Amazon’s Bezos on the Tough Questions

Amazon.com, Inc. chief executive officer Jeffrey P. Bezos told Business Week in its latest edition that there’s plenty of room for both his company and eBay, in the online auction arena.

“I think that’s one of the most misunderstood things about e-commerce,” Bezos said. There aren’t going to be a few winners. There are going to be tens of thousands of winners.”

But Bezos also said that the auction model would never replace the retail as the dominant e-commerce model.

“Percentage margins don’t matter,” Bezos said. “What matters is dollar margins: the actual dollar amount.”

But some analysts say all this talk about which model will stand the e-commerce test of time is irrelevant — there’s so much camouflage masking the real question that never seems to be answered: when will Amazon be out of the red, make a buck — be profitable?

Say what you will about eBay’s lackluster revenue performance of $47 million last year when compared with Amazon’s dazzling $610 million sideshow — at least eBay turned a $2.4 million profit, while Amazon lost $124.5 million. This reality check should take the haughty edge off of Bezos’ words.

The Question Seems to Make Him Squirm

Near the end of Bezos’ interview with Business Week, when the question of profitability versus new expenses once again reared its nagging head, the CEO was true to form:

“Make no mistake about anything I’ve said here: Long-term profitability and building an important and lasting sustained company is incredibly important to us,” he said.

He went on to say — in a predictable refrain — that by investing now, Amazon increased its chances to one day become profitable.

True to its big spending ways, it was reported on May 21st by the Atlanta Business Chronicle, that the Seattle-Washington e-commerce giant would be leasing up to 800,000 square feet near Atlanta for a new regional distribution center that would employ about 500 workers.

Meanwhile, many on Wall Street are wondering how much longer investors will be willing to absorb loses for the promise of future profits — especially when past history has shown that today’s favorites can easily become tomorrow’s losers.

What do you think? Let’s talk about it.

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