alt Hacker NewsAmazon's core business does not make sense. Despite being so massive, their retail operation makes almost no money. There is little market share left for them to win, the best they can do to grow is shave expenses.
AWS has been their real money maker, but also the explosion of AI and server farms has worked against them in threes ways: there is much more competition on infrastructure, the costs to run infrastructure keep going up, if you're looking for a growth industry there are other more appealing stocks now to park your capital.
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> There is little market share left for them to win
Despite controlling about 40% of US online retail, Amazon only has about an 8% share of total US retail. There’s still plenty of room to grow here.
https://www.emarketer.com/content/amazon-will-surpass-40-of-...
> Despite being so massive, their retail operation makes almost no money
You misunderstand the point of retail. It's now a marketplace where they use their name recognition and (alleged) consumer friendliness to collect fees from sellers. It costs to list, it costs to do FBA, and it costs to run ads so that your products appear in search results. Amazon ads is incredibly profitable.
That's also why Prime has such a grab bag of benefits. By keeping Prime membership sticky, the overall value of that marketplace supports the fees charged to sellers.
Their profit margin on retail is similar to other discount retailers like Walmart. Retail just doesn’t have huge margins.
I am not so sure this is an accurate analysis? Notably, a major thing that kept it so that retail made no money, was the massive expense of expanding the retail operations. That is, expanding retail footprint is a massive cost. And you have to expand if you want to reach more customers.
This is different from AWS where your reach is essentially "all of the internet" for anything that you launch. But this really just meant that reinvesting the revenue from AWS was harder for them to do, compared to revenue from retail. As a result, they didn't. Not nearly as aggressively.
Relevant data point on AWS - GCP is giving out a ton of cloud credits to startups. On average $100k in comparison to $10k-20k from AWS.
Before Claude Code, a full cloud migration could easily be a couple months. We migrated our whole stack to GCP in about a week. It's trivial to switch clouds now with K8 stack and Claude Code.
> There is little market share left for them to win, the best they can do to grow is shave expenses.
I think Amazon netted something like $70 billion last year. What's the problem with them just staying the course and earning tens of billions of dollars in profit year-after-year-after-year?
they could improve their product search page so it's actually useful
Depends how you define their "core business" I suppose.
You're right, but their retail business does support the bulk of their ad business which is extremely profitable. Arguably it might actually make sense for them to run their retail business as a loss leader to support their high-margin ad business.
They could just increase prices. They deliver fast (often same day) and always accept my returns. Add 5% to prices, pure margin.
> Amazon's core business does not make sense. Despite being so massive, their retail operation makes almost no money.
Net profit margins for retail are only around 3% across the industry.
Amazon isn't actually doing anything unusual in that regard. Retail is just a very low profit margin business whether it's physical or online.
These numbers are always confusing to those of us in the tech world where SaaS net profit margins are always very high.