Loading ...Just Another Distraction
As I have said in the past, AMZN is done as far as being a growth stock. Today’s announcement about online pharmaceutical sales is just a distraction. Throughout their history and continuing today they have only one profitable business. AWS was and is their only cash cow, however their once almost total market share and obscene profit margins are and will continue to shrink. They make no money on all their low margin, high volume businesses and prescription drugs with all the competition is just more of the same. As they no longer have the benefit of the huge margins and significant market share from AWS,(still the leader but increasing competitive pressure) they no longer have significant growth prospects to justifty their outrageous valuation. Today’s pop from the latest distraction will fade away shortly and the inevitable decline will continue over the months and years to come. 
About 50% of Amazon’s revenue comes from third party sellers like myself. Amazon launched Marketplace on November 1, 2000. My first order came on November 5th, hasn’t stopped since. Currently, for books, Amazon takes ~15% of the sale, all done via computer. This is almost all pure profit. When Covid-19 hit my online sales took off like a rocket, as have all other online sellers. I’ve experienced a bit of a slowdown since, when the economy started to reopen, but now that Covid is back with a vengeance, so are my online sales. My other sites that I sell on are also doing much better.
Very good that it is profitable for you. It does not generate the margins needed to justify their valuation. Already given up most of the morning pop.
Sir Chartsmaster,
Here’s a perspective from an investors’ WhatsApp group in my neck of the woods (suburbs of Silicon Valley):
” AMZN offering medicines is not to profit from it…but when you order medicines home delivery, one might also want to order other household groceries…AMZN wants that flywheel effect to sell more of their other goods. AMZN flywheel continues to spin ?
Even at 1000 ft view, major amazon customers used to be younger and below 50 yrs all these years. with covid, very sure they attracted many older ones. with pharmacy, their main target to attract older ones to the platform gets fulfilled.
that’s why business long term strategies should be driven by data – this is pure data play ”
Now let’s hear more on this from you and Sir Avocado Pit and others 🙂
GL
Just curious, Sir Avocado Pit, what do you sell on Amazon and other online portals?
May be, what you are reporting is specific to the sector in which your product(s) lie?
Always happy to see fellow Tenters prosper!
GL
He sells books
I’m a used and rare bookseller with an open shop that no longer has customers. Been doing this for 35+ years. I don’t make a lot of money doing it, but it is fun, and I report to nobody other than my wife, who is only peripherally involved. I’ve been selling online since 1992, before the Internet. I do my own fulfillment, which means I have the books and do my own shipping, vs what a lot of younger and newer booksellers have done, ship to Amazon and let Amazon do the fulfillment. Doing this enables me to go out and look for books, which is the really fun part. Treasure hunting. We also have a couple of booths at the Factory Antique Mall just north of here. (Largest inside antique mall in the US) We sell books and doodads there. More treasure hunting that we get paid for.
Don’t care what they sell, like when they started out with books. The old joke in retail, “yes we lose money on each unit sold, but we’ll make up for it with volume!” My point is the business that drove them into finally actually making money and gave them the astronomical valuation was AWS. It was a whole new industry that they created(kudos to them) but the competition has caught up, the margins are shrinking and they are too big to grow at rates fast enough to justify the valuation. The chart shows it topping. Company, like many can survive and even thrive, the stock is done.
Great points, couldn’t agree more!
I have also time and time again mentioned on this forum, that though I never owned AMZN, and sorta kinda regret it, but I do not see any reason to buy and hold AMZN.
May be I can buy 1-2 AMZN shares just for fun … to compare the “returns” versus miners … but then I end up buying a new junior rock … that’s just me
And another aspect … their inhumane treatment of their workers who are just slaving it out to make a living, and at the same time, eliminating hundreds of thousands of mom-and-pop small retailers by selling for smaller or even negative margins … no exaggeration there, at all!!!
I saw that big oil was maligned a lot in this country … when will Apple and Amazon be called for their inhumane treatment?
Just my thoughts.
GL
That’s why I sell books. Amazon will never be able to drive me out of business.