Quote:
Originally Posted by WillAdams
...Amazon's commission is $12.83, over 18 percent.
Tidy sum for just running some servers and charging a credit card.
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18%?
That's "nothing".
I've mentioned it before, but to repeat it here:
Most corporates have ASG (Administration, Sales, General) costs in the excess of 20%. 15% are considered benchmark, I know a few companies with >30%.
Meaning:
Their Gross Margin is 18%.
But that's not their EBIT.
With 18% Gross Margin, they can consider themselves happy, if even a few percent should be left.
It's well known, that Amazon still doesn't generate much of a profit.
(So does Facebook, Google on the other hand...)
For now, it's still about market leadership.
Question to me is, when their investors will insist on starting to make some serious profits.
"Profit" obviously is one of the reasons, why Amazon in the meantime is offering their own hardware and services, instead of being just a merchant.
Just for reference:
I've done a consultancy project a year ago.
An IT service provider with his average Gross Margin of 30% did struggle with being close to bankruptcy and seeking process optimizations...
Of course, this service provider is way smaller than Amazon, but the reference still somewhat applies...