I see you have not done your homework but have relied on the number provided by Amzon.
Respectfully, you are entirely incorrect. I am intimately familiar with corporate reporting practices (as a practicing CPA), and read the 10K prior to purchasing my shares. AMZN has correctly reported the "fulfillment" costs -- they do NOT represent "cost of sales" and would be inappropriately reported as such.
While this category "marketing", which includes "fulfillment", currently exceeds the margin being generated, you are [incorrectly] assuming that these costs are a fixed percentage of sales, regardless of what level of sales is attained. This is, of course, sheer and utter nonsense.
The category for the years 99, 98, 97, and 96 has represented 24.3%, 21.8%, 27.4%, and 38.7% of sales, respectively. While we could argue about the meaning of these numbers, one thing is abundantly clear -- the costs bear no direct relationship to sales, as you suggest. There is a fixed component and a variable component. And this is the fault in your purported analysis, which assumes they are either totally variable or are variable to the extent as to make losses systemic.
I suggest you pull out the last 10K and study it. You will fine without a doubt, fulfillment expenses far exceed gross margins.
The 10K doesn't provide sufficient information to make this determination, as it doesn't break down fulfillment costs into expendables and depreciation, nor does it break out other costs, which are undoubtedly substantial. Perhaps that contributed to your error.
$100 billion in sales makes no difference.
This is simply incorrect. Does the term "economies of scale" not mean ANYTHING to you?
Look, I suspect we can disagree about this from now on. Ultimately, we'll have to see who was right a year from now. But those of you who are going around suggesting the profit margins are insufficient are simply not knowledgeable on the subject, OR you are intentionally misleading those who don't truly understand what's behind the numbers. These companies, whether B&M or .com, operate on very slim margins, which is okay when sales are in the billions. |
