The NT Times has gathered many bits of information about Jeff Bezos, Amazon and what Bezos might do with The Washington Post. Among very interesting bits about his personality, testimonies from early employees, there is a description of Amazon’s current business model. Nothing new really, but a good reminder that Amazon’s goal is not profitability for the moment:
Though indisputably one of the great marvels of the age, Amazon is a curious beast that offers few obvious lessons for how a newspaper like The Post might become profitable. Financial writers have noted that Apple makes more than twice as much money in a quarter than Amazon earned during the last decade. Last quarter, Amazon had a net loss of $7 million. But Wall Street loves Amazon anyway, despite its slim margins.
Amazon tends to give its profits directly to its customers. It sells to them at a discount, will often ship free and, if a customer wants to return an item, will refund the money before even receiving the return.
Sometimes it will even do more. Say you buy a book, and then decide it’s not for you. You tell Amazon you are returning it. You might get a message like this: “Keep this item and receive a refund! It’s on us!”
That’s a sure way to win friends and lose money. But Wall Street believes that the company will someday monetize tens of millions of customers — in other words, make a real profit each time it sells them something. Maybe next year. Or the year after. From the very beginning, Mr. Bezos has made Amazon an investment story about the company’s potential rather than its reality.