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Coupang: Korean E-Commerce Craze - [Business Breakdowns, EP.169]
Business Breakdowns
Analyzing Cost Structure and Margins of the Business
Amazon operates under a unique cost structure, leveraging a contractor model, particularly on the courier side, which provides an advantage given the absence of a union workforce. The company reports a single operating expense line item, leading to criticisms regarding transparency in cost breakdown. Currently, Amazon achieves gross margins of approximately 25%, with expectations for improvement as the business shifts focus from first-party (1P) to third-party (3P) sales. The business is divided into roughly 55% 1P and 45% 3P, indicating the complexity of revenue reporting, where 1P sales account for total revenue while 3P sales record only commission income. This distinction necessitates evaluating the company's performance based on Gross Merchandise Volume (GMV), estimated between $35 billion and $42 billion, rather than revenue, due to the accounting treatment discrepancies between 1P and 3P transactions. Overall, insights into Amazon's cost structure and margins remain limited, suggesting a need for more detailed financial disclosures.
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