Saturday, August 15, 2015

Fifteen Things Amazon Won't Tell You!

Because of its massive advertising budget and other ties to the company, the media often seems to be in bed with Amazon. This means you seldom hear anything bad about the retail behemoth and stories are always being put before us as free advertising. These so-called news articles are often spun to place Amazon in the most flattering light. The company excels in creating illusions that fail to hold up under scrutiny. Its vision of drone delivery is an example of the kind of pop it can garner with such a strategy. One thing is certain you can count on the media to never tell the truth or the whole truth and anything but the truth. Below are fifteen things Amazon is not in a hurry to tell you. I tried to stop at ten but found it impossible.

#1.  Amazon is a self-promoting hype machine that is far from transparent and while politicians fall over themselves to be in its shadow it is not our friend. It looks to a future where workers are replaced by robots as it goes about putting small companies out of business. The strong ties Amazon has developed with politicians should give us pause. Consumer rights organization Consumer says tech giants, including Amazon and Facebook, have been spending record-setting amounts in lobbying Washington and while Facebook Inc. spent $2.69 million in the second quarter, a 27 percent increase over the same period last year we saw Amazon's lobbying efforts climbed 103 percent to $2.15 million, a new high this would lead many people to believe its clout in the Washington is on the rise.

#2.  Amazon has pursued a strategy of fast growth. They seem to go to where the fast growth is even if the sector has yet to be proven profitable. This has worked because the myth of future profits around the corner has been dangled before investors like a carrot. It should be noted that a key weakness in their business plan is that new competition can now cheaply and easily replicate the most profitable parts of Amazon and cherry pick much of their future potential.

#3. When government subsidizes groups like Amazon the cost is shifted onto both the taxpayer and  its competitors. I contend that only because of its political connections could the money-losing United States Postal Service agree to a special deal with Amazon to do Sunday deliveries in two cities? This is wrong on several counts. The first and biggest reason is that the USPS is an extension of the US Government and a money losing one at that. Another problem is this hurts all the smaller mom and pop businesses and brick and mortar stores in a community. While this arrangement may add revenue to the postal service it still is not the job of the government to compete with private delivery companies such as UPS and Fed-X. Claims that the USPS makes money on these deliveries offsetting other losses does not justify such intrusion by government into the private sector.

#4. The company is not a great job creator or even interested in creating jobs. This was highlighted with a positive spin in a press conference where Bezos talked about 1,382 newly deployed Kiva robots, in Amazon’s warehouses, a sign of future intentions to limit "job creation". When Amazon does create jobs we often find the employees are unhappy and have complaints about both pay and the way they are treated and dehumanized. In 2011 it was publicized that at the Breinigsville, Pennsylvania warehouse, workers had to carry out work in 100 °F (38 °C) heat, resulting in employees becoming extremely uncomfortable many suffered from dehydration and collapsed. Loading-bay doors were not opened to allow in fresh air because  "managers were worried about theft". Amazon's initial response was to pay for an ambulance to sit outside on call to cart away overheated employees.

#5.  When he is not smiling on stage the Jeff Bezos the CEO of Amazon is not an easy going fella. Amazon has faced accusations of putting undue pressure on suppliers to maintain and extend its profitability. One effort to squeeze the most vulnerable book publishers was known within the company as the Gazelle Project, after Bezos suggested, "that Amazon should approach these small publishers the way a cheetah would pursue a sickly gazelle."

#6.  A great deal of the sales Amazon has generated have been tied to Amazon’s "no sales tax" advantage. This often makes a big difference with penny-pinching shoppers. This is especially true when it comes to buying big-ticket items such as consumer electronics, the absence of sales tax can be a major motivation to shift the order to Amazon and more appealing than instant gratification.

#7.  Amazon is a tax dodging machine the US online retailer had previously reported that sales in  Britain grew to 6.7 billion dollars in 2013. However, accounts filed at Companies House show sales of just 620 million dollars for with tax payments of just 6.5 million dollars. The company claims all is on the up and up and it has to do with the point of origin and from where the goods are shipped. Margaret Hodge, chair of the public accounts committee, said that UK shoppers should boycott Amazon over the level of tax it is paying.

#8.  Amazon abuses and exploits the brick and mortar stores that line streets throughout America. These are the stores that employ our family members, support little league teams in the community, and add value to our lives. It could be said that Amazon has the social conscious of a gnat when we look at the company we see no community generous givebacks of the kind that are encouraged by so many brick and mortar retailers. 

#9.  How hardcore and nasty the company is to deal with. A while back, Amazon shut down its Texas distribution center after the state sent the company a bill for $269 million. That intimidating figure, according to the state, was the total amount of sales tax due between 2005 and 2009. After a series of lengthy talks Amazon reached an agreement where it will be forced to collect sales tax from Texas residents but managed to avoid paying millions in back-taxes.

#10.  That hardware sales like Amazon's Kindle and Fire do not hold much promise as a driver of future profit. The company cannot compete in such a crowded field and it is merely a fig leaf  in hopes of wedging its way into a broader but still questionable market of after sale revenue.

#11Like Tesla Motors the stock of Amazon defies logic but has been propelled forward by an environment of cheap and easy money. Add to this blowing shorts out of the market and momentum trading and you arrive at a bubble ready to burst. While Amazon continues to buy companies, the revenues from these companies add to their sales growth but still no profits exist. If they are a distribution company their stock should be trading at around 18 times earnings. When you look for a P/E ratio on Amazon you find N/A because the company makes no money.

#12   Some time ago Bezos referred to Amazon's victory over IBM in a  legal battle to service the cloud computing needs of the CIA we can only assume this has to be in relationship to the American government collecting more data and in effect spying on the American people. Just how much revenue the company pulls in from the government through veiled web service subsidiaries like "Vadata" seems to be deeply buried away.

#13.  When it comes to AWS (Amazon Web Services) the company is slow to share specific numbers, but tech industry insiders seem to agree that only Microsoft and Google are in the same league. What many people forget is that AWS comprises only a small percentage of their overall revenue. This is an arena where a slew of competition exist and more is coming online each day as the equipment and facilities become easier and less expensive to build or replicate, but Amazon claims this adds a great deal of value to its stock price.

#14.  Jeff Bezos founder of Amazon has been the person who has benefited the most from this soaring stock market star. Even if the company's stock price comes crashing back to earth while he would most likely lose a lot of money he could sidestep the total devastation many shareholders would endure. Forbes shows Bezos as having a real time net worth on 7/24/15 of just over 43 billion dollars making him the fifth richest man in the world. This means it is conceivable that he will survive, not only could we expect that he would have advanced warning of Amazon's impending doom, but it is logical to think he would be able to shelter assets and hedge in ways the average shareholder could not.

#15.  Amazon should receive the "Job Killer Of The Year Award", The company has positioned itself so it employs a minimum labor force at relatively low pay. This means they will be able to apply massive hurt to small businesses forced to pay workers higher wages as more minimum wage laws come into play across the nation. Amazon can avoid locating in these higher pay areas and ship into them. Meanwhile, small businesses will have to cut hours to reduce overhead making them less convenient to their customer base and inadvertently pushing customers towards more online purchases.

While the people who love and support Amazon might claim the points above show Amazon and its CEO to be clever, cunning, and masters of the game, an argument can be made that an aura of evil hangs over much of what it has created. The low prices many consumers buying from the company claim to enjoy come with a hidden price often paid for by others. In playing "hardball" it is difficult to overlook how the company has exploited and targeted concerns working within the established rules that positively affect and add to our society. People should consider what kind of community and society they want in coming years before jumping on the Amazon bandwagon.

Years ago another company whose name started with the letter "A" was also about to take over the world, its name was AOL. Today long after its mega-merger with  Time Warner it is almost forgotten and has been placed in the dustbin of history. When all is said and done, Amazon a company that has not proven itself to be profitable may experience a similar fate. A word to the wise, if you don't want to be left holding shares in a company that has been severely downgraded by both analyst and the public you might think about some of the things above that Amazon is in no hurry to tell you.

Footnote; This is a follow-up post to an earlier article about Amazon that debunked the myth they are good for the economy and its role as a major job killer. As politicians tout how they helped Amazon create jobs in a certain area or state they often fail to comprehend the number of jobs destroyed or the damage inflicted from the unfair competition they have endorsed. The sale of goods over the internet has a great deal of merit, but how it is carried out determines its effect on society. More in the article below dispelling  the myth Amazon is a job creator.


  1. Excellent article on Amazon. I've always thought Amazon is just over-hyped, and way, way overvalued. This just confirms that.

  2. This article is poorly written with unsubstantiated claims, insinuations about government influence and personal complaints. Innovation often "kills jobs". Was the Ford Motor Company bad because they created the assembly line which produced cars with far fewer man hours? The claim is ridiculous. Progress always comes at a cost, attacking innovation because not everyone wins is shortsighted and foolish.

    1. It is great to live in a place we are able to express our own opinion. It appears we should agree to disagree.