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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.'"
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.
I once had a signature.
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.
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.
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.
(-1: Post disagrees with my already-settled worldview) is not a valid mod option.