“Cool Down Time For Amazon (NASDAQ:AMZN)”
Despite the frenzy and furor over Amazon on both sides - shareholders and antitrust types alike - AMZN could have a rough patch ahead. While growth and market share dominate the culture and drive of $AMZN what is happening in their quest for dominance is destruction. When sales competitor Wal-Mart Stores (NYSE:WMT) is compared to Amazon the difference is intense: WMT has an enterprise value of $271B with revenues at $486B, Amazon is currently at an enterprise value of $478B with revenues of $150B. The joke in the past was Amason sold $1.00 for $.99, now AMZN is creeping towards selling $1.00 for $.50.
If additional uproar and change in the name of growth and market share continue it will be at the (additional) detriment of American enterprises and jobs. This is not about policy, this is about sound business. Who has better margins - Wal-Mart or Amazon? Who is going to last?
- As a retailer, Wal-Mart spends 75 cents out of every revenue dollar on the stuff it sells (cost of goods sold). That leaves it a gross margin of 25 cents - or 25%. But, all those stores, distribution centers and trucks create a huge fixed cost, representing 20% of revenue. Thus, the net profit margin before taxes is a mere 5% (Walmart has for years made about 5 cents on every $1 revenue). - Forbes 2015
Without a doubt Amazon is very powerful. Notions of entry into a single industry send ripples across the globe. If AMZN is to survive the change it has created it must find better market segments to apply innovation to so as not to completely uproot elements of American industry in what could become a failed experiment. Industry should not be subjected to Jeff Bezos and his attempts of reaching the moon.