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Amazon Posts Huge Loss In Second Quarter, Despite Sales Rise

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http://www.theguardian.com/technology/2014/jul/24/amazon-loss-second-quarter-sales-rise-fire-phone

Amazon has reported a rise in sales on Thursday but posted a bigger-than-expected $126m (£74m) loss for its second quarter, sending shares sharply lower in after-hours trading.

Revenue at the company rose 23% to $19.34bn but losses increased as the firm spent heavily in a bid to expand its business with its first smartphone, the Fire Phone – which goes on sale in the US today – and to expand new services including grocery delivery and video streaming.

"We continue working hard on making the Amazon customer experience better and better," said Amazon's chief executive officer, Jeff Bezos.

Shares of Amazon dipped 10%, to $358.61, in after-hours trading as the company said it expected further losses of up to $810m in the upcoming quarter – compared to a $25m loss in the third quarter last year.

If this is a real loss the share price is impressive, just good accounting?

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If you had bought the last dip just a few months ago you would still be up about 20%.

Seems to me that any time a US tech stock dips it merely shoots up 10 to 20 percent over the next 4 to 6 months.

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If Amazon can't make a profit -what with tax dodging and slavery for employees - who can?

Amazon don't care about short-term profits, what they want to do is to control entire segments of the technology market. They're already the leader in online retail and because of their effective monopoly, they can now leave that business run on auto-pilot and use profits from it to try and break into other markets. We've already seen them develop the e-book market, virtually eliminating all competition so they're now pretty much in a monopoly position. Their Kindle Fire range is still a work in progress, but so far they have made decent strides in breaking into this market. As long as they're still developing new products and trying to break into new markets, then they're going to be spending cash to do so.

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Amazon don't care about short-term profits, what they want to do is to control entire segments of the technology market. They're already the leader in online retail and because of their effective monopoly, they can now leave that business run on auto-pilot and use profits from it to try and break into other markets. We've already seen them develop the e-book market, virtually eliminating all competition so they're now pretty much in a monopoly position. Their Kindle Fire range is still a work in progress, but so far they have made decent strides in breaking into this market. As long as they're still developing new products and trying to break into new markets, then they're going to be spending cash to do so.

Denninger seems less hopeful.

In addition their AWS services, which they have touted as one of their saving graces, has become embroiled in a price war and they're spending on PPE (probably for that service although I'm sure distribution is part of it) like a drunken sailor while having to continually slash pricing to obtain customers.

We've heard for years that Amazon was "investing" and that investment would reap rewards.

http://market-ticker.org/post=229234

I dont think its that easy to run a monopoly on-line...OK it takes a lot to built the trust needed to get everyday people to shop with you, but its a global marketplace and the only way I can see them achieving a true monopoly Is with political lobbying to make it so. Chinese competitors will get going and undercut amazon, unless it can achieve a cult like brand following as with apple.

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We've already seen them develop the e-book market, virtually eliminating all competition so they're now pretty much in a monopoly position.

Uh, no.

I haven't seen figures for a while, but Amazon's ebook share in America seems to have dropped from around 90% when ebooks first became big business, to around 60% last year. In much of the world, they have a ton of competition from local ebook stores, and their market share will be even lower.

Apple could also probably take a bigger chunk of that market if they actually cared about it, instead of using it as just another way to lock people into iPhones and iPads.

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Ok, so now with time to read the earnings report, here's the deal.

First, revenues are rising as reported but expenses are going up even faster. Notable places where expenses are exceeding revenue growth rates include:

Stock-based compensation up 31% (!) y/o/y

PPE purchases are up 50% (yikes!) compared against same-quarter last year, and capital lease additions doubled.

Shipping expenses are up 30%.

Marketing is up 40%.

Tech and content is up 40%.

In short -- sweet Jesus, these guys are burning money like it's newspaper in the fireplace!

The only good news is that the cost of goods sold is up 20%, but revenue was up a bit more, so they're driving cost. Of course that's bad for their vendors; they're getting squeezed.

Now here's the kinda-ugly on the sales side.

International is slowing -- it's up 18% on sales while domestic is up 26%. But, remember, we were told international was going to save the day! Uh, that's the same change y/o/y from last quarter -- no improvement in either domestic or international.

Denningers take.

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Amazon don't care about short-term profits, what they want to do is to control entire segments of the technology market. They're already the leader in online retail and because of their effective monopoly, they can now leave that business run on auto-pilot and use profits from it to try and break into other markets. We've already seen them develop the e-book market, virtually eliminating all competition so they're now pretty much in a monopoly position. Their Kindle Fire range is still a work in progress, but so far they have made decent strides in breaking into this market. As long as they're still developing new products and trying to break into new markets, then they're going to be spending cash to do so.

A myth. You can't dominate a market as big as online retail. It's like trying to eradicate all the mosquitoes in a swamp, there are so many and their resource requirements are so low they'll always come back, stronger than ever.

Amazon is a fine firm, but its current model is also based on massive, massive amounts of ******** and wishful thinking.

Edited by marceau

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I dont think its that easy to run a monopoly on-line...OK it takes a lot to built the trust needed to get everyday people to shop with you, but its a global marketplace and the only way I can see them achieving a true monopoly Is with political lobbying to make it so. Chinese competitors will get going and undercut amazon, unless it can achieve a cult like brand following as with apple.

Alibaba, TaoBao, Dealextreme, Banggood, plus many others no doubt.

No need to go to the wholesaler when you can get to or near as possible to the manufacturer.

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At some point the realisation will dawn that you can't deliver products to customer's doors for less than the cost of them picking the stuff up themselves from a shop.

Amazon's downfall is too little investment in automation and expanding their sales volume faster than the physical infrastructure.

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They are also leaders in areas I doubt most people realise. Have a look at Amazon Web Services. Seriously impressive stuff. They basically sell their expertise in internet infrastructure to anyone that wants to rent it by the minute of any scale. Their influence now seeps into literally every industry in some fashion. This is no doubt driving some of the excitement.

Rival retailers? Either they or a 3rd party are using Amazon's servers.

Online casinos? Somewhere some part of it will.

NASA? Yep, they use them.

Academia? Yep.

Dropbox? Yep. It's basically just a front end to Amazon.

Starting to make sense now? Their stuff is really really nice.

Edited by cica

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At some point the realisation will dawn that you can't deliver products to customer's doors for less than the cost of them picking the stuff up themselves from a shop.

Amazon's downfall is too little investment in automation and expanding their sales volume faster than the physical infrastructure.

Actually, being cheaper isn't the main reason people buy books from Amazon. It's the convenience of choosing the book you want, without having to spend time going into town.

A lot of bookshops, if asked, would match the Amazon price on request, just to keep the customer. Most customers don't ask.

As mentioned in other posts, Amazon is going into other products and services, because it has to. Relying on the Kindle alone will not keep the company afloat. The danger will be, like Microsoft, that it takes on too many areas, and has to compete against too many strong competitors.

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Amazon's downfall is too little investment in automation and expanding their sales volume faster than the physical infrastructure.

Where on earth did you get that idea from?! Their business model may turn out to be borked in the long run but if there's one thing they are not doing that's under investing in technology and infrastructure. When was the last time you read a headline about Amazon failing to deliver people's orders?

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Amazon is a ponzi. It needs to keep growing to create the illusion of success. Wait and see what happens when the growth stops. It'll make Enron look like a storm in a teacup.

Il make a long term call.At some point Amazon will make the biggest profit in retailing history.Maybe the biggest corporate profit ever.They make a loss because they reinvest their free cash flow into the business.I sell on there and traffic keeps growing and growing.

Edited by durhamborn

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They are also leaders in areas I doubt most people realise. Have a look at Amazon Web Services. Seriously impressive stuff. They basically sell their expertise in internet infrastructure to anyone that wants to rent it by the minute of any scale. Their influence now seeps into literally every industry in some fashion. This is no doubt driving some of the excitement.

Rival retailers? Either they or a 3rd party are using Amazon's servers.

Online casinos? Somewhere some part of it will.

NASA? Yep, they use them.

Academia? Yep.

Dropbox? Yep. It's basically just a front end to Amazon.

Starting to make sense now? Their stuff is really really nice.

No longer offering Amazon webstores

I had a call from Amazon last week to see if I needed help with the my account, as we're in the process of having some stock manufactured and it's been sat dormant.

He informed me that they are no longer offering webstores to the UK (or Germany) , but could not offer any explanation as to why or suggest any alternatives. This has obviously thrown my business plan out the window, as the webstore was to be a major part of selling our products.

I'm unable to find any documentation or help on this matter, can someone suggest alternatives that would work with FBA?

https://sellercentral.amazon.co.uk/forums/thread.jspa?threadID=81047&tstart=0

Speaking as a small Amazon 3rd party seller who's sales have fallen off a cliff over the last year, I can no longer can make a full time living there.

I see a lot of problems ahead, as do many Az veteran sellers here..

http://amazombies.co.uk/index.php?action=forum.

Many Az 3rd party sellers have survived with cheap storage in their attic / garage, no way will the switch to Az FBA, neither would they trust Amazon not to change the rules, while having their stock hostage.

The massive price deflation in the last few yrs has destroyed many markets, so it just not worth entering them. I guess, a conspiracy theory would be that amazon want them destroyed (slowly, while they suck he last profit out of it) as they hope they will control a digitised media future.

As a buyer, the last few things I have bought from amazon have been a lot cheaper than the competition, I thought one basic rule of capitalism, was that you charged what the market would stand, ie. usually a few pence / £ cheaper than your nearest competitor.

eg

Northern Exposure - Season 1-6 az £19.70 nearest 3rd pty competitor on az £39.9

http://www.amazon.co.uk/gp/product/B005UXK2UU/ref=oh_aui_detailpage_o04_s00?ie=UTF8&psc=1

Electric Caulking Gun az £54 nearest £64

http://www.amazon.co.uk/gp/product/B003CRJOS2/ref=oh_aui_detailpage_o03_s00?ie=UTF8&psc=1

I pay £89 a yr for Az prime & had a £2 vid game delivered free next day, it would cost me £4.89 to deliver that game, swing & rounabouts is one thing, but this is madness. I use it a few times every week.

Amazon now have their own delivery service (which RM blame for falling sales ) they use low unmarked roof short whel base ford transits.

I asked the 2 tired 50+ yr olds who delivered my last package, why they did not use bigger vansto get more parcels in. I understand SWB for parking, but surely at least a high top SWB.

They said az preferred lots of small vans to fewer bigger ones. One guy was moaning about having to do another guys job after doing a 10 hr shift

Edited by Saving For a Space Ship

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A lot of bookshops, if asked, would match the Amazon price on request, just to keep the customer.

Care to name some names? Maybe an independent would (doubtful), high street definitely not. Not a book shop but the likes of HMV don't even match their own web pirces. If it's on Kindle though you don't even have to leave the house.

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I thought one basic rule of capitalism, was that you charged what the market would stand, ie. usually a few pence / £ cheaper than your nearest competitor.

eg

Northern Exposure - Season 1-6 az £19.70 nearest 3rd pty competitor on az £39.9

There's no rule of capitalism that says you have to charge one penny less than the other guy. If Amazon charged one penny less than that 3rd party competitor they might make very few sales. Better to make £5 profit per sale on 10 sales than £25 profit on 1 sale. Northern Exposure DVDs aren't exactly an essential good that customers have to buy.

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Where on earth did you get that idea from?! Their business model may turn out to be borked in the long run but if there's one thing they are not doing that's under investing in technology and infrastructure. When was the last time you read a headline about Amazon failing to deliver people's orders?

The distribution centres are not cutting edge in terms of automation, very far from it. Ultimately, they themselves, are nothing more than a fulfilment operation for consumer brands and publishers and not a particularly efficient one at that.

With Royal Mail now looking to have squandered their monopoly if more cost-effective sub 5kg shipping options come into the market for all their size Amazon would possibly not be able to compete with the smaller operators.

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Care to name some names? Maybe an independent would (doubtful), high street definitely not. Not a book shop but the likes of HMV don't even match their own web pirces. If it's on Kindle though you don't even have to leave the house.

Yes, of course I'm talking about independents. Staff in big operations like Waterstones obviously don't have permission to vary prices.

But an independent, would certainly match the Amazon price (if asked), although you would need to add in the 2.99 postage that Amazon charge. Why? One, it's cash. Two, the customer is in front of you, so there is a big chance of a repeat visit. Third, any chance to get one back on the Borg..

Incidentally, my bh always tries to get a lower price when she sees a book she wants ( mainly second hand independents) . I have not seen her turned down yet...

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There's no rule of capitalism that says you have to charge one penny less than the other guy.

I suspect a lot of Amazon's big discounts are just loss-leaders to get people onto the site, where they buy other things, too. Our printer cost about half as much on Amazon as it would locally, but DVDs and Blu-Rays are often cheaper in local stores (though those stores are shrinking their movie stocks in favour of phones and other more profitable markets).

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