Why Amazon Has No Profits and Why It Works
I listened to a talk by Amazon's CTO, Werner Vogels, where he was explaining that Amazon's entire strategy is to build an infrastructure for itself, then rent that infrastructure out to its competitors. That way, increased competition can actually fuel your growth. The talk was about APIs, but Amazon views APIs as a general term: "Fulfilled by Amazon" is an example of a non-technical API.<p>Likewise, I think Amazon's self-funded retail operations are largely a break-even enterprise. Other businesses have been successful with this -- Costco comes to mind -- but the scope of capabilities Amazon is looking to develop is staggering.<p>If they can build a completely vertically integrated retail platform from procurement to payment to delivery, basically they're operating a retail enterprise without taking any inventory risk on themselves. Which is what this article means by "capture a significant portion of US retail": if they can provide merchant services to investors, it turns Amazon into basically an investment bank. Amazon takes a retailers money, turns it into inventory, sells it, takes a cut, then returns money. The only inputs and outputs into the Amazon machine are money, and it turns retail operations into an investment product.