Amazon is much, much more than a bookseller. The question is, how long will Australians have to wait to fully experience it?
The e-commerce giant reported quarterly results this morning Australian time and Wall Street loved them. In after-hours trading, the stock soared by more than 17 per cent, pushing the company’s market value beyond $US250 billion ($340 billion) and – in a nice piece of symbolism – above storied US brick and mortar retailer Wal-Mart.
In the US, Amazon sells practically everything you can think of online, and at rock bottom prices. How? Well, with a notoriously efficient distribution system, for one thing.
Tens of millions of Americans pay $US99 a year to subscribe to Prime, Amazon’s free home delivery service, which includes free perks such as a streaming TV service akin to Netflix. In some cities, you can even get stuff delivered within an hour. Prime has been expanded to places like the UK, Germany and Japan, but not yet Australia.
Amazon’s web services business does have a presence in Australia. But its much bigger e-commerce operation doesn’t as the company would yet need to set up a local distribution network. Every so often (as recently as two weeks ago) reports suggest it is looking at warehouse space, but nothing as yet has transpired. The company’s head office in Seattle did not respond to enquiries from Fairfax Media this morning about any plans in Australia.
There’s another reason Amazon has been so successful with consumers around the world, and why local retailers should be terrified about its possible entry to these shores: its complete lack of focus on profit.
Every quarter, Amazon’s sales grow at high double-digit rates, while profits remaining absent or meagre at best. For example, this morning, it reported a (surprise) $US92 million profit, which is pretty tiny relative to its $US23.2 billion in sales.
The American commentator Matt Yglesias once described Amazon as a “charitable institution being run by elements of the investment community for the benefit of consumers”. It’s actually hard to disagree with this description.
Jeff Bezos, the company’s CEO, has managed to convince people that his strategy to reinvest Amazon’s cashflows into expanding its distribution infrastructure and keeping prices low (rather than achieving short term profits) is the right one. For the most part, they agree. The stock is up 28,000 per cent since its 1997 sharemarket float.
But Amazon has not avoided criticism entirely. Working conditions in its warehouses has been described variously as brutal and being like a prison. One day, Australia might get to find out.
Source:- www.smh.com.au
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