Amazon: Profits are a Problem
Clouds from frankincense and burnt offerings are parting and the golden calf is exposed. The old doctrine; a company is worth what it earns, the new rules: profits are a problem. What is the most disruptive idea in business today? That net income is a liability. Amazon’s philosophy that sees brand consciously spending just as fast as it earns since inception has ushered an expansion that’s almost as dramatic as this intro. As a result Amazon is a contender to being the first 1 trillion dollar market cap company in the world. With Wall Street confused under the rising shadow of Amazon, one lesson can be taken away from this.
Amazon is the world’s largest retailer, accounting for 60% of all US online sales. Amazon has used it's capacity to adapt technology as a strategic advantage, often being the most disruptive presence in any area it reaches into. What started as an online bookstore has scorched through retail, television, electronics, and cloud computing defining the rules competitors play by in each of those territories. Amazon can confidently stride into any industry and anticipate total victory through it’s ability to use technology to force a rethinking of how business is done. While the vanquished are left learning the new rules Amazon occupies a unique position of being able to write them and this is how it’s done...
Net profits are habitually voided at Amazon. The company funnels it’s astronomical earning into its competitive advantage; infrastructure. Amazon views infrastructure, not money, ‘earnings’, turning ‘extra money’ (net income) into a pile of missed opportunities. Now here’s the interesting part... Amazon gets more results spending less, and still forces itself to spend more. Though Amazon finished 2015 with only 1/4th of Walmart’s revenue, Amazon makes $623,000 per employee, three times that of Walmart. Take away the overhead of selling on the cloud compared to bird, b-movie and child-on-a-leash infested superstores and the future clearly belongs to Amazon. Even with a record potential for net earnings, Amazon chose to confuse Wall Street and fight the temptation to post high earnings numbers. Amazon charging past it’s own borders in a quest to build physical stores, I’ve taken away one lesson for this revolutionary outlook...
Define your own success. Amazon has told the world that infrastructure, data, and technology are its earnings, not money or margins. A business has been founded around the idea contrary to the concept of business itself and we’re left to learn the new rules that Amazon has written. The course is best changed by running in a different direction.
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