The Amazon Economy

| About:, Inc. (AMZN)

Most of us see (NASDAQ:AMZN) for what it sells. We see it as a giant department store, and a cloud services provider.

In short, we see Wal-Mart (NYSE:WMT).

Newspapers like to see Amazon this way because it lets them show Amazon as a threat to "brick and mortar" merchants. They harp upon the music retailers and the small bookshops left in Amazon's wake, and ignore the commerce being enabled. Amazon is more a threat to newspaper advertisers than it is to a small town's center. Amazon may be the best friend small merchants have.

With Amazon, small merchants have, not just a ready made web site, but the equivalent of foot traffic, transaction processing (including sales taxes where applicable), a logistics system, and complete reporting. I know several small stores in my own Atlanta neighborhood that do most of their business through Amazon. It gives them access to a global market, and while it takes its cut off the top, it provides services for that cut the small merchants could never build themselves. The retail margin can remain with the retailer.

What Amazon is doing with games is not very different from what it's doing for these small merchants. Game developers will be able to get into Amazon for less, take advantage of its world-class infrastructure, and probably get a better cut of resulting revenues than Facebook (NASDAQ:FB) gives them. After all if Facebook's margins were so lovely Zynga (NASDAQ:ZNGA) wouldn't have felt the need to build its own infrastructure.

As Amazon extends its warehousing into more places, offering same day delivery in some cities, and lockers in convenience stores this ability will only expand.

My only quibble is that Amazon doesn't crow more about what it does for small merchants, hiding their work behind its own brand. Maybe that will change now that eBay (NASDAQ:EBAY), the only online merchant with a comparable logistics network, is now calling on big merchants to go after Amazon through it.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.