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Same Old Amazon: All Sales, No Profit

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http://www.businessweek.com/articles/2013-10-24/same-old-amazon-all-sales-no-profit#r=rss

Here once again is the familiar Amazon (AMZN) paradox: The e-commerce king from Seattle has made a habit of losing money of late—in three of four quarters over the last year—yet its stock price is near an all-time high, following a 35 percent jump over the last 12 months.

Now we have a fresh example of this living, breathing corporate contradiction. Amazon just posted a healthy $17.09 billion in net sales during its third quarter, a 24 percent jump compared with the same period a year ago. But the company lost 9¢ per share. This is what amounts for good news to Amazon shareholders: Analysts had predicted sales of $16.77 billion and accurately predicted that 9¢ loss.

Naturally, shares rose about 1.5 percent in after-hours trading.

So sales of $17bn and zero profit.

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Does profit matter if you use the investment to takeover the sales of every product on-line? Once you own all the sales you only need to re-price slightly (and pay off the government/competition commission for a few years) to make exorbitant profits on everything! Remember things can all be re-priced by algorithm now. It can happen instantly. Amazon are deliberately investing in new tech to build their E-book and streaming business. Remember as books start to fall you don't need employees to post them - its just such a huge saving if you can convince the mass population to all own a tablet. Obviously the price of ebooks will remain similar to the real world versions but the costs to deliver will go to almost nothing in comparison.

Obviously investors will have to live on capital appreciation instead of dividends until the monopoly begins.

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Coincidentally, I've had a mass of price-reduction alerts this last couple of days from the Amazon price-watching service I use. Some tools and related consumables I keep an eye on (decent stuff - Wera, Bahco, Stanley, not just knock offs) are at their best prices for two or three years.

I'm quite glad I'm not competing against Amazon for a living.

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Does profit matter if you use the investment to takeover the sales of every product on-line? Once you own all the sales you only need to re-price slightly (and pay off the government/competition commission for a few years) to make exorbitant profits on everything! Remember things can all be re-priced by algorithm now. It can happen instantly. Amazon are deliberately investing in new tech to build their E-book and streaming business. Remember as books start to fall you don't need employees to post them - its just such a huge saving if you can convince the mass population to all own a tablet. Obviously the price of ebooks will remain similar to the real world versions but the costs to deliver will go to almost nothing in comparison.

Obviously investors will have to live on capital appreciation instead of dividends until the monopoly begins.

They sell an awful lot more than e-books. They're highly unlikely ever to enjoy a monopoly in the provision of said texts. And yes, profit matters if you want to keep the instituitional money invested (see share price).

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I don't see how the sales can be called 'healthy' unless there is a (large) profit.

Who cares what the f****** sales are if you lose money? The sales could be 50000000 billion, but if you lose money you've totally failed.

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I don't see how the sales can be called 'healthy' unless there is a (large) profit.

Who cares what the f****** sales are if you lose money? The sales could be 50000000 billion, but if you lose money you've totally failed.

What is it Lord Sugar says? Turnover is vanity, profit is sanity?

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What is it Lord Sugar says? Turnover is vanity, profit is sanity?

He's not my favourite prophet, but he seemed to sell a lot of tat and make money from it! :huh:

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Does profit matter if you use the investment to takeover the sales of every product on-line? Once you own all the sales you only need to re-price slightly (and pay off the government/competition commission for a few years) to make exorbitant profits on everything! Remember things can all be re-priced by algorithm now. It can happen instantly. Amazon are deliberately investing in new tech to build their E-book and streaming business. Remember as books start to fall you don't need employees to post them - its just such a huge saving if you can convince the mass population to all own a tablet. Obviously the price of ebooks will remain similar to the real world versions but the costs to deliver will go to almost nothing in comparison.

Obviously investors will have to live on capital appreciation instead of dividends until the monopoly begins.

The trouble with that approach is that 'owning' sales is impossible unless you are doing something nobody else can. Amazon can't 'own' all online retail - they can kill off all their competitors today and have million new ones spring up tomorrow. There aren't enough barriers to entry, so it's like trying to eradicate mosquitoes, lots of effort but they'll just come swarming back.

E-books maybe, but that's not what is causing a loss on every sale. They could stick to e-books and logistics and turn a huge profit right now, but they are chasing something else. I think that something is illusory market share so they can claim 'growth'. That's been the folly of many a publically listed company in the last few decades, profit coming behind growth because growth kept the share price going higher. 'Jam tomorrow' companies generally have the biggest downside shareprice risks - too much optimism in the price, too many negatives disregraded.

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I don't see how the sales can be called 'healthy' unless there is a (large) profit.

Who cares what the f****** sales are if you lose money? The sales could be 50000000 billion, but if you lose money you've totally failed.

Every one of those sales is money their rivals are no longer making. I think their long term plan is a Wallmart style domination - drive all the competition out of business and then ratchet all the prices up.

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Loads of sellers on ebay just seem to be busy fools competing with each other to stuff the same cheap imported tools, costing the same from the same supplier, into a jiffy bag for the least money. I often think Amazon are just the biggest example.

Amazon's only real strength can ever be delivering products to customers doors for a lower cost than the competition. Consequently, you'd expect Amazon to be at the absolute forefront of warehouse automation and logistics. In reality this couldn't be further from truth. It's easily seized turnover with low prices but continually played catch-up in opening ever bigger yet inefficient distribution centres the final step process of every single order being little more sophisticated, and just as labour intensive, as a fifties department store cash and wrap counter.

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Amazon's only real strength can ever be delivering products to customers doors for a lower cost than the competition.

Not true. Unless it's a specialist item, I rarely bother comparison shopping other than between amazon.com, amazon.ca and amazon.co.uk. So long as the prices seem reasonable, I'll buy from them because I can get everything in one order, they'll deliver reliably, I don't have to trust my credit card to some site I've never heard of, and they have great customer service if something goes wrong. I would buy far more if if amazon.com would deliver more of the less commonplace items they sell to me here (parts for my girlfriend's car, for example).

I still wouldn't buy shares in them at anything like current prices, though.

Edited by MarkG

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