SeaVille
Me, I'm just a dopey academic who knows less than zero when it comes to running a business.
But when I was a kid I worked in a local hardware store filled to bursting with everything from clock radios to toilet flappers.
And, rarely, I would deliver stuff, usually to an elderly customer in the neighbourhood who couldn't get to the store (I grew up in Oak Bay, in Victoria, at a time when just about everyone was an old).
Anyway...
As a result of my after school retail job I know, first hand, how inefficient a distributed delivery model is compared to a centralized one.
As such, I have never been able to understand how a company like Amazon actually makes bucket loads of money on its entirely distributed retail business.
Well, according to local Lotuslandian tech guy Tim Bray, they don't.
In fact, as someone who scrutinizes Amazon's financial statements regularly, Mr. Bray has come to the conclusion that Amazon actually loses bucket loads of money on retail:
As such, I have never been able to understand how a company like Amazon actually makes bucket loads of money on its entirely distributed retail business.
Well, according to local Lotuslandian tech guy Tim Bray, they don't.
In fact, as someone who scrutinizes Amazon's financial statements regularly, Mr. Bray has come to the conclusion that Amazon actually loses bucket loads of money on retail:
...Amazon as a whole isn’t really very profitable. Its retail sector loses money, and that loss is made up by the tens of billions of gravy coming in from AWS (Amazon Web/Cloud Computing Services) and Advertising.
Why is this business structure considered rational? And why is it legal for Amazon to be the prime competitor of the economy’s whole retail sector while not having to make a profit?
Obviously, foregoing profit for the sake of growth is a tried-and-true business strategy, and laudable within limits. But it seems obvious to me that Amazon is way, way past those limits.
As I’ve said since the moment I walked out Amazon’s door in May 2020, AWS should be spun off. The best time to do that was three years ago. The second best time is now...
Imagine that!
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What does Bray know?....Well he used to be a VP at Amazon before he quit at the beginning of the pandemic when he couldn't stomach how the company was treating its workers as he outlines....here.
I learned of Mr. Bray recently on the latest episode of Arshy Mann's most excellent podcast 'Commons'.
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2 comments:
I, too have wondered how Amazon makes money. Their prices aren't always that great, but I don't see how they can deliver their products for the amount they charge. Sometimes they even have to send a delivery person around twice if you are not at home. Something doesn't add up.
Gordie--
Mr. Wray concludes that they subsidize the retail operation to crush all competitors with all the money they make on the cloud. That's why he thinks it should be broken up.
Here's a thought experiment...What happens when some bunch of kids comes up with a better cloud model?
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