Amazon.com, Inc. (NASDAQ:AMZN)’s self-described “consumer-friendly” business model is threatening to destroy the local communities of many of those consumers and eroding their own future purchasing power. As Salon reported in a scathing article on the online retailer, by collecting generous government subsidies and massively undercutting retailers to the point that Amazon.com, Inc. (NASDAQ:AMZN) doesn’t even make any profit itself, they risk stripping economies around the world of their revenue and infrastructure and funneling it all back into their profitless machine.
The article cited four key reasons why Amazon.com, Inc. (NASDAQ:AMZN) is having a destructive effect outside their giant, profitless bubble. Firstly, they get subsidies and tax exemptions in many jurisdictions they operate in, immediately giving them a huge advantage over local retailers who already have greater overhead as it is, and need higher margins. As some states have finally started to demand Amazon.com, Inc. (NASDAQ:AMZN) collect stats, resulting data has shown their sales dropped by 10% as a result, showing a moderate portion of their sales were essentially funded by the government.
Second is the ruthless, predatory way they attack markets and the competition in those markets to drive them out and assert control, including the $100 million loss they took in just three months undercutting diapers.com until they convinced the site’s owners Quidsi, Inc. to sell to them in 2010 for $550 million.
Third is their practice of encouraging “showrooming”, which their new Fire tablet does especially well, with Amazon.com, Inc. (NASDAQ:AMZN) even offering $5 rebates to people who go and scan the product in a store but actually buy it online from them. That practice is making a mockery of local businesses, who essentially become giant showrooms (hence the name) for the online retailer.
Lastly, their monopoly in certain markets, particularly the e-book market, is now starting to bring out their ruthless side with suppliers, as they demand ever-steeper cuts of sales, with suppliers essentially having nowhere else to turn now that Amazon.com, Inc. (NASDAQ:AMZN) is the only game in town. That practice threatens to drive many small publishers out of business, who can’t afford to operate with their margins slashed ever lower.
Despite $19.34 billion in revenues being sucked out of local economies last quarter, Amazon.com, Inc. (NASDAQ:AMZN) lost $126 million and continues to drive forward with endless, aggressive low-margin expansion in new markets and territories rather than instituting a responsible, sustainable model.
Amazon.com, Inc. (NASDAQ:AMZN) is down 18.95% year-to-date as investors continue to be annoyed by their inability to generate any profit from their substantial operations.
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