I will explain it how I mean, since I know they do make a profit. Also, in this thread I am examining Amazon's core business (internet retail) and not its stock price. I as a costumer also love Amazon's service, but again, here we are talking about their business. Amazon and Bezos always struck me as an oddity. There is a rule about the Time magazine cover, by the time your face makes it, your company is going down. Sure enough this happened to Bezos 10+ years ago. Bezos looks to me like a guy who started out with a hairdresser salon, and ended up managing a rock band. Anyhow, let's have a quick look at how Amazon has been doing as a retailer. It started out as an online book retailer, and for years it hasn't made any profit. Truth is, it costs lots of money to open up huge warehouses and individual shipping of books aren't cheap either. So since selling books wasn't profitable enough (and I could say Bezos is actually failed at his original dream, they switched their profile a bit, and started to sell a lots of things. Finally after 6 years, they turned a little profit, although it was minoscule. A few years later they again changed their profile and welcomed 3rd party sellers, basicly selling now anything from anybody. As it turns out, this was a very good decission, because right now, the biggest chunk of the profit comes from this, they only need to provide server space and someone else is shipping the product, but % of the sale comes to Amazon. As I see it, even until this 3rd party engagement/change Amazon was still making so little profit, that the original loans (for starting the company) and bonds couldn't have been paid back. Then as a last change, they became an technology company introducing the Kindle, that became a big success not just profitable itself but helping to sell more ebooks. By 2010 I think they paid of all debts, so that took 15 or so year. Then soon after that they issued a billion bonds, taking on another debt. So what is my problem with Amazon? That after 17 or so years, it is still in the red if I add everything up, their core business (retailing) profit margin is only 1.5% (and that is after adding the 3rd party sellers, so without that, they might just break even) and still Bezos is hailed like a hero or some short of genius. But wasn't he just proven wrong with his original idea? (both book retail and Amazon retail) Well, he started out selling books, and since that wasn't profitable,he had to switch business profiles so many times that eventually the most profitable part of Amazon is basicly a selling platform, where sellers and buyers meet, but it is not necessary about Amazon's own product. Just like Ebay, without the bidding. Then why do they need the huge warehouses anymore? Oh yeah, one more thing. The paper thin profit margin is also endangered by States who want to tax Amazon's internet business. So far they have been lucky and avoided this, so we can even say that without the extra advantage of taxfree internet retail, they couldn't even compete with Walmart or Best Buy brick and mortar stores. But lawmakers are working on it, and it is hard and expensive to move a warehouse from one state to another one. Anyhow, I wonder how others look at this analysis?
I think you are basically correct if we are evaluting the success of Amazon based on its balance sheet. Although I would like to add: 1. There is some value in the ability of a business to persevere and survive (Amazon's many profile changes) until its in the right place at the right time for a home run (Kindle). That's not to say a successful ebook explosion would not have occurred without Amazon, but in history it was Kindle/Amazon that first brought ebooks to the mainstream. 2. This has nothing to do with rating Amazon as a business, but Bezos' has probably done well over the years with large bonus' every year regardless of profit. 3. As ebook sales continue to grow and eclipse real book sales, I expect more and more books will be offerred in only ebook format or Amazon may just stop stocking printed books. As such I expect warehouse cost to fall drastically in the future. Barring unforseen events, this would help increase Amazon profitablity?
You mean eventually they are going to close the warehouses? Then yes. The funny part is that Amazon could have existed WITHOUT its own products, just on servers and making connections (a la Ebay) between buyers and sellers. So we have to give credit to Bezos that he kept changing until they ended up in the green, but not charging sales taxes was a huge advantage that might go away soon. (originally the lawmakers said that net commerce was so young that it needed this advantage to develop)
