Hacker News Reader

Comment by jamiequint | Hacker News Reader

> This is of course Amazon’s model, which underpriced competitors in retail and eventually came to control the whole market.

This is false.

First, Amazon is far from controlling the whole market. They control close to 50% of e-commerce which itself represents less than 12% of total retail sales.

Second, Amazon didn't predatory price, or if it did, it didn't for long, certainly not long enough to achieve its current market share. The author is mistaking Amazon's lack of profit for its propensity to reinvest all of its profit into other businesses (e.g. AWS), or its willingness to take short-term losses in order to reach economies of scale where profits exist (which, as Amazon's retail business has shown, they do).

View on HN

I think you have it reversed, AWS accounts for most of Amazon's profit and is used to fund other ventures.

> AWS revenue came accounted for 13% of Amazon’s total revenue. Of Amazon’s total $3.1 billion in operating income, 52% came from AWS. [0]

[0] https://www.cnbc.com/2019/07/25/aws-earnings-q2-2019.html

No, long before AWS, Amazon intentionally re-invested all of the excess revenue that would be reported as profit back into the business instead (expanding capex and opex).

I thought aws sprung out of investment in their own infrastructure. A happy accident of sorts, not some preplanned mammoth investment in building AWS from the ground up

Not at all.

AWS, or rather S3 was a pet project of one of the very early Amazon employees who wanted to do something fun. It wasn't really taken seriously or had deep strategy at first. Once it's started to gain traction, Bezos realized the enormous potential and full-steamed-ahead AWS.

Then it took many years for Amazon retail to actually start using AWS products in any meaningful way.

That's not how profits reporting works.

Yes, so 52% of Amazon's operating income came from AWS.

Which means, conversely, 48% came from Amazon retail and other services.

In other words, it's not true to say that AWS subsidizes the rest of Amazon, or that the rest of Amazon runs at a loss.

Or, it’s true.

Amazon did predatory price for several years, subsidising sale and delivery with venture capital.

I’m baffled by the nonsense point about reinvesting profit from a lack of profit. AWS doesn’t excuse the years of cynical predation.

50% of a market is easily enough to dominate and control one, of the other players aren’t the same order of magnitude of influence.

>Amazon did predatory price for several years, subsidising sale and delivery with venture capital.

Amazon was founded in 1994 and went public in 1997, and sold more than books in 1998. Where does "several years of subsidy with venture" factor into this?

It's also hard to believe that Amazon weathered the dotcom crash while losing money.

> They control close to 50% of e-commerce which itself represents less than 12% of total retail sales.

Both of these numbers are surprising to me, can you source them? Particularly the first one, which I assume is a global measure, and I'd be interested to know what % of North American e-commerce Amazon controls. I wager I could walk outside my home and ask 100 people on the sidewalk to name one e-commerce site and far more than 50% would name Amazon first.

> I wager I could walk outside my home and ask 100 people on the sidewalk to name one e-commerce site and far more than 50% would name Amazon first.

I don't know how many people would consider the likes of Wal-Mart, Target, and Kohl's "e-commerce sites" even though they have probably ordered stuff through their websites.

I'm not the original commenter, but here's two sources [1] [2] for the 50% number, with [1] saying this represents 5% of US retail sales. It's 50% of US e-commerce.

[1] https://techcrunch.com/2018/07/13/amazons-share-of-the-us-e-... [2] https://www.cnbc.com/2018/07/12/amazon-to-take-almost-50-per...

Thanks very much. Some great other replies to my question in this thread as well.

In North America, Walmart seems to be a significant competition amongst others.

Clothing is also a big part of e-commerce, and Amazon doesn't have a good hold on that.

I would struggle to name a single online general retailer that isn't Amazon.

Unless you count, like, Walmart. Basically everyone else has some kind of niche. Amazon sells everything.

Why wouldn't you count Walmart or Target? For household consumables I bounce between Amazon and Target's subscribe and save offerings depending on whichever is cheaper.

Jet still exists (a Walmart acquisition), but I don't hear much about them and have a feeling they're not doing so great.

Naming something popular != market share.

Reply on news.ycombinator.com