Monday, October 6, 2014


Regarding Amazon, its profits, and why it works.

Amazon was originally a novel model of business: a book sales website, offering new and used books at rates much lower than you might find at the local Campus Bookstore. The model was so successful that they expanded into, eventually, pretty much everything legal to trade. The prices are incredible because they have so many different competing suppliers all selling through the same website.

Amazon's income is no surprise, given the model. They provide what consumers want at low prices. So why is profit so low? Because of their investments. They developed the kindle, are considering drone delivery systems, are developing digital media streaming services, and are expanding internationally. Investment is an essential component of growth, and the people at Amazon are clever enough to know that investing essentially all of their revenues is a long-term move designed to get a larger payout eventually.

Investors may be upset with having to wait for their payout, but the people at Amazon have accounted for that too, of course. Whatever investors want out will certainly be able to find investors who want in: Amazon isn't going to be disturbed by a loss of investors any time soon.

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