Amazon Is a Great Company Because It Has the Most Generous Shareholders in the World

BIV

I'm Biv Dick Black, the Over Poster.
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#1
Over the weekend, Henry Blodget had a good experience with Amazon that cost them some money, a tendency he declared makes them one of the best companies in the world. Amazon, he says, is like Rick's Cafe in Casablanca in that it "constantly sacrifices short-term profit in the interest of serving other constituencies and values, including customers, employees, and the community," so "it's certainly no mystery why Amazon continues to take over the world."

I agree with all of that, but I insist that it actually is a mystery. After all there's a reason why most companies don't employ the "provide a great service at such a great price that we don't actually earn any profits" business strategy, namely that shareholders typically want to own shares in profitable companies.

If you don't turn a healthy profit, people tend to sell your shares. That makes the company cheap enough that sooner or later some leveraged buyout shop will take you over, reorganize, start earning profits, and start paying themselves special dividends. That's life. Except for a few special companies who have a hearty ban of investors who have enough faith in management to let them pursue a strategy of growth and excellence rather than profits. It's the fact that Amazon is able to maintain such a healthy market capitalization even while pursuing Jeff Bezos' strategy that makes it such a terrifying competitor. If Wal-Mart didn't care about turning a profit, it could easily raise wages and have a better reputation. If your cable company didn't care about turning a profit, it would slash prices and you'd love it. If Apple didn't care about turning a profit, Verizon and AT&T would be handing out free iPhone 5s like candy.

It would be a wonderful world. But it's not the world we live in because these are publicly traded companies in a capitalistic economy. They don't just want to make money; the broader dynamics of the marketplace mean they have to make money or the managers will lose their jobs. Amazon is special. Wall Street has essentially granted Bezos the right to operate an extremely forward-looking charitable venture on the theory that at some future point it will acquire monopoly pricing power and start screwing us all. Personally, I'm skeptical that theory makes sense, so I'm just going to enjoy the ride. But don't hate on Amazon's competitors for not offering as good a value proposition. Pity them. I'm sure the bosses here at the Washington Post Company would love the opportunity to just deliver products regardless of profit, never pay dividends, and get hailed as geniuses for figuring out that the key to running a great media brand is for expenses to be unrelated to costs.
www.slate.com/blogs/moneybox/2012/12/12/amazon_s_zero_profit_business_strategy_it_s_amazing_but_someday_we_may_all.html
 

Atomic Fireball

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Jul 26, 2005
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#2
I was fuming when Amazon started collecting California taxes a few months back. A few days ago they emailed me a 10% off code for the duration of the Christmas shopping season, which coincidently cancels out the CA tax for that duration. Smart.

They also own Woot - I dropped an insane bundle during the last wootoff because they recently instituted a flat $5 shipping fee for all purchases during a 24 hour period. Also smart.
 
Dec 12, 2007
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#3
I saw a piece on the business channel not long ago on this. Amazon doesn't make massive profits but huge share holders keep buying into them because they move such massive volume of products.
 

whiskeyguy

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#6
I saw a piece on the business channel not long ago on this. Amazon doesn't make massive profits but huge share holders keep buying into them because they move such massive volume of products.
The Amazon business model focuses on extremely-long term planning as far as internet companies go. Everything they do is to build a customer base that will use all of their services, so each service is cheaper but profits accumulate over all of them. You buy inexpensive goods from Amazon, which motivates you to get Amazon Prime. Amazon Prime includes free streaming of some movies/TV shows, which gets you use to the delivery method so you buy/rent other streaming movies from them. They sell inexpensive tablets so you use their priority streaming services and App market, not to mention their ebook store. It's a very smart way of running a business, and ensures longevity in the company.

The reason they have to pay CA sales tax is they are building distribution centers in California and many other states, so they can provide 1 day shipping for many items at a low cost.
 
Dec 12, 2007
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#7
I saw a piece on the business channel not long ago on this. Amazon doesn't make massive profits but huge share holders keep buying into them because they move such massive volume of products.
Say "massive" again you illiterate cunt. I fucking stink.
 

Bobobie

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Oct 1, 2005
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#8
Amazon Prime rules. Netflix is starting to suck in comparison. I've purchased over a dozen kindle books, coffee, a puzzle game, a laptop Power Supply just in the last few months.
 

weeniewawa

it's a man, baby!!!
May 21, 2005
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#9
I spend way too much money on Amazon

I blame Amazon prime

speaking of that, I need a Roku box to watch their streaming video service for free

be right back
 

Bill Lehecka

The Fat Horse v. 2.0
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Dec 8, 2004
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#11
Remember when Amazon was just a bookstore?

Jeff Bezos is the new Steve Jobs, BTW. Or at least Jeff wants to be him.
 

Neon

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#12
Remember when Amazon was just a bookstore?
Absolutely. Used to buy tons of books from them when I was living in Israel. Had no real access to lots of science fiction in English, so I was on Amazon real early. I remember what an amazing concept that was for me back then. A basically unlimited selection.
 

CousinDave

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Dec 11, 2007
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#13
Absolutely. Used to buy tons of books from them when I was living in Israel. Had no real access to lots of science fiction in English, so I was on Amazon real early. I remember what an amazing concept that was for me back then. A basically unlimited selection.

I think I 1st ordered from Amazon in '95 or '96 CD Now too, which Amazon ended up buying

In 15+ years I've probably spent close to $75k on Amazon
 

Neon

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#14
I think I 1st ordered from Amazon in '95 or '96 CD Now too, which Amazon ended up buying
Fuck, I forgot all about CD Now. That was another one I frequented way back when. And judging by where I was living at the time, my first Amazon orders were right around 95-96 as well. Pretty impressive considering I was in Israel (things took longer to take root there back then).
 
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CousinDave

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#15
I spend way too much money on Amazon
I blame Amazon prime
speaking of that, I need a Roku box to watch their streaming video service for free
be right back

Yea I spend way to much money on Amazon as well - the easier you make it for someone to buy something, the more likely they're going to buy something is the first rule of business and Amazon realizes that more than any other retailer internet or B&M

I've been subscribing to Amazon Prime almost since they first offered the service, I'm only 1 ship day from their hub in KY and about 60% of what I order comes from that location.

I really wish USAA and Amazon would work out a deal like USAA has with just about every other web retailer, but I'm guessing its not likely to happen since Amazon has a deal with Chase

Apple TV really needs to get Amazon Prime, but its also on the PlayStation & Xbox
 

whiskeyguy

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#16
I just looked it up in Quicken and I've spent ~$5,000 at Amazon since 1/1/2009... holy shit. I was also going to college from the start of 2010 to last June, so not a lot of disposable income.

Add to that the fact that I use Amazon Wish Lists for Christmas, so family members buy shit on behalf of me, and that's a decent amount of money.

On a side note, fuck Quicken. In that same time frame, I've spent $5,100 on alcohol, $2,000 on cigs, and $2,240 at bars. That doesn't even count when I paid with "petty cash".
 

weeniewawa

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May 21, 2005
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#17
just made another Amazon order today

brake parts for my 64 GMC pickup. they have them in stock

I could drive all over town and maybe havet order stuff

the NAPA didn't have the shoes but Autozone did

but Amazon has everything and better price too
 

DanaReevesLungs

I can keep rhythm with no metronome...
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#18
I've had Amazon Prime since it's inception so, like 2004 or so. With the amount of stuff I order in a year from there that $80 a year is saving me a ton on shipping cost. It's gotten to the point where I buy some bulk goods I can't find anywhere else to take on the road with me.
 

blazin

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Dec 9, 2004
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#19
Im starting to love Amazon more and more these days.

Their local courier express delivery is a thing of magic. I can order some items at 3AM and get them by noon.

Just started taxing PA customers, so that kind of sucks. I just bought a DSLR and had to pay 6% tax, but in 35 days I am getting 2% back, I suppose in store credit - plus no interest for 12 months and maybe a $150 promotional credit if I read it correctly. They certainly make buying stuff attractive, and easy.