[zeven7]

That's not what I've heard. A quick search found me this:

> The company loses an estimated $1 billion to $2 billion on Prime shipping annually

http://www.marketwatch.com/story/is-free-shipping-killing-am...

Amazon wants market share enough to absorb a loss on shipping costs. It's part of why Amazon is still not profitable.

[andrewfong]

Saying Amazon is absorbing a loss on shipping costs to get market share implies that that they're engaged in predatory pricing (i.e. they're selling below cost to get market share with the intent to raise prices once competition has been destroyed).

There might be some truth to that, but the better explanation for why Amazon isn't profitable is that it's simply plowing all of its profits back into the business. This link is older, but it does a pretty good job of going through the numbers and Jeff Bezo's thinking: http://a16z.com/2014/09/05/why-amazon-has-no-profits-and-why...

[nitrogen]

It's not uncommon for an ecommerce site to charge less for shipping than it actually costs them (for perception/psychology reasons), and make up the difference on margin or services.

[unclebucknasty]

Is there anyone who believes Amazon's prices wouldn't rise in the absence of competition?

[sokoloff]

How much are Walmart, Home Depot, and BestBuy losing on "operating retail stores"?

It's a cost of operation or cost of sales, IMO, and you have to look at it in the context of overall profitability and revenue growth, not as a standalone line item. Otherwise, you might argue for those other three to close all their retail outlets or charge admission in order to "stem the losses".

[unclebucknasty]

It's an operational cost, not COGS. And, sure it's a standalone line item as much as any other.

Not sure I understand the distinction you're attempting to make. It's a function of their model that can affect their competitiveness and may well argue for (or against) closures.

[sokoloff]

I used "cost of sales" when I meant "cost of revenue". However, I suspect the revenue from Prime counts as top-line and the shipping cost losses are absorbed as a cost on the COGS line, so the net effect is probably reflected as revenue and COGS. If I get some time, I'll poke through their last 10-Q/10-K to see if I can confirm that treatment.

The point I was trying to make is that Prime (and any associated losses) is part of Amazon's go-to-market strategy, just as opening retail stores is part of HD, WMT, and BBY's strategy. Saying that Amazon is "losing money on Prime" but that the others aren't "losing money on stores" seems a double-standard to me.

[unclebucknasty]

I guess you can parse it any way, but I consider those to be very different. A more valid comparison is between the retail stores and Amazon's distribution network, fulfillment centers, warehouses, etc. These things all fall under capital expenditures (CapEx) and represent hard costs that must be paid/financed.

Like retail stores, they are also part of the required infrastructure to fulfill customer orders.

Prime, OTOH is more a marketing expense. I would compare it to coupons, store savings cards, etc.

So, the double-standard doesn't exist in my view; unless you were to count retail store costs without counting Amazon fulfillment costs.

[marme]

amazon is very profitable but they plow back all profits into new business ventures so they pay 0 taxes because they can report no profit. If you make a billion dollars profit and then immediately spend that building a new datacenter or warehouse whether you need it or not that still counts as a business expenses that is subtracted from profits. Amazon will never stop trying to enter new businesses because they have no plans to ever pay out dividends or hold on to cash profits

[dlgeek]

Not profitable? They made almost 600 million dollars profit, after taxes last year.

[amdavidson]

Almost $600 million on $107 billion in revenue.

A profit margin of 0.57% [0]. That's so close to zero that I'm comfortable saying they're not profitable.

[0]: https://finance.yahoo.com/q/ks?s=AMZN+Key+Statistics

[fapjacks]

Well, I'd take that profit margin over a 200% profit margin that nets me $1,000 any day.

[tamana]

That's not a fact, that's some rando's guess.