very poorly written and extremely verbose fiction glorifying sociopaths?

(I'm not even anti-Amazon, but "Atlas Shrugged" is comically bad literature and philosophy.)

What a Load of Shit

[segedunum]

Amazon doesn't report profits for tax reasons, and they are involved in the same creative accounting every other well connected company is.

Amazon's competitors still leaving an open goal

[mattbee]

So here are two experiences that made me think "screw this, I wish I'd shopped at Amazon". This may just be a UK-specfic experience, but...

1) Samsung Series 9 laptop from PC World, bought from their store in April, came with Windows 8 drivers (I think) that just never worked. Mouse pointer jerking around, it blue-screened within 5 minutes on one boot out of every two. I updated its drivers through Windows, through the Samsung driver update utility ... just hopeless. I tried to use it for about a month, trying to avoid reboots, but eventually gave up and took it back to the shop. Their nice assistant agreed it looked screwed, took it back, and after two phone calls their support people said that because I hadn't made a restore disc, they couldn't / wouldn't do anything with it, and it must have been my negligence that broke it. I am taking them to court for the £900 purchase price to get a refund, after I'd bought a different model ... at Amazon.

2) Bought a £150 model helicopter for a member of staff as a leaving present from Maplin (big electronics component & gadget store), to be delivered to his house. They make a picking error and deliver a completely different, much cheaper product. I call them and say, hey, you've made a mistake would you mind delivering the correct item. No. I must go over to the recipient's house, pick the item up, drive it to the store before they will acknowledge their mistake and get me what I ordered. They generously offer a freepost address for me to send the item back, but I must be sure to go to the post office and get a certificate of dispatch! [if you've never been to England this generally involves driving into town, queuing, finding it closed for lunch etc.]

I know from for 1) Amazon would take the item back without question, and I'd be confident enough ordering a replacement on the same day, giving me what I want sooner. And for 2) again, I know they would send the right item out without question and tell me to keep the mistake, it's nor worth the restocking fees.

So whenever I hear "Amazon driving retailers out of business" what I really hear is "Amazon showing how it's done by treating customers as honest & impatient, competitors continue to fuck it up". Amazon aren't even the cheapest, or even the easiest web site to find what you want, but I do know that they care about customers getting what they want quickly, and often that's why I'll pay a bit more.

Is this unfair to ALL OTHER retailers? Am I forgetting some intangible Amazon magic here?

Re:Amazon's competitors still leaving an open goal

[Tailhook]

Yesterday I bought smoke detectors from Amazon. There are perfectly ordinary smoke detectors, but there is one little problem; these are bit more expensive than some other, similar smoke detectors; a couple extra features the really cheap $9 smoke detectors don't have.

Why should that be a problem? Unfortunately, because these aren't the cheapest conceivable smoke detectors, the Home Depots, ACEs and Lowes of the world won't stock them in store. The retailers almost never stock anything other than the lowest end manifestation of any given product on their shelves.

Many of us are familiar with this phenomenon due to having built a computer from components; you can't find the optimal parts at Best Buy et al. They carry only PNY dreck. The good, full featured items are only available from on-line re-sellers.

If you are thoughtful and do not simply "sort by price" and invariably pick the cheapest item on the list then traditional retailers are useless; they operate only on price. Products that fail to be the cheapest are simply not available in-store.

For me, Amazon is a liberation; before I could get effectively anything from that one site I had a choice; a.) buy exclusively low end stuff from the brick and mortar retailers or b.) hunt down yet another site the specializes in some product, create yet another account, share personal details with yet another online entity and deal with the vagaries and failings of yet another outfit.

What about Australia

[warewolfsmith]

Seems Mr Bezos forgot about the land down under, were still paying through the nose for postage. And that's only the books, still cant buy electronic toys from Amazon for an order down under. Surely must be time for an operation here in Oz.

Most of these comments are incredibly uninformed..

[Anonymous Coward]

As someone who works for an ecommerce company and has to interact with Amazon on daily basis, it is kinda easy to see that these comments are really uninformed...

Did DEC ever pay a dividend?

[Strange Attractor]

I used DEC computers from 1975 through the 1980's till I switched to SUNs. It was a great company that made great machines. While I used their machines, they had never paid a dividend because they believed they should use profits to grow the business. I don't know if they ever paid dividends. I wonder how DEC's IPO price compared to what COMPAQ paid for the company at the end.

Re:Did DEC ever pay a dividend?

[JazzHarper]

Interesting. No, DEC did not ever pay a dividend. The IPO was 375,000 shares at $22/share on 18 August 1966. I'm not able to compare that to later market caps, since I don't have a record of all the subsequent secondary offerings and splits. DEC's market cap peaked in 1987 at $26.6 billion. It fell dramatically from there, to $6.7 billion in December 1991. The sale of the company to Compaq for about $9.6 billion ($2 billion cash plus stock) was announced on 26 January 1998.

Keeping Company With Al Capone

[Anonymous Coward]

Al Capone also had no earnings for the years he operated his business' in Chicago according to his ledger book which he submitted to the US Treasury Dept. IRS. However, his "shared" ledger was not the real ledger showing the amounts of money and whose hands it was changing from and to whom.

Delivery Service

[Anonymous Coward]

Amazon wants to deliver anything and everything same day to your door. Amazon wants to kill off brick and mortar retail. You go online, shop, a few hours later the items show up at your home or business.

It's sad how low in the comments section this is.

[Anonymous Coward]

Also: Locked bootloaders (after having them be unlocked in the first edition Kindle). Sadder? They're still gaining inroads with their walled gardens in education just like Apple does. It's sickening.

Neither of these even appear on an equivalent Hacker News thread. It's nothing but glowing "OMG THEY'RE SO AWESOME I LOVE PRIME" over there.

If I had mod points they'd be yours.

[Anonymous Coward]

This applies to Walmart even more so.

WTF?

[sociocapitalist]

I don't know what the fuck this article or the summary are on about.

Amazon is profitable. They (and many other multinationals) claim not to have profits on their ginormous revenues by shifting those profits offshore to avoid paying tax in their core market countries.

http://www.theguardian.com/business/2013/jul/19/oecd-tax-reform-proposals-amazon
http://www.reuters.com/article/2013/05/22/us-eu-tax-avoidance-idUSBRE94L0GW20130522

I wonder why Sears hasn't "Amazonified"

[gatkinso]

They have the distribution infrastructure, shipping, suppliers, and market penetration... along with hundreds of brink and mortar pick up centers. Their online sales have sort of taken the approach already small scale.

They could even leave a few stores open.

It just boggles my mind. I currently LOVE shopping at Sears. Best experience ever. You walk into a fully stocked store, the place is deserted yet fully staffed, you buy your stuff (at a cash register that is absolutely huge and clearly using early 1980's technology... but I digress), and leave.

Too bad this is not sustainable.

Re:I wonder why Sears hasn't "Amazonified"

[LWATCDR]

This is funny. Amazon is the 21st century Sears! Back in the early to mid 1900s you could buy anything from Sears including houses! http://www.searsarchives.com/homes/1915-1920.htm
Sears decided to move away from "catalog" sales in the 70s-90s. Really too bad since they could have been Amazon instead of Amazon.

They've bitten off more than they can chew.

[Anonymous Coward]

They seem to be willing to be a virtual flea market. One that sells lots of Asia-made junk.

All About Avoid Taxes!

[Anonymous Coward]

A no brainer.

Move along.

There is no story here.

Amazon - Walmart

[p51d007]

I wonder how long it will be until those that love Amazon now, once they become another "Walmart" and push the little guy out so to speak, will start hoping Amazon would die?

It goes both ways.

[Anonymous Coward]

Nobody will bother to read this, but I just have to say. It goes both ways. One could just as easily argue that one of the REASONS companies like Walmart, etc, may pay "poverty level" wages and still find so many takers is actually the existence of said welfare/foodstamps programs and their availability at those income levels. If the pay is truly insufficient to provide an employee with the necessities of life and if the programs weren't available at that income level, Walmart's cheap workforce would vanish and they'd end up needing to voluntarily increase wages to attract and retain sufficient employees to keep the company running. That doesn't even require raising the minimum wage nor enacting any new regulations, it just allows the employment market to correct itself (and no, I don't lean Libertarian, it's just common sense).
Of course such a move to lower income caps would be hugely unpopular since it would "cut benefits" and "hurt the poor" and such, because most people are incapable of logical reasoning and base their opinions mostly on emotion and anecdote. It could also discourage some people from working at all because they'd quickly exceed the income cap. So in light of that, the next step would be to completely erase long-term public assistance (except in the most extreme cases like the permanently and totally disabled with no family to support them) and instead provide only short-term welfare, while using some of the savings to pay for affordable education, retraining, money management classes, mentors, and other teach-a-man-to-fish programs. Also supplement the program staffing with welfare recipients who then basically have a job instead of a handout, until they can find or create a better one.
Next you have to deal with the excessive cost of education due in-part to cheap student loans and tuition assistance that also basically boil down to a government subsidy that even applies to for-profit institutions (which is ridiculous, if nearly ANY student can easily get, say $5000 in basically free tuition money, it's only a matter of time until tuition magically goes up by, you guessed it, ~$5000 on average). There are several countries that produce as-good-or-better college educated students at a fraction of the cost the US does.
I won't even get into healthcare at this point because that mess is so deep and wide at this point that the only "fixes" seeing the light of day, will almost certainly break nearly as many things as they purportedly fix.

I think the best solution to most social problems is for people to actually care about one another and take action on a personal level rather than continuing to increase mandatory government programs, seemingly without bound. Neither huge government, nor mega corporations, nor lavish demands from labor will ever really solve any of these problems long-term.

Same-day delivery

[casab1anca]

Same-day delivery is certainly more of Amazon's doing than any carrier's. Very few (if any) retailers have a vast network of fulfillment centers like Amazon does, enabling them to ship out locally and deliver on the same day.

Cancer is a better euphemism

[Anonymous Coward]

Something which grows without end, eventually killing the host.

I have to go with Buffet on this one

[ILongForDarkness]

Companies with good cash flow putting money in investors pocket while having a protected product (either brand, patents, process leadership) beats technology that will someday somehow make you lots of money. As much as I like Amazon at some point you owe your investors a return on their investment, real dollars not wall street hopes and dreams that might get whipped out the next time we have another housing bubble or war.

do you get value in return?

[Chirs]

Talking about how much you pay in taxes is pointless unless you also talk about what services you get in return.

How are your roads, your water treatment plants, your health care, your power plants, your communications infrastructure, your emergency services, etc...?

find better stores

[Chirs]

Unless you live in a small town there should be at least one or two "serious" computer stores that will stock and/or bring in whatever you want. My local one even stocks Monoprice cabling for basically the cost of ordering small quantities from Monoprice myself (they buy in bulk so get a discount).

Oh, and for things like smoke detectors, HVAC components, electrical supplies shop the industrial district, not the big box stores.

That or we could recognize one truth.

[Anonymous Coward]

A man or woman working a full-time job should at least earn enough to live. A living wage law would go a hell of a long way in correcting this situation.

Most of Amazon's management are empty suits.

[Anonymous Coward]

They all fight amongst one another and stay silent in meetings. (at least so I've heard)

I wonder what would happen if Bezos left.

Jeff needs to get off his arse...

[Meski]

And give his Customer service guys in Amazon Payments a swift kick. I've been communicating fruitlessly for months trying to get my account unlocked. Anyone else? Anyone found a way to get through to them?