Amazon founder Jeff Bezos has a habit of entering any business in which he believes he can make a dollar, even if he loses money on each sale. The trend has been among the most criticized of Amazon’s tactics, and Wall Street has complained bitterly. Investors want Amazon to stay with the old rule taught in every business school. Companies should stick to their knitting.
Amazon’s expansion almost certainly has hurt its anticipated numbers, which were laid out in its most recent earnings statement:
First Quarter 2015 Guidance
- Net sales are expected to be between $20.9 billion and $22.9 billion, or to grow between 6% and 16% compared with first quarter 2014.
- Operating income (loss) is expected to be between $(450) million and $50 million, compared to $146 million in first quarter 2014.
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So many years into it life as a public company, it ought to have better results on the bottom line, at least in the opinion if some of its shareholders.
The travel business is not much different from the grocery business or tests of drones as a means of delivery for products bought from Amazon. Scores of new products and inventions eventually ought to lead to some that will be successful. Amazon has reached the $100 billion mark in annualized revenue, so in Bezos’s opinion it has earned the right to experiment.
The travel business is among the most competitive in America. Travel, airline and hotel sites have been in business long enough to have established loyal customer bases. So have credit card sites, which use travel promotions as a way to drive up charges and customer balances. Airlines and hotels offer loyal programs and discounts. Travel sites offer one-stop shops and discounts as well. Travel has become a commodity of sorts.
Amazon’s management cannot help itself. Enter any and all markets in which there may be sales. If some of the efforts do not work out, who cares? Other than, in many cases, shareholders.
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