
How Amazon’s Bottomless Appetite Became Corporate America’s Nightmare - thisisit
https://www.bloomberg.com/graphics/2018-amazon-industry-displacement/
======
stcredzero
_Amazon makes no sense. It’s the most befuddling, illogically sprawling,
and—to a growing sea of competitors—flat-out terrifying company in the world._

No. It makes perfect sense. All economic activity is going to be intermediated
digitally. Riches to those who get there first. Jeff Bezos saw this, and knew
books were a good way to get his toe in the door. However, his aim was the
railroad baron money all along.

When Amazon went from selling books to selling everything, people said it
didn't make sense. Even I said that. However, in retrospect, it makes perfect
sense.

(In the industrial revolution, people with far sight could predict that all
economic activity would be intermediated through mechanized means of
transportation. The analogy is perfect.)

~~~
dalbasal
"selling books to selling everything" seemed a reasonable change to me, and I
think it was articulated as a strategy by bezos early on. As you say, books
were a starting point.

Selling books to selling computing on demand... That was a big leap, and the
most profit generating "pivot" I can think of.

Alexa, video streaming, kindle and ono...these are really Amazon becoming like
Google. They're now defined as a business by the skills/abilities they have,
not the services they provide. Technology company, not search company.

..this justifies investing more on self driving cars or nuclear power and less
on search engines. For most companies this would just be pr/hr-speak, and
impossible in practice. Usually companies have to spend most of their money on
core products, because it takes money to deliver those products. Tesla or
Walmart could define themselves however they want, but they'll never be able
to spare more than a penny or two of car dollars on stuff that isn't related
to making cars. The margin isn't there.

To be a Google, you need a legitimate cash cow. Amazon now have one, aws.

~~~
saalweachter
AWS was surprising.

A lot of what Google does, or fails at, makes a lot more sense when you
actually think about what its core competencies are: big data, anything that
works best with an exabyte of data, a billion CPU-years, and some crazy
machine learning / good ol' fashion statistical elbow-grease.

It's obvious how this relates to their original business, Search, and how it
relates to their more successful spin-offs and their failures. Spam filtering
and self-driving cars are more big data problems (though spam filtering is
less impressive nowadays), and the Cloud and YouTube make a lot more sense
when you realize that Google _already_ runs a _really_ efficient data-center.
Meanwhile, eg, Google Reader was something that didn't really need a Google to
run, and suffered for it.

It's not as obvious to me how AWS grew out of Amazon; it doesn't seem obvious
to me that you need that much data center to run Amazon (or at least, Amazon-
at-that-time).

~~~
gt_
I recall an episode of Software Engineering Daily where the host, Jeff was
interviewing some Microsoft guys and they suggested AWS was the result of
Amazon selling it’s own infrastructure. Jeff interrupted him and said that was
“not accurate.” Sorry I don’t have link to the episode here but it was not a
very good one. The Microsoft guy responded by saying the truth of the story
didn’t matter, which is pretty absurd but I think reflects how Amazon came to
dominate the public consciousness. The truth just doesn’t matter in
advertising or in reputation. We’ve learned how to undermine it with buzz and
mediation.

For example, many were sick of Wal-Mart. Was it because of the way they
treated their workers? No. If it were, they wouldn’t have ran to Target and
Amazon instead. The actual shopping behaviors are guided by convenience but
judtified by cultural associations. Target capitalized on the same image
appeal without offering anything new at all. Amazon is, culturally, Target +
Silicon Valley. Ad agencies all understand this very well. Amazon is
neoliberalism in the flesh. There’s nothing a bit surprising about it.

~~~
emodendroket
I've always wondered about how Target can maintain this image as some kind of
forward-thinking retailer when they're no better than Walmart is on most of
that stuff, but I think the answer is honestly mostly "the Wrong Kind of
People shop at Walmart."

~~~
Spooky23
They offer better service and selection in many areas than Walmart. This is
particularly true outside of the south, where Walmart is just better for some
reason. Here in the northeast, Walmart is like DMV especially when benefit
checks come in.

They also appeal more to women, and eschew product categories that men and
poor folk flock to like car parts, guns, fishing, Jesus books, crafting, etc.

~~~
dragonwriter
> They also appeal more to women, and eschew product categories that men and
> poor folk flock to like car parts, guns, fishing, Jesus books, crafting,
> etc.

Target does _not_ eschew most of those categories (guns and car parts are the
only ones I think they consistently don't carry). Also, as an aside, crafting
isn't a “men and poor people” category, anyway, but a famously huge interest
for middle class women.

~~~
Spooky23
My local Walmart probably has two full aisles for crafting stuff... probably
about 200 linear feet. The next aisle is ball jars and canning.

Target probably has about 40 feet of that stuff, mostly scrapbooking and
similar stuff. No yarn, no knitting needles, etc.

Fishing in my local Target in a single 4-ft section, next to 12ft of water
bottle and Thermos jars. Walmart is probably two half aisles of stuff.

~~~
emodendroket
While I don't doubt that there are some differences in focus, Walmart
generally has more of everything than Target.

------
matthewmacleod
It’s a shame in some ways.

Setting aside the rest of it, the core Amazon experience is kinda annoying.
Trying to find anything in its morass of Bad metadata is increasingly
challenging. The marketplace aspect is comprehensively shitty, to the point
that I will entirely avoid anything that isn’t actually shipped by Amazon.

Haven’t you ever hit a product page for say, a pair of shoes, and the “colour”
options are things like “Blue”, “Green”, “EXTRA LARGE”, “pair”, “SHOE”, “red”
- each of which actually turn out to be different products from different
sellers with different delivery terms. Or a listing for an SD card that
combines different manufacturers for different sizes, except some of them are
actually SSDs and other ones are 3.5” hard disks? I’m full of rage just
thinking about it.

And it’s a shame because ordering from Amazon is great. Fast and reliable
delivery, easy returns, that kinda stuff. If it was easier to find things on
it, I’d use it even more. As it is, I barely tolerate it, and there are other
options that are actually pretty appealing.

~~~
Paperweight
This absolutely enrages me, too. Especially when other big retailers are
copying the same model. It's made shopping for computer parts an absolute
nightmare.

I swear the plan is to maximize the time it takes to find anything and thus
have more time to try to sell you more junk.

~~~
Slansitartop
> It's made shopping for computer parts an absolute nightmare.

Give Newegg a try, they get it right.

~~~
astrange
Though each order seems to result in six emails, without a way to turn it off.

~~~
Slansitartop
I have filters for all "order" emails, so I haven't even really noticed
anything like that.

------
j-c-hewitt
Walmart also sells everything, and it actually sells more of everything than
Amazon by quite a lot. Just not online.

The gap is not even close. Walmart sells almost $500 billion in goods every
year in the US alone. Amazon sold less than $200 billion in 2017. You could
fit more than 2 Amazon.com's into Walmart. This is admitted by the article
halfway down but a lot of people don't really take this into account when they
think about Amazon.

Amazon may be a very exciting stock, but it is not the leading retailer. It is
only the dominant retail website online, and that dominance in market share is
actually quite misleading because the Amazon Marketplace is not a 1:1
comparison with how Walmart retail stores work. The Amazon Marketplace is
hundreds of thousands of independent retailers daisy chained together to
supply the website with valid, high quality offers combined with a small
number of conventional vendor suppliers. Walmart is Walmart. When you buy from
Walmart you buy from Walmart (unless it's through the online Walmart
Marketplace which aspires to be an Amazon Marketplace clone).

Amazon has had some breakout successes in entirely different markets from
retail, like their leading cloud business.

~~~
pm90
It was really surprising to me that Walmart, being as anal about logistics as
they are, didn't invest all that much in their digital marketplace. Even now
their website is not ideal.

~~~
_rpd
For traditional retailers, e-commerce is an upstart that 'steals' sales from
established geographically-based territories. To support the e-commerce
project is to betray all established players. It cannot gain support until it
is much too late.

This is true of almost all 'disruptive' technologies, and is the reason that
startups can win so big.

~~~
pcnix
A topic very well explored in "The Innovator's Dilemma" by Clayton
Christensen.

~~~
machinehermit
Looks interesting, thank you. Just bought it on amazon.

------
reddog
As just a customer, Amazon is the closest I've gotten to Star Trek level
technology. I tell Alexa what I want and two hours later a set of headphones,
a box of Tide and a package of Earl Grey tea materializes on my front porch.

Not quite as fast as Picard's replicator but for all practical purposes, the
same thing.

~~~
_rpd
Yeah, any retailer that requires me to fight traffic, parking and morose
customer service just to obtain an item that I can instead have delivered to
my porch is at a severe disadvantage.

------
borgel
If anyone is interested, the original Amazon letter to the shareholders
(reproduced with every succeeding letter) is worth a read [1]. In some ways it
pretty much explains all of Amazon.

[1] [http://media.corporate-
ir.net/media_files/irol/97/97664/repo...](http://media.corporate-
ir.net/media_files/irol/97/97664/reports/Shareholderletter97.pdf)

------
joshamania
I don't see why so few people seem to understand that Amazon's key feature is
as a payment processing facilitator. People don't shop at Amazon because they
have the best deals or have the best logistics or whatever. They shop at
Amazon because they can generally find almost anything on there and have it on
its way within seconds. People use Amazon because they don't have to think
about it. They don't have to get out their credit card or even think about
credit/debit cards. It's so damn simple I really don't see how anyone else is
really going to compete. The absolute number one reason I don't go to Amazon
competitors to buy things is having to deal with payment processing (from a
customer standpoint). The only time I _don 't_ use Amazon is that rare
occasion when Amazon (or one of their "partners") doesn't have what I want.

~~~
_rpd
I disagree. Their core feature is rapid, reliable delivery of the ordered
item. Other sites are cheaper than Amazon, but I don't trust them to actually
deliver what I order in a timely manner.

When I do shop elsewhere, I don't mind entering payment details as long as I'm
not required to save them (I don't trust most sites not to be hacked and leak
my payment details). But if I ever get a delivery time over a week or a 'back
ordered' status, I cancel the order immediately, because I know that they
don't really have the item on hand and are just gambling that they can broker
the sale at a profit. I've had merchants outright admit that they can't
fulfill an order unless they can add some high margin accessories to an order.
Not a game I'm interested in playing.

------
AndrewKemendo
I think what people don't understand about Amazon, is that internally it's not
one big company, it's a thousand little companies that serve each other
through what amount to API's. In that sense it's much more like a
conglomerate.

This confused me when I went to meet with some of the teams because it didn't
seem like they even talked - and that was kind of the point, they weren't
supposed to really talk. Each stove-pipe had to "sell" their services to each
other or build them from scratch.

So in that sense it's always competitive because every group is basically
fending for themselves like a startup, but has fantastic resources and access
to services backing them up. That also means they can "move" into any industry
that there is margin in, and rapidly grow inside of it.

Pretty genius really.

~~~
simsla
I think that's definitely part of it. It's very interesting to observe the
lifecycle of many of these services.

\- The company has a business need. \- Because of the economics of scale, it
often makes sense to develop an internal solution. This is true both for
fullfilment centres, and for purely internal problems: e.g. a video
conferencing system for half a million employees. \- As the product matures,
the team or leadership recognises how people beyond Amazon might benefit from
it. (think fullfilment, AWS, etc) \- The internal service becomes a public
product.

------
namlem
Amazon is winning because they have realized in the information age, central
planning has become far easier and more effective. The bigger they get, the
more they'll grow until they take over everything.

~~~
mattmanser
The bigger they get, the more the chorus for anti-trust will grow.

Look at this article for example:

[https://www.ft.com/content/aba8d444-fb94-11e7-a492-2c9be7f31...](https://www.ft.com/content/aba8d444-fb94-11e7-a492-2c9be7f3120a)

Which cites this too:

[https://www.yalelawjournal.org/note/amazons-antitrust-
parado...](https://www.yalelawjournal.org/note/amazons-antitrust-paradox)

The problem for some of their competitors too is that if they do suddenly
trigger a slew of new laws, then Google Play and the Apple Store will probably
get caught up in it too.

The other thing that could happen is the balkanization of the internet, where
heavy trade tariffs will start being applied to America's dominant internet
firms. It's already effectively happened in China. They've certainly not
engendered any positive will in the rest of the world either for all their tax
dodging.

~~~
gxs
Unlike most accusations of a monopoly (see Apple) this is actually approaching
something close to being applicable.

One piece of anti-trust law is that you can't leverage one monopoly to create
another. Can definitely see this become an issue as Amazon gets bigger and
bigger.

------
baybal2
Well, Mr. Bezos' own nightmare is Alibaba for obvious reasons - when most of
what he does is reselling stuff from China, how he is gonna compete if he has
to sell Chinese stuff cheaper than Chinese do themselves?

That does not compute...

Btw: Alibaba is still slowly picking at US market, teaspoon at a time
[https://news.cgtn.com/news/3d677a4e77517a4d/share.html](https://news.cgtn.com/news/3d677a4e77517a4d/share.html)

~~~
jes5199
until they have warehouses in the US, it’s worth it to me to pay the amazon
premium to get stuff delivered quickly

------
glup
Given the outsized role that AWS has on the bottom line (mentioned in this
article and elsewhere), what is publicly known about which parts of AWS are
the most lucrative?

------
kercker
Now only Apple and Alphabet is more valuable than Amazon and it looks like
Amazon will overtake Alphabet to be second only to Apple soon.

~~~
Apocryphon
Next up: Facebook to rename itself to also begin with the letter A.

~~~
GenericsMotors
Acebook?

~~~
wiz21c
I'd so much prefer SafeBook, but it won't happen soon...

------
stretchwithme
The author seems prone to exaggeration. Everything was going wrong for Amazon
in 2014? Amazon makes no sense. Working at Amazon is like a Dickens novel.
Amazon breaks all the rules.

------
cm2012
FYI - Amazon is a huge driver of small businesses. More than 50% of all the
revenue from their whole e-commerce business is from 3rd party sellers, who
are generally small operators.

~~~
dwc
This can be true and still be not so great at the same time. What any company
like Amazon tries to do is capture revenue, typically by taking it away from
someone else rather than create something new.

In the short term that can mean a boon for small business as large competitors
to Amazon are undermined. In fact, Amazon uses small sellers to do the
undermining. Once everyone in a market segment essentially works for Amazon
then they are free to tighten down the screws and extract more profits.

~~~
dusing
In my experience when we brought our small (10yr old) brand to Amazon prime it
doubled our revenue in the first year. Albeit at a lower margin, but still
higher that wholesale. The customer crossover is surprisingly minimal, so it
is not stealing from our traditional online business. I know this through
extensive promotions on our direct website that do not seem to sway demand on
amazon.com for the same thing at a much higher price.

~~~
sah2ed
Wait, are those products listed at higher prices on Amazon or your website?

If I can get an item cheaper from the seller directly, assuming paying them
securely is not a problem and shipping costs stay constant, of course I'll
switch to buying from the seller's website directly.

Unless if the seller's website is harder to use or their business/domain is
name not that memorable/trustworthy.

------
digitalzombie
I dislike how I can't get prime for just shipping without the video services.

Isn't this just bullying Netflix and other video streaming services? Not only
they sell stuff online but they also have a video service. Which is fine but
it's not a la carte.

It feels monopolistic. But I'm not sure if that's fair or not of a comparison
but I personally don't think it's fair.

------
itissid
How can anyone justify in a P/E ratio of > 250 is beyond me. Math and logic
seem both out the window. For investors who want to invest on the scale of
decades - like you and I- this will become either a cautionary tale or the
greatest returns on an ecommerce stock - ever(Only by then it will be much
more than ecommerce).

~~~
Veelox
It is because Amazon purposefully depressing the earnings part of P/E by
outlaying massive amounts into capex and R&D. They have a gross profit of
~$66b but a operating income of ~$4b. If they halved their operating expenses
that ~$4b becomes ~$34b and the P/E becomes ~30 which is much more reasonable.

------
rweba
Eh, I still don't buy the hyperventilating.

The breathless narrative is that Amazon is some all-consuming all dominating
monster that is just going to crush everyone everywhere.

I don't see any justification for this.

(1) Walmart is much bigger. Not to mention Tencent and Alibaba who.

(2) They have well-funded competition and no monopoly power in any of their
sectors.

(3) They only have 4% of all retail (online and off) hardly a stranglehold.

Yes, they will do well and grow, but I don't think they will just effortlessly
win in every market like this article is implying.

------
ZeikJT
"In 2015, AWS was responsible for two-thirds of total operating profit. Last
year it was more than 100 percent."

AWS was responsible for more than 100% of the operating profit? Despite being
impossible statistically, is this a sensationalist way of saying that it
accounted for all of the profit and covered some or all deficit as well?

------
austincheney
> It’s the third-most-valuable company on Earth, with smaller annual profits
> than Southwest Airlines Co., which as of this writing ranks 426th.

Would somebody mind explaining this to those of us who are not investors? Is
this saying Amazon's stock is super inflated by investment speculation?

~~~
usaar333
Investors are credibly speculating that Amazon will continue to have very high
revenue growth rates.

Southwest last year grew revenue 4%

Amazon grew revenue 38% (!!)

If you believe that pattern will continue for a very long time, it makes sense
to give Amazon an enormous valuation.

As a practical example, if you discount the future by 10%, Amazon is growing
discounted yearly revenue by 28%; Southwest by -6%.

Now stocks follow (the sum of) discounted future profits, not current. If
Amazon's revenue increase continued indefinitely, while holding fixed profits,
Amazon would be worth an infinite amount, while Southwest's value is actually
bounded. Of course Amazon certainly will slow revenue growth at some point -
but it isn't too hard to see why it could very well be worth an order of
magnitude more than Southwest.

~~~
jacksmith21006
Yes all about growth. Google is similar as now over $800b market cap and
growing at over 22% and accelerating but also much more profitable than
Amazon.

------
jacksmith21006
My biggest issue is the anti competitive behavior by Amazon in banning all
companies on their marketplace from being allowed to sell competing products
from companies like Google.

Fine do not sell yourself from not allowing anyone else is going too far.

------
soniman
Maybe someone can explain the unit economics of how Amazon makes a profit.
Identify the product category (outside of the marketplace business and AWS)
where Amazon has a cost advantage versus the most direct competitor - Best
Buy, Petsmart, Netflix, Costco, etc. It's hard to do.

~~~
petra
Most people don't buy at Amazon because it is the cheapest.

~~~
reaperducer
People on the internet tend to ignore the value of a quality item, and of one-
day Prime shipping.

And even within Amazon, I'll buy something marked "sold and shipped by Amazon"
before I'll be a similar product from "ReallyGoodOverSeasNumberOneCo."

And I've had incredible luck with the Amazon Basics line of goods. So far,
just batteries and headphones and other miscellany, but the quality is far
superior to any of the Eastern drop-shippers.

Then again, it was AT&T that ran commercials in the 80's saying "You get what
you pay for" and "Be the best and you'll never go out of business."

AT&T is now out of business, with its name bought by Southwestern Bell after
its death in order to cash in on the brand.

~~~
kevin_b_er
I'll warn you right now that even if you buy something "sold and shipped by
Amazon" you can get one of the items sold by 3rd party as new. Amazon dumps
them all in the same box. I believe they call it "co-mingling". You may still
get junk/counterfeit for all your work. The only things actually protected
properly are direct Amazon brands.

So you are already fully deceived by "sold and shipped by Amazon". It may not
be.

~~~
reaperducer
I've heard about co-mingling, but taking a chance with "sold and shipped by
Amazon" is about the best I can do.

------
crb002
The Fortune 500 have an alternative. Build a nonprofit cooperative for their
own data centers. Offer only S3, in memory S3, RDS, Lambda (with GPU/FPGA
instances too), and SQS equivalents as generic compute services. KISS. Beat
AWS on price and simplicity.

~~~
crb002
IBM/Lenovo can do it too. Custom fabric for affinity of Lambdas and in memory
S3 on the same rack for insanely low latency. Killer is an MPI Broadcast
primitive over a tree network and other bare bone equivalents of fundamental
MPI operations. DOE alone will stop buying CRAY when they can use commodity
low latency racks for HPC.

------
jhoechtl
How can a company the size and market dominance as Amazon not be subject to
monopoly discussion?

They have grown far to big. Unfortunately with Alibaba there is no more
alternative than to allow companies to become as dominant.

------
Jerry64545
Jeff Bezos is a star trek fan. May be this explains his desire to create a
society free of labour which means eradicating the middle men as the first
process.

------
avoutthere
I wonder when Amazon will break itself apart (a la Alphabet) in order to
lessen regulatory scrutiny?

~~~
6ak74rfy
I have been wondering the same thing. How would that affect employees though?
For instance, employee movement within Amazon is straightforward today, but
will that still be the case if Amazon went the Alphabet way?

~~~
rifung
Employee movement between companies in Alphabet is not really different than
movement within Google.

I would consider movement within Amazon to be more difficult than movement
within Alphabet as you have to interview again for your new team at Amazon, or
at least this was the case when I was there.

(I work at Google and previously worked at AWS)

~~~
simsla
Does the recipient team of an internal transfer at Google not conduct any kind
of interview? (I'm not talking about your traditional whiteboard interview,
but surely people meet up and make sure that the transfer meets the bar of the
new team?) I've noticed that expected skill for a job level depends strongly
on location, so trying to sync up with a transfer doesn't feel strange to me.

~~~
rifung
Sorry I should have been more precise. The manager has to approve the transfer
so presumably they would talk to you first to make sure you're a good fit and
give you more context into the role. So I suppose although it's not called an
interview, it basically is one.

------
candiodari
Unfortunately, this is merely Bezos cashing in on the US government's
ignorance on sales tax and the internet and winning [1]. If you see Bezos'
history you can see that he is a financial engineer and he engineered it well
[2]. That's not to say it isn't ridiculously impressive regardless of that and
there were many other points that could have been missed, and weren't.

But the amount of money that was, essentially accidentally, injected into
Amazon this way, accelerating it's revenue by double-digit percentages in a
way inaccessible to it's competitors is staggering.

The problem with mail order has always been that they can never match
Walmart's prices on logistics, because of the economies of scale. Because
Walmart's customers bridge the expensive last mile for Amazon. Amazon has
worked very hard to make the cost difference for the last mile less, but even
now it's not a match. So how could Amazon ever become competitive ? Tax
optimization.

And then Bezos' figured he could make sales tax pay for last mile : that
despite having local state infrastructure he would not have either pay sales
tax himself or force his customers to, which was a big gamble, and frankly
questionable in legality, a clear advantage over his shop-based competition.
But he won, despite a few incidents. This was the main, but not the only
successful "tax optimization" Amazon successfully executed.

This is the same hole Alibaba exploited and quite a few others. Cheap toys
from China work because they

1) don't pay fair price for delivery due to international postal agreements
[3]

2) don't pay taxes like their US based competitors do. They don't pay sales
tax, nor do they pay quite a few other taxes. (I'm going to assume this is
well known)

Now there are plenty of other companies that were extremely well positioned to
do the same, above all perhaps Ebay, but they ... well they screwed up
royally.

Perhaps this did not need to lead directly to Amazon and Alibaba/"China inc"
perse, but something like them are the result of government "planning"
(between quotes because this is how a whole host of negotiations by lots of
people interested in other things turned out, not the result of anyone's plan,
it is a series of accidents (and mostly costly mistakes) cemented in
international and interstate agreements).

So the great accomplishment of Amazon and Bezos is to (a) be new, and able to
construct their companies around the holes in these agreements (b) to know
about the holes in the agreements in the first place. The greatest threat to
Amazon is China.

But sadly, and despite that I agree that Amazon's technical and organizational
structure are a remarkable feat, the company is the result of Bezos exploiting
accidental governmental financial engineering to a large extent.

[1] [http://money.cnn.com/2017/03/29/technology/amazon-sales-
tax/...](http://money.cnn.com/2017/03/29/technology/amazon-sales-
tax/index.html)

[2]
[https://en.wikipedia.org/wiki/Jeff_Bezos#Early_career](https://en.wikipedia.org/wiki/Jeff_Bezos#Early_career)

[3]
[https://www.washingtonpost.com/news/storyline/wp/2014/09/12/...](https://www.washingtonpost.com/news/storyline/wp/2014/09/12/the-
postal-service-is-losing-millions-a-year-to-help-you-buy-cheap-stuff-from-
china/?utm_term=.44bcf4113384)

------
baybal2
It isn't, but Mr. Bezos wants everybody to think that it does, and it appears
that it works for him.

------
zerostar07
> In 2015, AWS was responsible for two-thirds of total operating profit. Last
> year it was more than 100 percent

wait, so why doesn't amazon ditch the online shopping business?

~~~
kardos
Because they can switch on a 30% profit margin at a moments notice once the
competition is sufficiently demolished

~~~
echosmith
Not quite. Firstly, retail is not a huge loss maker like people make it seem.
Amazon has shown in the past that it can make a 6.6% margin on retail (which
is fairly huge). Even right now North American retail makes about as big a
profit as AWS, losses are coming from international retail.

So in the end you can imagine Amazon being something like 6-7% margin on
retail (that's not assuming any technological paradigm shifts like fully
automated warehouses, amazon owned banking and payments, fully amazon owned
logistics) and 25% margins on AWS.

On top of that you have a fast growing ads business that is destined to rival
Google and Facebook (if not displace them) with fat margins, and a big chunk
of the smarthome/IoT market via Alexa and AWS.

~~~
jacksmith21006
Doubt you will see Amazon compete in ads at a competitive level with Google or
even fb.

Big problem is media buyers knowledge of their platform and willing to.learn
it as well as integration with the ad ecosystem.

------
bitL
Amazon is just one scalability improvement in blockchain away from getting a
major DApp-based competitor with the potential to obliterate its e-commerce
side (while keeping cloud one) within a decade.

~~~
ztratar
What part of a decentralized app gives such a market advantage?

To think that centralization is Amazon's main weakness is, pardon me, quite
comical. At the end of the day, much of their _power_ stems from efficient
centralization of supply chain, purchaser-side negotiations, economies of
scale, and team coordination.

Just because an app is on the blockchain doesn't innately make it a winner. It
has to deliver the same value to customers at a cheaper price. Amazon doesn't
make much money on most transactions, so saying the "cut out the middle-man to
save money" argument doesn't really work.

So where's the logic? I'm genuinely interested, but just not seeing it.

~~~
bitL
First, as you say Amazon is a middleman charging from 3-15% per sale, making
many small 3rd party sellers unable to compete (if they pay shipping
themselves etc.)

Moreover, they often abuse their position by insta-banning sellers e.g. upon
very first listing etc. due to faulty machine learning fraud detection, so
using their platform is increasingly risky even for quality sellers.

The main advantages of Amazon are centralization of payment information
without the need to enter CC etc. at different shops for every single purchase
(which blockchain has no issues with by design), fast shipping times with
Prime (this might be tricky to reproduce; here is the supply chain efficiency
advantage you mention; nevertheless a drop-shipping idea with generic
warehouse robotics would commodize it) and returns for any reason (this is
people-intense unfortunately and not so easy to automate right now). For us
programmers, they also supply state-of-art merchant API services with some
interesting things like real-time repricing possibility, observing top sellers
for any category to duplicate etc. yet there are quite a few flaws and their
API feels dated and could be made much better.

Amazon as a brand name is also trustworthy; here trust-less approach in DApps
and observing any seller/buyer's transaction history can obliterate this
advantage, though some implications are quite scary.

To replace Amazon, you'd need a marketplace, which seems like the easiest
thing for a DApp; another DApp for background checks on sellers/buyers; for
Prime you'd need additional robotics (which is no longer so difficult to be
honest due to advancements in the past 3 years, especially in confined areas
with known environment map), cheap land with pre-fab warehouses that could be
owned and ran by individual communities. Obviously, human nature would be
biggest risk here (trading illegal goods and services via chains of fully-
automated companies, referencing each other), and you might argue that
orchestrating all of this might require something like Amazon to exist anyway;
I believe though that it only takes for Amazon to make a few hundred capable
single programmers to become upset to solve many of coordination problems in
automated fashion. Legal and political requirements might be much higher
hurdle.

------
Analemma_
The really terrifying thing about Amazon is that investors allowed them to
operate at a loss for decades, which is a luxury afforded to nobody else. How
are you supposed to compete with that? Even if you knew how to build a
competitor to Amazon, the market would never give you enough time to do it.

~~~
swarnie_
Retain control of the company and deliver 20 - 30% yoy growth and you can do
whatever the hell you want.

Amazon is a darling to investors.

~~~
dv_dt
It is now, but for a long time investors lamented Amazons self investment and
long-term outlooks.

~~~
s73v3r_
Which is fine; those people chose not to invest in Amazon.

~~~
dv_dt
Actually only sort of, it's likely only because Bezo's retained enough control
to fight off an activist investor with a shorter term horizon. Structuring
themselves to insulate from takeover by short term interests is something that
several startups have conciously done.

------
frgtpsswrdlame
I think Amazon illustrates that our understanding of 'monopoly' is lacking. It
is not just a company which owns 95%+ of the market which is dangerous, but
just normal old large companies that own 20% or 40% or so of markets.
Oligopolies have their own effect on markets - the econ 101 explanation is a
kinked demand model where there is no incentive for the companies to lower
their price.

~~~
icebraining
Whose understanding of monopoly? For example, the EU antitrust law cares about
whether the firm is dominant in the market - a large share is only one way to
show that. (And it's not conclusive evidence! A firm can still dispute that
they have dominance, despite the large share)

~~~
emodendroket
US antitrust enforcement has basically settled on "if it's not directly
leading to higher costs for consumers leave it alone." This is kind of Matt
Stoller's signature issue that he's always writing about.

~~~
echosmith
I actually like that definition. If it's causing harm to customers - prove it.
Efficiency is not a crime.

~~~
emodendroket
The problem with it is twofold: one, it ignores indirect harms to consumers
from monopoly power (for instance, maybe they're not engaging in all-out price
gouging but they are keeping competitors or new services out of the market).
Two, it ignores other externalities, like regulatory capture or systemic risk,
that result from having huge business interests.

