October 2013
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Bookstore marvels at’s dubious success

Westminster Theological Seminary’s bookstore almost went out of business last Christmas, largely because they have a hard time competing with’s prices, which are so low that even Amazon itself can’t make a profit. In a recent email to their customers, they lamented:

Our great challenge is that we continue to exist in an environment where Amazon — the industry leader — is allowed by Wall Street to function without regard for their short-term profitability. Some of you may be aware that Amazon recently reported a $7 million loss on $15.7 billion of revenue. Next quarter, they are forecasting a loss of between $65 and $440 million. Despite this, their stock is up about 20% this year, indicating investor willingness to sustain Amazon’s loss-leading business model. As I ponder economic history, I can’t name another 21-year old company with which Wall Street has been this patient.

Amazon’s results show that, despite their buying power, technology, management skill, and income from non-book products and services, they are unable to post a profit given their current pricing model. This reality is made all the more striking given that competitive forces like Borders and independent bookstores have gone out of business while Barnes & Noble and other retailers struggle to carve out an existence.

Small bookstores and online commerce rivals aren’t the only ones puzzled by Wall Street. Recent articles in Forbes and The Guardian also show surprise that investors continue to have seemingly unwavering faith in Jeff Bezos, despite little or no explanation from him for the losses. Will this bubble ever burst? Whether it does or doesn’t, what will the long-term effect be on consumers?

6 comments to Bookstore marvels at’s dubious success

  • Andy

    I think that you need to look a little deeper at Amazon’s financial statements (Yahoo Finance or SEC filings). While they posted a loss last year, the two previous years produced profits (I can’t go back further) and are profitable so far this year. They have a strong balance sheet with a positive tangible net worth and a good cash flow statement (I would say that most of the loss last year came from some sort of depreciation event).
    I see Amazon doing nothing wrong. If others can’t compete then that is not Amazon’s fault.

  • With the continuing increase in ebooks and the drive by the manufacturers to put them not only in the hands of the consumer but also our classrooms, I believe the long term viability of Amazon will make up for the short term losses. If Andy is correct, and I am assuming he is, a blip of even 21 years as the technology phases up is worth the revenues in the long run. Think of it, CJ, do you honestly believe there will not come a time when ebooks outnumber printed textbooks? Welcome to the future, mate.

  • Andy

    I wish my kids textbooks were ebooks today. How great would it be to update them as needed and keep them current. Instead of multiple books to use in school they could have a tablet that would contain all of what they needed. It could even be linked to the web for current information, alternative learning resources, etc.

  • soothsayer

    I’d be thrilled if a lot more people read- period.

  • merle widmer

    Karrie, Our current government represents the poor, the wealthy, and the ulta-rich. Most of the rest of the populace is left to lead lives of quiet or not so quiet lives of desperation. Abetting the situation is the liberal media and the loss of enough talented reporters who report factual news that affect most of us. And to cover what is really happening in local communities such as Peoria and surrounding areas.

  • marc

    I think Amazon is way beyond selling books at this point. They continue to do it but it isn’t at all their leading interest. Their real money maker going forward is being the intermediary – the warehousing, logistics, and automation of order fulfillment. They are such a supreme force that only Walmart can possibly compete on their level of efficiency because WalMart is the only one I can think of that might be able to afford to invest as heavily in the warehousing and technology for automation.