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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Glenn D. Rudolph who wrote (89429)	1/2/2000 8:48:00 PM
From: i-node	Read Replies (2) \| Respond to of 164684

I am always guessing how did the boxes all that stuff was shipped in really cost? How much was non managerial labor? I can't say I have a clue so I project that fulfillment is exceeding gross margins at this point in time. Hang on ... the notes indicate that both inbound and outbound shipping costs are included in cost of sales ("Gross profit is calculated as net sales less the cost of sales, which consists of the cost of merchandise sold to customers and inbound and outbound shipping costs"). I would expect this to include packaging. "Fulfillment costs include the cost of operating and staffing distribution and customer service centers". Operating costs should NOT include packaging materials, shipping, or any other DIRECT cost. Cost of Sales should include DIRECT COSTS and certain APPLIED OVERHEAD costs (where repackaging or other manufacturing-like activities are involved). If, in fact, DIRECT costs such as packaging were included in marketing, I would think this reporting was inappropriate. For example, the utilities, property taxes, wharehouse leases, payroll, toilet paper for that matter are all in the marketing expense. These are all properly expendable (i.e., not inventoriable) costs, and therefore SHOULD be expensed as operating expenses. This is NOT a manufacturing operation, where you should allocate toilet paper costs to cost of sales -- unless, of course, you're selling toilet paper. I am truly of the opinion that when the numbers from Amazon are released in January, they will state books and CDs were profitable. This was mentioned in the SEC filing in November, I believe, at least for books. Having placed it in the filing, I'd be very surprised if they don't so announce. Fulfillment expense is in marketing rather than operations or cost of sales. Let's think about how this happens. Keep in mind that accounting requirements are that the income statement reflect separately Revenues, Cost of Sales, Gross Margin, Operating Expenses, etc. Operating Expenses are generally broken down between "General & Administrative" expense and "Selling" expense. The problem is that fulfillment costs really should not be included in cost of sales, as they are not "direct" costs. OTOH, they aren't G & A, either. In fact, they pertain to "Selling" better than any of the other commonly used categories. It's a small jump from "Selling" to "Marketing". Damn, I'm long winded these days. Guess I ought to get to work...