Amazon's $19.7 billion March quarter revenues ($80.1 billion over the last four quarters) makes it sound like a global juggernaut but its $19.6 billion ($77.4...
Amazon's $19.7 billion March quarter revenues ($80.1 billion over the last four quarters) makes it sound like a global juggernaut but its $19.6 billion ($77.4 billion) cost base says it is simply using its muscle to disrupt traditional businesses not build profits. Its profits are well short of its capital costs. This is the equivalent of dumping (yes, dumping) on global markets. Local High street traders have a legitimate gripe. There is no way this is a sustainable business for a $140 billion market cap company. It needs to charge more (or take an enormous value hit) but, in having recast pricing expectations so dramatically, higher margins may yet prove too challenging. Pressure on Amazon to build profits is probably good for traditional retailers who have been adapting to Amazon's pricing environment and will have good leverage to any improvement in pricing power.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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