From Seeking Alpha:
A lot of investors have looked at Amazon with consternation, as the company has not only not followed the normal pattern or retailers in general, but it also hasn’t followed the pattern most tech companies have followed in the recent past. This has resulted in the company outperforming in many quarters, followed by projections it’ll get crushed under the weight of weak margins and earnings.
Granted, a lot of that happened before the emergence of its powerful AWS cloud service. Yet, even with that as a significant part of the company’s overall growth, the retail segment still is the largest part of AMZN and continues to defy the odds. This isn’t because its model is misunderstood, but I believe because the transition to e-commerce by consumers is stretching out a lot longer than other tech businesses have experienced when scaling and disrupting existing markets.
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Consumers are increasingly moving toward the convenience of online shopping and all the perks associated with it. Amazon is by far the best at doing this, and e-commerce is far from being a saturated market not only in the U.S., but also globally.
With that in mind, the announcement by Amazon it’s going to add another 100,000 jobs in the U.S. supports the thesis that it sees a lot more room to grow before it considers the U.S. market saturated. As for the rest of the world, there is even more growth potential there.
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The online U.S. retail trend has a lot of impetus left in it, and when measured by overall retail sales, remains less than 10 percent of all U.S. sales. That is only going to increase, and if Amazon maintains its superior service, it’s going to get by far the largest portion of those sales.
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What has stymied some of those commenting on what is perceived as Amazon’s weak earnings model, is they’re measuring it by the usual way tech companies perform in the early years of the business. Normally a tech company will seemingly emerge out of nowhere and disrupt a market. It isn’t concerned about generating profits in the early years, instead focusing on scaling and grabbing a big piece of market share before it looks at how to improve margins and earnings.
With Amazon, that hasn’t been how it has played out, and it makes a lot of analysts and pundits nervous, which has produced skepticism concerning whether or not AMZN has an earnings end game in mind.I think the problem there has been growing market share on the e-commerce retail side is a much longer process than totally disrupting a market. Amazon isn’t about to settle in and work on improving margins and earnings when it could lose its momentum on the growth side.
What I’m saying is this isn’t the relatively quick play associated with the majority of tech segments.
Link to the rest at Seeking Alpha
“A lot of investors have looked at Amazon with consternation …”
… because Jeff keeps on confusing their simple-minded little heads!
“Retail” is simply too many different and *big* markets to be disrupted quickly or, for that matter, to stabilize quickly. The transition to online-mostly is a generational shift.
And the exact same issues apply to “publishing”, which pundits and establishment apologists keep pretending is a unified monolith to hide the fact that it is a collection of very different markets that once shared a reliance on dead tree pulp, all being disrupted to different degrees and evolving at different rates.
One thing both “retail” and “publishing” share in common is that availability and logistics are the cards that control all others. Wal-Mart made its mark that way and so is Amazon. Anybody who aspires to play the game, whether B&M or online, “retail” or “publishing”, needs to scale up both product availability and logistic efficiency.
Most aren’t.
Many can’t and won’t.
They’ll be tomorrow’s roadkill.