
Why aren't more companies like Amazon? - mcnabj
https://medium.com/future-tech-future-market/615de5a92b36
======
simonsarris
Nobody is challenging Amazon because their Earnings Per Share are...

-0.20. Negative 0.20.

Investors lump AMZN with GOOG and the like but GOOG's EPS is 33.59. TGT? 4.26.
Walmart is 5.07.

No other company with a market cap (100+Bn) as large as AMZN is allowed to get
away with that. The only one that comes close is Vodafone, with a tiny
positive EPS (0.13).

It's important to note that if any other company spent until their EPS was
negative, investors would _flip._

Amazon is playing with razor thin margins while trying to scale up a _platform
to end all platoforms_ that we might someday use for everything without
thinking about it. On that day/year/eon dollar bills might as well be printed
with Jeff Bezos' face on them.

Amazon won't be using UPS and Fedex trucks on that day. They'll be using
Amazon trucks. You'll know that era when you see it, I think.

If you're Walmart or Target its hard to justify it at this point, the stock
could take a major dive from such a risk. They're at the "Ask-questions"
phase, and the questions are always "What's the profit?" because these are
publicly traded companies. Amazon has been playing it risky since the get-go.

Bezos is in for a _very_ long gamble, and that frustrates the hell out of some
investors, but its lofty enough to still attract investment dollars while in
the "build-first" stage. Hopefully they can pull it off for a few more years
before the stock market shifts to "Ask-questions."

So that's why. Amazon is doing something bold that would cause the mother of
all stock dives in any other 100+Bn company. They get a free pass because
Bezos is convincing and for Amazon its sort-of-always-been-this-way.
Walmart/Target/Etc do not have either of those luxuries - the incredible (or
believable) visionary and being a company that's still in burn (build) mode.

~~~
snprbob86
This comment is spot on.

However, my next question is: What can we do to make more companies be like
Amazon?

Not every business needs to operate on razor thin margins, but I'd love to see
more big companies playing the long game and continuously innovating. Wall
Street invests in returns, not innovation. What can be done to help reset that
balance a bit?

~~~
smacktoward
Do we really _want_ other companies to be like Amazon? If the Amazon endgame
is "own the entire retail sector," I'm not sure that we ("we" meaning "society
at large", not just "Amazon shareholders") want _any_ company to be like
Amazon... even Amazon.

Not to mention that when the endgame is "own the entire retail sector," even
if other companies _want_ to be like Amazon, in the end they'd have to kill
Amazon to do it. Owning the entire retail sector is incompatible with the
existence of lots of thriving alternatives. It's like the Highlander -- there
can be only one.

~~~
lhc-
And, don't forget the rather nasty consequences of Amazon's ability to operate
on no margins: it kills all their competitors who have to actually profit to
stay alive. When Amazon moves into your market, your company is probably in
big trouble. Really, thats good in the very short term (lower prices for
consumers), but bad in the long term (because once amazon controls everything,
theres no reason to keep their margins so low).

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tptacek
Amazon makes so little money relative to the size of their enterprise that
Matt Yglesias has described them as a charity run by Wall Street.

~~~
Glyptodon
If by 'charity' you mean the only efficient company on Wall Street. If things
are properly efficient profit will be near 0. Large profits mean that
competition has failed.

~~~
SamReidHughes
Your comment makes no sense. If their competition is pushing their profits to
0, then the competition's efficient too.

~~~
rayiner
What he probably means to say that the market is efficient (which the retail
sector is). Margins are razor-thin in the retail business because competition
pushes profits to zero.

------
jtbigwoo
There are more companies like Amazon, but they don't exist online. Amazon is
Walmart, Costco, CVS, and Target. (You could also compare them to Home Depot,
Meijer, Kroger, etc.)

There are two traditional paths to success in business--high volume/low margin
or low volume/high margin (Timex vs. Rolex). Walmart is the classic high
volume/low margin company. They started as a five-and-dime. Over the years
they used their growing market power to add more product lines until they
became a one-stop shop for everything. Amazon has followed Walmart's playbook
almost from the beginning. While other early competitors were passionate about
books, Amazon was passionate about warehouses and operations. The same thing
happened when Amazon moved into music, electronics, and everything else. They
could operate faster and cheaper than the other guys.

There are two reasons why there isn't another Amazon in the online world.
First, geography meant that Walmart, Target, and Costco didn't directly
compete in every place from the very start. They had time to develop and
fortify an operational base and then expand. Companies like buy.com had to
immediately challenge amazon in order to survive. Second, technology companies
don't generally focus on the low margin/high volume path. Online companies are
generally populated by folks from the tech industry who look to Microsoft and
Apple as their models for operating a company.

------
josh2600
Uhh try going to a VC to raise money with the Jeff Bezos story today:

"We're going to lose money for five years and then operate at absurdly low
margins for eternity".

Look, Amazon may win in the long run, but asking why more companies aren't
like amazon is like asking why every company isn't Apple. We can't all be
outliers.

~~~
DrinkWater
Or you could simply say: People who invest money are rarely committed to long-
term strategies. And Amazons definition of long-term is very unique.

~~~
seunosewa
Investors don't have a problem with long term strategies. They have a problem
with strategies that involve losing money consistently or making no profits
for many years, in the hope that you can magically start making obscene
profits sometime in the distant future. Most companies that practice this kind
of long term strategy end up going bankrupt before the profits materialise, so
it makes sense for investors to be wary of them. Warren Buffett is a long term
investor, and even he would not touch Amazon's stock with a 10 foot pole.

~~~
DrinkWater
But Amazon is not "Most companies". Amazon has done a brilliant job so far,
and has changed from a bookstore to a cloud-provider, mega store, content
generator and ad network (and probably many things more); utilizing the medium
"internet" in a way most companies can only dream of.

In my opinion, like i said, Amazon has a very unique POV on long-term
strategies and it collides with people (or stock markets) expectations on
making a lot of money in a short time.

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csharpminor
I get the concept of a two-minute read, but this article strikes me as lacking
any substance whatsoever.

~~~
omonra
There should be a name for articles whose body adds (virtually) nothing to the
title itself. That is not to say that the title is not worthwhile - but you
can save yourself the trouble of reading as long as you got the title :)

~~~
whateverfor
They are already tagged like that here on Hacker News thankfully: see the
medium.com?

------
jmduke
The companies that remind me most of Amazon are General Electric and Honda.

Amazon started with a single complex offering (centralized eCommerce) and from
that they famously abstracted and platformized everything about their
business: they decentralized their marketplace, they dogfooded their web
services to the point that they were able to actually sell their web services,
they relentlessly keep decoupling their core.

Honda, and General Electric, too started out with pretty simple value
propositions. Honda started by selling piston rings to Toyota, and from there
started manufacturing car part after car part until they had enough to create
the cars themselves. (And it turned out that when you can manufacture a car
yourself from start to finish, you can manufacture a lot of other stuff with
the same goods, from drills to radios).

On the other end of the spectrum, General Electric expanded by maintaining
otherwise orthogonal SBUs and becoming one of the first companies in the 20th
century to really take advantage of cross-branding, figuring out that if a
customer liked their lightbulb they'd be okay with using the same company to
buy a handheld radio.

(Incidentally, both GE and Honda also profited tremendously from WWII. I hope
no tech company happens to profit tremendously from a WWIII, mainly because I
hope there is no WWIII.)

~~~
nostrademons
It actually reminds me a lot of Richard Branson's Virgin group. Started in the
recording industry, then compulsively reinvested profits to get into airlines,
hotels, cell phones, retail, spaceflight, and various other industries. And
like Amazon, Virgin tends to hold investors by the balls, bleeding them dry to
finance risky new ventures by the force of Branson's personality.

------
emn13
Why is it apparently considered hip nowadays to style a few simple paragraphs
in font-size 5000%? If you're non-blind this is useless at best, and if you
zoom by default, it's unusably large.

Annoying.

~~~
Semaphor
Unless the article is very long, I prefer to read it like that.

------
tixocloud
Isn't GE doing it to something extent? They're so diversified and so far away
from the light bulb business that they originated from. Also, universal banks
have diversified product offerings.

The article poorly assumes that every company has talent and capital to take
on the risk of entering new markets all the time. It's easy to say "we
should've done this and that" in hindsight of success but there are numerous
failures of companies that tried to enter new markets and failed.

------
genuine-a
Amazon needs to start focusing more on the international market. Mark Meeker's
2013 internet trends showed that while 8 out of the top 10 internet properites
are owned by american companies, 81% of the internet traffic going to these
sights is international (Slide 6 of Mary Meeker's Internet Trends:
<http://www.kpcb.com/insights/2013-internet-trends>). Even though Amazon had
been around since the 1990's, Alibab's gross merchandise volume surpassed in
the 2011-2012 time frame(Slide 69 of Mary Meeker's Internet Trends:
<http://www.kpcb.com/insights/2013-internet-trends>). The emerging markets
such as China and India, as well as the Next 11 countries (Research paper by
Jim O'Niel: [http://www.goldmansachs.com/our-thinking/archive/archive-
pdf...](http://www.goldmansachs.com/our-thinking/archive/archive-pdfs/brics-
book/brics-chap-13.pdf)) is where Amazon needs to be focusing their efforts if
they want to stay competitive in the next decade.

~~~
tnuc
They just started in India.

<https://www.amazon.in/>

~~~
genuine-a
tnuc, they definitely did just start there, I remember the HN post yesterday
which was covering it! It's going to be interesting to see how they change
their buisness model to better fit the Indian and South-east asian culture.

------
omonra
I was kind of hoping the article would provide the answer.

------
luser001
Answer: evolution. The ones who tried this don't exist any more.

Amazon is an outlier.

If another company did this, _but it's stock price didn't keep rising_ ,
corporate "raiders" will replace the board and get money back as dividends.

Sorry if my point isn't clear. I'm typing this in a hurry.

~~~
varelse
I'm not sure that Amazon is an outlier, but rather that as you say, other
companies fear they would get raided if they tried to reinvest all their
profits (what most companies probably ought to do a lot more of IMO) instead
of issuing them as dividends and/or taking the money off-shore.

Given that Jeff Bezos cut his teeth at D.E. Shaw, I'll bet he went into this
with his eyes wide open as opposed to the usual lucky and wet behind the ears
ivy-league hipster willing to sign away 90+% of his/her idea's net worth from
the get-go just to get a shot to pursue it.

Jeff Bezos was the right guy in the right place at the right time. That
doesn't mean Amazon can't be taken out, it just means that someone needs to
enter the space with a background capable of competing with him rather than
creating another pets.com.

------
rbur0425
Why would any company want to be like Amazon!? They steal and do not protect
the sellers. You can file an A-Z claim on anything that didn't have signature
required and get your money back. Call their support and they cannot help you
in any way. They buy there products from 3rd party sellers at net-60 terms and
then return the merchandise that didn't sell back to you at your expense. They
steal money from 3rd party merchants, when a buyer makes a claim they take
directly from the seller instead of investigating the issue. What company
would still be in business if they did all of this?

------
AndrewDucker
Because there's no money in it?

Either you compete with them by lowering your prices to match (in which case
you're almost making no profit, and probably a loss), or everyone ignores you
and buys from Amazon.

~~~
isaacb
The post doesn't mean why aren't there more ecommerce giants, but rather why
don't more big companies aggressively reinvest their income into growth and to
enter new markets rather than hoard cash just to satisfy stockholders.

------
nostrademons
Nobody has yet pointed out that the specific example cited in the article,
online grocery delivery, is a reaction to Google entering one of their core
businesses with same-day delivery?

<http://www.google.com/shopping/express/about/>

It seems to invalidate the premise that nobody is competing with Amazon.

------
slg
I don't buy the counter examples of Microsoft, Google, and Apple. All three of
those have a history of entering new markets with large upfront expenses and
turning them into successful businesses. What exactly is the difference
between delivering groceries and creating the Xbox, Android, or the iPhone?

~~~
wildwood
The main difference is the margin. IPhones sell, reportedly, at a 58% margin.
The profit margin on Windows has, in the past, sometimes exceeded 90%.

Amazon is retail. They make 12% margins in a good year. Which is one big
reason why Amazon will put significant effort into a new market with a 25%
margin, that the others would turn up their noses at.

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reeses
"They never enter a market they can’t compete in, and they keep entering new
markets all the time."

Auctions? Search?

------
mikecane
J.C. Penney. Nuff said.

------
yoster
That comment "Nobody is challenging Amazon in e-commerce. Nobody." is highly
inaccurate. Every major company already does deal in e-commerce. Amazon may do
it best, but it doesn't mean they are not being challenged. Many companies are
doing pretty well in e-commerce. Their expansion into grocery home delivery
has been snail paced at best. It is like raving about Google Fiber when it
will not be available for most of the country for a very long time.

------
notdrunkatall
More companies aren't like Amazon because they want to make a profit. Amazon
operates at cutthroat margins, as if it were still a startup sacrificing
profitability to grab market share. Once most companies own a solid chunk of
the market, their concern shifts from outcompeting everyone else on price to
outcompeting everyone else in other areas and fattening their margins in the
process.

Amazon is the outlier because Bezos is still in charge, and he's playing the
long, _long_ game.

