Is Amazon Resorting to Deceptive Selling Techniques? If so, why?
May 29, 2012 7 Comments
Amazon.com’s (“AMZN”) stock is one that nearly everyone seems to want to short (especially among the long-biased crowds). In fact, it seems like a stock people go short, citing some fundamental thesis that’s been around for a decade (“high P/E, yet low margin business, deserves lower multiple”), THEN go around looking for reasons to short it. One short-seller told me, ” AMZN is not a stock that short-sellers short.”
I mostly agree. What is funny and ironic is … the loudest fundamentally-oriented cheerleader and bull of Green Mountain Coffee Roasters’ stock on Twitter/Stocktwits in November 2011 (before, during, and right after it gapped down 40%), wrote a piece 2 months ago titled “Amazon.com (AMZN) is the Secular Short of 2012” http://www.firstadopter.com/2012/03/amazon-com-amzn-is-the-secular-short-of-2012/ The market has disagreed so far. I respect and admire his courage, but am nevertheless skeptical when he talks shorting or valuation. For example, even now, AMZN is actually less expensive than GMCR, on a cash flow basis. You can at least do an intellectually honest DCF on AMZN. You can’t with GMCR.
Don’t get me wrong, I believe there are good reasons and opportunities to short AMZN, but I believe the more compelling reasons are of a quant/macro/vol/fund flows nature. For larger hedge funds, with certain liquidity needs, etc., AMZN, at times, actually makes a lot of sense as a short, either for hedging or purely directional betting purposes. But these are very different reasons.
Anyway, I noticed something very peculiar (to put it nicely) that might be much ado about nothing, or prove that firstadopter is onto something:
I searched for a certain product on AMZN @ 10:29 pm and AMZN claimed – “Only 1 left in stock – order soon”
Fearing that the product may have sold out, I searched again for the same product on AMZN @ 12:29 am and AMZN claimed – “Only 20 left in stock – order soon”
What is going on? It could’ve been a glitch, there could’ve been more inventory mysteriously made available within 2 hours or… AMZN is tinkering with deceptive sales practices. After all, for customers sitting on the fence on whether to purchase a product, perceived scarcity might do the trick.
I’ve noticed similar in the last 2-3 quarters…this happens to be the first time I saved screen shots showing this.
What supports my suspicion is, this product is widely available at other retailers…not to mention, it’s selling on eBay for ~15% lower (new, free shipping, receipt, etc).
Let’s suppose I am correct, and AMZN is resorting to such techniques. Why? The product may be selling way below expectations, and AMZN is forced to do whatever is necessary to get it moving.
The question, as far as I’m concerned, is – does this mean this particular manufacturer/supplier is not doing well? Or is this merely the tip of the AMZN iceberg?