Slower growth, higher margins as Amazon.com plays middleman

An article in the Wall Street Journal (April 26,2013) describes Amazon.com’s growth as lowing, from 34% last year to 22% for the same quarter this year, while margins increased by 33% to 26.6%. The author claims the slowdown is the result of the growth difficulties given the company’s current size. But the increased margins reflect the company’s role in enabling sales from third party sellers, for which only the portion of the margin collected by Amazon is recorded as sales. But these transactions generate a greater margin than Amazon’s own shipments. Will Amazon’s future role be more like ebay – enabling commerce rather than initiating the sales by carrying its own inventory ? Will the barrier to entry for competitors (to Amazon) be lower if Amazon’s merchant role decreases ? How important will future Amazon devices like the Kindle, possible setup boxes for delivering content etc be in it future growth ?

About aviyer2010

Professor
This entry was posted in Operations Management, Supply Chain Issues and tagged , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s