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I'd say that AMAZON is a rather unique case in terms of its "Start Up" and its initial "Non-Profit" status.
There were a few unique components that happen to have been present when Jeff Bezos conceived his "Business Plan" ....
(a) the internet had recently arrived and was starting to be seen as a potentially useful business and transactional tool.
(b) goods and services could be displayed to anyone, with an internet connection, over the internet,
(b) payment for goods and services could be securely made and ordered and delivered via the internet.
So my guess is that Bezos put all of that together, plus other useful ideas, borrowed about $300,000 from his parents (for their 6% stake in his business), and RACED OFF to start up AMAZON because he knew that HE WOULD HAVE TO GET A HEAD START ON THE COMPETITION and build himself a very large and secure place in that sector of the Market which could very soon become crowded.
So he initially just went for SIZE AND MARKET SHARE AND INNOVATION AND DEVELOPMENT AND EXPANSION ..... and profits would come later once he was THE DOMINANT PLAYER ...... and I'd say he's done very well at it ....
If we look at his Annual Results for 5 years ago and his latest Annual Results to date, one can see where his MAJOR costs are and how his Bottom Line has performed .....
For DECEMBER 2015 :-
And for December 2019 :-
As one can see, AMZN has always had a good Gross Margin, i.e. Revenue - CoS.
BUT then there's the AGGREGATE of SG&A + R&D.
In 2015 there was only 2.2% of Total Revenue left over at EBITDA. In addition Debt Expense was chewing up nearly 20% off that minimal EBITDA. . In 2019 it was slightly better at EBITDA, but it was still relatively low at only 5.3%. Debt Expense was getting to be less of a drain on Revenue. However, a Bottom Line of 4,1% is not the greatest, also bearing in mind that AMZN is paying less Tax than the Corporate Rate.
So it looks like the current "two cost-chains" around Bezos's leg are SG&A and R&D. Once they get deducted there's not much left over.
However, Jeff may be slowly but surely reducing their "influence" via his R&D which has contributed to greatly automating his business and very likely reducing staff costs (and Union "interference(?)") into the future.
One example is the complete automation of his storage and selection processes in his warehouses. In this video we see individual, vertical metal storage cages, with numerous shelves in each one, containing a variety of items all with Bar Codes. A self propelled robot can be sent to find a particular cage, lift it up, and bring it to a distribution point without a human being involved !!
Now all of that must have cost MILLIONS IN CAPITAL AND R&D ..... but now that it's done and it's there, the financial benefits should, to a certain extent, start accruing.
Of course, no doubt, nothing is STATIC in this line of business, so Jeff will always have to be "One Step Ahead" of the pack, which will, undoubtedly mean ongoing R&D expense .....
But then, we come to an observation or two from Warren Buffett in that regard .....
