Wednesday, September 12, 2012

Doubling down, Amazon, tripling down.

"AMAZON'S BIG BET: BUILD, BUILD, BUILD...." Bulletin front page, 9/12/12.

Here's one of those simple observations that I can't prove, unless it happens. And which almost no one will agree with me.

But this constant growing of Amazon at the cost of profits is a very dangerous technique.

For this reason: What if something -- some new technology, some new gadget, makes their model obsolete? What if someone -- some new competitor, with a better algorithm or something comes along and knocks them off?

That headline is right: What they're doing is the equivalent of putting every winning hand in the poker pot -- because if they lose the last hand, they lose it all.

I know, it doesn't look likely at the moment -- but when does it ever? Who would've though Apple would come roaring back? Who would've thought G.M or Sears would become nearly bankrupt?

I did this kind of growing of marketshare in my own store for about a decade -- in my own small, insignificant way. Sales got extraordinarily high (for me) at the peak. But competition set in; product became obsolete. It was all for nothing -- I was just churning large amounts of cash, none of which stuck.

I've tried not to make that mistake again. I grow slower now. I make sure I make a profit as I go along. I don't mistake size and sales for being profitable.

Just saying.

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