Amazon is Great, But is it Leading Us Toward an Economic Collapse?

Photo courtesy of fastcodesign.com

Photo courtesy of fastcodesign.com

Fastcodesign.com has a great post that takes a very interesting look inside an Amazon fulfillment center in the U.K.  The story includes a vivid pictorial showing the inside of an Amazon warehouse while the story goes on to describe working conditions and what Amazon brought to the defunct mining community.  The photos are fascinating.  The scope of Amazon’s operation is breathtaking.  But the questions I have concerning the future of Amazon have been mounting in recent years and they becoming alarming.

Take a look at fastcodesign.com’s look inside Amazon’s massive fulfillment center in the English Midlands.  Then consider this…

I’m strangely conflicted after reading Fastcodesign.com’s article.  The sterile, organized, refined nature of the facility and operation appeals to me on one level.  The dehumanizing quality troubles me at the same time.  Plus, Amazon operates on a shockingly small profit margin.  Especially for an entity its size.  With that in mind, on some level it still feels like a house of cards being built ever higher without a solid, maintainable business model to support it once the prevailing wind changes.  Certainly Amazon has done great things in the area of cloud computing with its web infrastructure development and, maybe even more amazing things for traditional publishing when it comes to proliferation of ebooks.  A solid case could be made to credit Amazon for bring ebooks to the main stream.  That’s no small feat.

But these shipping centers seem precariously placed.  I’m not sure the business model holds up in the long term once states start imposing sales tax on Amazon and once Amazon finally gets real about its free shipping policy.  They are currently writing off billions of dollars in shipping each year.  Prime memberships will never fully offset that loss.  With a profit margin that doesn’t keep the lights on in even the most money conscious traditional business, how can Amazon’s pace possibly be maintained?

And what happens to these massive fulfillment centers when things change?  The location described in the linked post will look like a well appointed, deserted mine shaft when all is said and done.  Is that necessarily an improvement?  Especially considering that Amazon will have put traditional retailers out of business on their Sherman like march to their inevitable date with destiny?

Will we soon be referring to this scenario as the dot com bust 2.0?  If it plays out the way I fear, it will make the first bubble look like a tiny belch, considering the way Amazon has decimated conventional retail.

Update: 8/6/13 4:37pm
This TechCrunch post raises some very interesting points about Amazon’s financial situation and how it can be profitable, even when not making any profit on sales.  It’s very clever and really only works because of Amazon’s size and sales volume but it obviously does work.  I found the concept fascinating, if somewhat unconventional.

One Response to Amazon is Great, But is it Leading Us Toward an Economic Collapse?
  1. A Gold Reply

    Not sure if you will post this, but there are algorithms within the ecommerce machine – a kind of AI – that gives rise to hyper aggressive pricing models.
    Numerous occasions have arisen where I would buy a product for a certain price and in succession of ‘refill’ orders, the prices go up.
    At the store I liked a bar of a specific common soap for $4 USD. Later it may be offered at qty 3 for $8. Next order, the price goes to $9.30. After this, within two months, it is now at $12 for the three pack, and within the following month the three pack goes to $36.
    The problem is that they base their pricing model on THEIR market force, not buyers. So if in the long run they remove local brick and mortar stores, they can then designate their prices, and ‘wait out’ the buyer to put up with what their AI decided is the best price. They are no longer using the ‘free’ market but a forced pricing model.
    If you look into this, you will find this to be the case world wide.
    The only way to ‘vote’ this away is to drive local purchases at local stores and try hard to stop using Amazon for product. Even consider Target, Wal-Mart for now, that never seems to lift the prices so egregiously.

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