Amazon starts collecting state taxes? Profit margins are pretty thin, so what happens when the tax advantage ends? It won't be pretty, with a PE near 100.
As a Californian paying sales tax of 8.75% is a big incentive to use Amazon but after they have to pay sales tax that puts them even with all the other retailers. Price competition will have to cut into margins and/or sales. Walmart is looking to expand on-line and if anyone has the deep pockets they are the ones to do it.
amazon is stepping toe to toe with a number of powerhouses:
- apple on ipod/mobility
- google on droid/motorola mobility
- walmart on line
- best buy on line
- ebay on line
- all the box stores on line
- akami and other providers of cloud services.
in each of these confrontations amazon will face intense competition. Many of their competitors have much higher net margins and can reduce margins to bury amazon who has limited margins of 2%.
since this has never been done one needs to look at analogys/history on how this strategic plan will execute
the closest i can come up with is the Germans fighting on multiple fronts all over the world. How did that work out for them?
suggest buying puts well into the future and deep into the money to avoid premiums. Let the strategic defeat unroll.
Pretty sure it won't make much of a dent in their profit. You might see a panic-inspired market correction, but in the long run, Amazon can handle it. Most Amazon shoppers will not stop shopping there because of sales tax. I imagine 80% of them won't even notice.
It is smaller online retail companies that will be hit the hardest. It'll be interesting (and sad) to see all the unforeseen negative consequences of an online sales tax.
I wouldn't bet on people not caring or noticing the tax un-benefit.
Did NFLX users ignore the price increase? Did banking customers ignore new debit card fees ? The onslaught was huge. Granted, this isn't AMZNs doing... but the 4,5,6% or higher increase in cost will indeed effect sales. And given the already money losing position and high PE AMZN carries, the stock may well find it a long time before attempting a run at new highs. Right now I'm letting it have its way going higher and hope it does.I'll be looking out for a better place to sell it short. JMHO
Sales tax will make a difference. Thier profit margin is far less than the sales tax differential. How many folks do you think buy things from amzn when the price is higher than they can buy it elsewhere? Answer, not many.
This post was a clear mark of the novice Amazon Idi*t Short. Fantasy prices. What does this really mean? Does it means he will close for a loss of $50 a share in the not so distant future? Yep.