Amazon.com Inc. (NASDAQ: AMZN) has been one of the greatest growth stories of the current generation. It has grown from a mere online seller of books and CDs to an online giant that sells just about everything and wants your media dollars too. The problem is that all of this growth just hasn’t ever equated to significant profits. It may even have a societal cost that the public doesn’t consider. After its most recent earnings report, the investment community may finally be sending that long overdue message that businesses need to be profitable.
24/7 Wall St. has seen scenario this with critical eyes over the past year or so. It is one thing to invest for the future, something that Team Bezos has done relentlessly. This sounds great, but how many businesses should one company be allowed to disrupt by losing money and having in some cases what looks like a negative margin? After all, aren’t businesses under the tax code supposed to be formed to make a profit?
After the earnings call this week, we saw that CFO Tom Szkutak confirmed the lack of caring about profits. He said, “We are not trying to optimize short-term profit.” This is understandable for a real “short-term” outlook, but Amazon has been around since the 1990s and it keeps growing into new areas.
Amazon has been the greatest force behind the death of the community bookstore. It was one of the forces after Apple that helped put music retail stores under. Amazon was able to have consumers use destinations such as Best Buy and other electronics stores as a virtual showroom. Amazon has gotten into shoes, sports collectibles, groceries, the Kindle reader, the Fire smartphone, clothing, video games, office products, appliances — you should get the idea by now. If it can be sold online, Amazon is in it and causing havoc for the large retail destinations in just about every category.
Again, how long should Jeff Bezos be allowed to make no profits and keep disrupting businesses? It is without a doubt at all that Wal-Mart Stores Inc. (NYSE: WMT) disrupted communities handily in the past 30 years. Drive through any small town in America now and see how many vacant storefronts there are, and you almost certainly won’t see a general store. The difference between Walmart and Amazon is that Walmart at least made vast profits, it is a massive retail landholder, which also allows other businesses to congregate in the immediate area to feed off of the Walmart store traffic. And almost all of Walmart’s register sales generate local and state taxes. Lastly, Walmart employs some 2.2 million people.