Not exactly. Right now, they lose ("loooosssee") money acquiring customers. The more
items a single customer buys, the better.
Amazon and Wall Street believe that they will hit an inflection point, afterwhich
scale/leverage will kick in, in a big way. It's the same story as AOL a few years ago. The
strategy is called "Get Big Fast," you would do yourself a big favor if you learned more
about it.
Sal,
Please indulge me. I always felt I understood a retail business model but this one eludes me. Let's not use an AOL comparison because their cost of goods sold is not even close to fixed. However, AMZN will likely never obtain more than 25% gross margin.
Please post some numbers. Anything logical that you wish. That would simulate profitability for AMZN in whatever year you choose. Let's assume that marketing expense as a percentage of sales will reduce. However, you nor I know how much is marketing and how much is fulfillment expenses. An example would be nice before you state to GW that he would be better off learning more about this. Where is the inflection point? Inquiring minds.
Secondly, do not ever assume that your understand something better than another without being able to prove it. You post was rude to say the least and could be inaccurate. She me otherwise please.
Of course, many companies have tried "Get Big Fast" and failed. Amazon has already
come a long long way, however, and if they continue to execute well they'll beat the
odds. A primary factor that venture capital and Wall Street buy into is management;
Amazon has assembled a terrific management team. Terrific.
I have heard this line too from the sell side analysts. Please tell me how they are terrific. What they are able to do that other management teams cannot.
Thank you for teaching me in advance.
Glenn
PS If you are unable to provide a model, an apology to GW would be appropriate. |
