Having My Say

Be Good, But Not Too Good…

Capitalism is a strange beast, well, at least the U.S. version. If you serve your market too well, the regulators will destroy your company. That seems to be the case with what is going on with Amazon lately. As yet, the competition just can’t offer the quality of service that Amazon can, so of course, their market share continues to increase.

When Jeff Bezos started his company in 1997, he made it clear to his shareholders that there will be no dividends. I liked what he was doing, so I bought a few shares. They are now worth more than I ever imagined now! Thanks, Jeff, for thinking outside-the-box and letting me be part of it.

I just read an interesting article about Amazon’s distribution centers. While most business keep their inventory on bolted to the concrete shelves, Amazon’s storage actually moves around the building looking for carts that need their product. Nothing is set in concrete (pun intended) for those guys. It’s kinda like the storage computer says, “meet me at 3rd & Vessey at 11:02:15”.

Finally, I am a very satisfied customer and have been since the beginning when he started selling books on-line. Even that idea was innovative at the time. Innovation is simply Amazon’s middle name.

Walmart, Sears, and all the other big-box retailers were modestly amused that this new company when it started in 1997. They aren’t amused any longer, in fact, Sears doesn’t exist anymore in a big part because of “that amusing little business” twenty-six-years ago.

6 thoughts on “Be Good, But Not Too Good…”

  1. I have a different view of businesses such as Amazon and Google as they operate in New Zealand, but their sales divisions don’t. That way they make no profits locally and can actually make a loss. All goods and services sold within New Zealand are subject to a 15% goods and services tax (GST). Offshore business are outside NZ’s jurisdiction and pay no GST or income tax, so even ignoring economy of scale that Amazon has, it has a huge advantage over every NZ retailer and service provider regardless of whether they are an online business or one with a shop front.

    Then there’s factors such as the average wage of an Amazon distribution center worker is lower than the NZ minimum wage, and receive fewer benefits such paid annual leave, sick leave and parental leave required under NZ law.

    But it’s the economy of scale that tops it off. NZ is a very small market at the very end of a very long supply line and an open economy with almost no tarrifs on imports. Amazon will never open a distribution center here because the local market is too small, they would have to pay higher wages and pay GST. By shipping from offshore distribution centers they have a huge advantage over every NZ retailer.

    For those reasons I won’t buy from Amazon and support NZ businesses even they it costs me much more. One thing that annoys me is the number of people who will visit a local retailer to try on an article of clothing or examine a product and then order it from Amazon because it’s cheaper. Is it any wonder that some local clothing retailers have started to charge a fitting fee which is refundable if the item is purchased.

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    1. Thanks for your perspective of my post about Amazon. I didn’t even know that Amazon was in New Zealand. With such a small population, it doesn’t seem like it would be profitable. My State of Indiana, which is in the lower half in size is almost 2 million more people than NZ. It sounds like some of your problems are that the government is not active enough when it come so regulations and taxes. Not having to pay the “goods and service tax (15%) is definitely putting local retailers in jeopardy. Why would I buy locally if I can get it 15% or more break by bypassing them.

      On-line services are the future for most people, so something has to be done.

      Thanks again, Barry. Your insight is indeed valuable to the discussion.

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      1. Amazon doesn’t have a distribution centre in NZ and service the country from offshore distribution centers.

        Let me give you a real life GST example: I run a small webhosting and email business, and I am required to add 15% GST to the services I provide and include it in the invoices I send to my clients. Every month I pay the IRD the total of the GST I included on the invoices for the previous month, irrespective of whether or not I have received payment from my clients. My competitors include US businesses such as GoDaddy, Google, Amazon, HostGator, and Bluehost. They provide their services from a US entity and that entity invoices the NZ customer just as the do their US customers – without GST. They may still have a presence here via an agent or a locally owned subsidiary but the actual services are provided by and billed from the US entity. Remember that the GST is collected by the seller and then passed on to the IRD. The NZ agent or subsidiary is not the seller.

        Without draconian surveillance by the authorities, it’s not possible for them to know if someone purchases webhosting services from a NZ based enterprise or one based overseas, so unless that offshore enterprise volunteers to register for GST there is no way for the IRD to collect the GST. That puts my business at a 15% price disadvantage, everything else being equal.

        Another example: I use Netflix. They have chosen to register for GST and their invoices to me includes 15% GST that I trust they forward from the American entity to the IRD. There is another offshore streaming service that has not registered for GST and their pricing is on par with Netflix until the GST is added. I know a number of people who have decided to go with Netflix’s competitor because they are about 15% cheaper. I won’t because I feel it is unethical. Again, unless the authorities were to monitor every bank transaction I made, identify which ones were made to an offshore entity and then demand I show proof that each of them included a GST component, I don’t see how they could know if I had paid GST or not. In a free society that level of surveillance is unacceptable.

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