A brief follow up to yesterday’s post on how sucking it up and collecting state sales tax would affect Amazon’s operations. The argument there was that avoiding state sales taxes was leading to distortions/compromises in how Amazon set up its distribution system. Just collecting taxes would allow for better operations. Of course, that all assumes that Amazon is in the mood to spend on its infrastructure. If they were in a position to get by with the status quo, compromising on sales tax would not have a short-term impact on what they do. Turns out, however, that they are set to invest. (Amazon’s Growth Is Costly, Wall Street Journal, Jul 27).
The Seattle-based company reported that its second-quarter revenue jumped 51% to $9.9 billion, which Amazon finance chief Tom Szkutak said was the company’s best growth rate in 10 years.
But the increased sales came at a high cost, as the company spends heavily to add warehouses and digital offerings. The online retailer’s profit fell 8% to $191 million for the quarter as operating expenses rose 54%. Operating margins were squeezed to 2.0%, down from 3.3% from a quarter earlier and 4.1% a year earlier. …
Amazon’s spending is focused on both physical and digital infrastructure. Mr. Szkutak said the company will build 15 new distribution centers this year, a number that may grow by “a few more, at least.”