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Amazon's Bruising Week
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melgross
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melgross,
User Rank: Ninja
7/28/2014 | 2:08:58 PM
Re: Long term problems.
I know of a lot of people who have always bought a fair amount from Amazon, including myself. While it's possible that you might be buying more with Prime, that doesn't necessarily mean everyone does. Amazon has had to raise the price drastically over the years, and I'm far from being the only one who has stated that they take big losses from it.
melgross
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melgross,
User Rank: Ninja
7/28/2014 | 2:06:24 PM
Re: No heat in this Fire
I completely agree. I've been saying the same thing. We all remember the rousing welcome that WebOS received. But, when I was in carrier stores, I would see people pick up the Pre, poke around for a few moments, and put it down. The problem was that it wasn't discoverable. If you didn't know how to use it, you wouldn't know how to use it, if you know what I mean. Win Phone is the same way, people pick it up, and put it down again. It's too different, and until the latest update, had too many defect to be worthwhile. Whether the newest update will change people's attitude is questionable. The Fire phone is the same thing. The biggest new features don't work well at all, and don't seem to serve any purpose. The concept of head tracking is one that doesn't seem to make any sense, because the results can be easily duplicated by sensors that are already in the phone, that allow tilt. The fact that Amazon is expecting a loss up to $810 million this current quarter shows that the intro of the phone will cost much more than they will make off it.
Lorna Garey
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Lorna Garey,
User Rank: Author
7/28/2014 | 1:53:21 PM
Re: No heat in this Fire
And in other news, AWS apparently could be hosting DoS bots. So, yeah. Bad week.  
Lorna Garey
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Lorna Garey,
User Rank: Author
7/28/2014 | 1:39:20 PM
Re: Long term problems.
I agree with a few of your points -- mainly, I think the winners are manufacturers that have actually been able to turn the tables and make Amazon their distribution arm, not the other way around. And, I think getting into smartphones without either making a really, really good device OR giving it away to customers OR bundling in some data was a tactical error. 

However, not so sure they're losing on Prime, esp as the price is now $99. I have Prime, and now, all things being pretty much equal, I buy from Amazon as opposed to any other site. Say I can get a widget from NewEgg, Amazon or BestBuy. I need to save 10% - 20% and not pay for shipping in order to buy from NewEgg or BB. Barring that, I'll buy from Amazon since I have sunk that investment for two-day delivery. Prime is like a gravitational field. I suspect the costs for digital media are a wash because not everyone takes advantage.
Shane M. O'Neill
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Shane M. O'Neill,
User Rank: Author
7/28/2014 | 12:14:46 PM
No heat in this Fire
Microsoft and Amazon are trying to reinvent the smartphone UI with live tiles and carousals and 3D, respectively. Problem is, nobody was complaining about apps and widgets arranged on homescreens. I don't think the world wants a dramatically different smartphone UI and the Fire Phone will continue to struggle due to lack of apps. It doesn't help that the phone is clearly a ploy to use Amazon services, there is no deal on price, and only AT&T provides service.
melgross
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melgross,
User Rank: Ninja
7/28/2014 | 10:28:48 AM
Long term problems.
Amazon has put itself in a position where the likelihood of making significant profits is about nil. I remember Bezos telling us, a long time ago, what his business plan was, and it isn't what they are doing. Originally, his plan was to have a small team, those who wrote and maintained the website, or paying an outside company to do so, a small executive group, and people to interact with customers and suppliers. But, those suppliers were to ship all the ordered products. Manufacturers and fulfillment companies would do all the work, leaving massive profits for Amazon. But quickly, it was seen that this wouldn't work. There is way too much inertia between an order, and when a manufacturer or fulfillment company ships. This was found out long ago when the first big Christmas season hit the web stores all over. Late deliveries, wrong packages, no delivery, etc, were common. Amazon, and others, began to realize they had to do this themselves, and that changed his business plan forever. Massive warehouses and shipment centers became unavoidable, killing any hope of massive profits. As long as Amazon expands, they will need to open more of these, costing billions more. Then there is Prime. Prime has always been a loss leader for Amazon. As they continue to add services in the almost desperate attempt to get people to move to them, they offer all of the services others charge for, for "free". What does this cost them? Streaming music subscriptions cost between $10 and $15 a month for those companies offering them (and those companies still aren't making money). For many years they were a failure, until they understood that in order to compete with iTunes, they needed to give songs away for permanent ownership. But now, Amazon has raised Prime to just $79 a year. They are losing massive amounts of money just on those music services. But then there are movie and Tv services, books on Prime, free and expedited shipping, etc. Amazon could be losing $100, or even much more on each Prime customer a year. Possibly much more. So 10 million Prime users could cost them at least $1 billion in losses a year, possibly much more. Then, it's admitted they do no better than break even on devices, or lose money on each sale. Since people buy Amazon's devices because they are cheap, it's not likely they buy enough to cover those losses from marketing those devices. Likely, these people were already buying from Amazon, so there may be little incremental increase there. I believe the proof for what I say is the obvious non existence of real profits when they make any, and the losses when they don't. The problem for amazon is that their business is contingent on continuing these practices, along with low prices. Good for the consumer, but bad for the investor. Going by profitability, their stock is actually worth around $30, not $300. Someday, we may see it there. And, by the way, with a year's free subscription to Prime, the Fire phone is just continuing this sell it for break even policy we've been seeing. It's not likely they're making any real money on each sale.
pcharles09
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pcharles09,
User Rank: Ninja
7/28/2014 | 9:49:52 AM
Re: Gimmicky UI
@SaneIT,

Sounds like the many experiences I had with the Windows Phone. When Android gets compared to a WP, that's never good...
SaneIT
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SaneIT,
User Rank: Ninja
7/28/2014 | 9:35:00 AM
Gimmicky UI
The last thing you want to hear about your Android based phone is that the UI is gimmicky.  I knew there would be trouble when I heard that it would be locked down to Amazon's app store.  That has been the kiss of death for several Android based devices.  When you can't install apps that all your friends are talking about it tends to be more than a little frustrating.  Add to that the fact that people already complain about the fragmentation of Android and Amazon was just digging themselves a hole.  Can they climb out of it?  Probably but it won't be a quick or easy process.

 

 
progman2000
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progman2000,
User Rank: Ninja
7/28/2014 | 6:54:09 AM
Re: Several of the investor websites I follow..
It will be interesting to see.  Sometimes these things don't play out nearly like I thought they would...
nasimson
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nasimson,
User Rank: Ninja
7/28/2014 | 12:43:06 AM
Re: Several of the investor websites I follow..
Given the whimsical, unforgiving and shortsightedness nature of Wall Street, I see one more such mistake and the board will ask Below to step down.
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