I think the main thing will be how their margins play out. Amazon is a big enough company that investors expect decent margins even while they're growing rapidly. Perhaps this is an unreasonable expectation, but if so, I think Amazon should be more aggressive about giving guidance.
Are there basically just no margins in their retail business? Are they intentionally depressing profits to keep taxes down? Why isn't there plenty of money there?
Because even if they're investing a ton of money in expanding their distribution system to allow for growth, normally that gets treated as a capital cost and amortized over a period of time, not just expensed in the period they pay the money out. The same is true for upfront investment in their Kindle Fire business (edit: or in AWS infrastructure).
I'm not trying to attack Amazon -- they're a savvy company that has proven to be hugely successful through any number of trials and crises. But it's just not clear to an outsider what's going on with their business at the moment.
I agree with you, I am just betting (hoping?) that the current crash is temporary and they will recover in the near future.
Their revenues are also down significantly (I think it was something around 40%) which can't be explained by large investments effecting their earnings.
amazon's entire focus is on top-line growth. if they have any extra money lying around, they'll use it to make investments, hire people, or lower prices. as far as i can tell, they aren't too interested in profit as long as they can get away with it.
I wondered the same when I recently ordered a mousepad (via one of their partners) for ~$3 with free shipping, but since they used US mail I can understand how they managed it; they can perhaps do the same for small quantities of dental floss.
I mean, somebody got paid to load my 90 yds of Reach onto an airplane in the middle of the night and fly it from Tennessee to California. With virtually no added cost to me, since I have Prime which I share with 5 other people in my family. New economy or not, there's just no way that makes economic sense.
I know the argument is that Prime alters one's spending patterns, and ten paying customers are subsidizing every yokel like me who's too busy/lazy to walk to the drug store. Still it feels like an unsustainable model.
I often wonder if we'll look back on this period as the apotheosis of consumerism, when cheap and abundant fossil fuels made it possible behave like we all owned matter transporters.
I don't know that it's so unreasonable. The floss at the drug store got there the same way, after all, and it's not as though they scheduled the flight especially for you.
Indeed. It would be expensive for me to overnight you some floss. It's not expensive for Amazon to overnight you some floss, because they overnight thousands of packages every day and have some sort of contract that makes that cost a lot less for them.
Are there basically just no margins in their retail business? Are they intentionally depressing profits to keep taxes down? Why isn't there plenty of money there?
Because even if they're investing a ton of money in expanding their distribution system to allow for growth, normally that gets treated as a capital cost and amortized over a period of time, not just expensed in the period they pay the money out. The same is true for upfront investment in their Kindle Fire business (edit: or in AWS infrastructure).
I'm not trying to attack Amazon -- they're a savvy company that has proven to be hugely successful through any number of trials and crises. But it's just not clear to an outsider what's going on with their business at the moment.