(CREDITS):
--written by thewriter197
--employed by Ashford University
Amazon, like many online retail companies, has mange to produce products that have greater value then most retail stores available today. In the year 2018, a high percentage of people around the world have decided to buy online products. 20-30 years ago, people would go to the local retail store in town to order supplies. But, the modern job market has been a lot worse in recent years from 2015. Most jobs do not offer full time hours and this can cause people to be more cautious when spending. People are deciding to buy most of their items online to save money for bills. People are getting smarter and they want to make sure their bills are paid by any means. We must look at different financial data in order to determine if Amazon products are a good investment. We must also look at different financial data to determine if retail store products are a good investment. Smart people who invest in online retail stores like Amazon will have stable income, products that do not lose value, and customers who are always eager to purchase on Amazon.
First, let’s talk about the Amazon company. The online internet retail company “Amazon” was created by Mr. Bezos. Mr. Bezos decided to take his parents’ savings to build a online internet company (Price III, 2013). He had a knack for customer service and online business (Price III, 2013). The first employees for Amazon were people Mr. Bezos knew and assumed could handle different roles for the company. He was using small desks and small space for his company. He started off with making his brand name Amazon well known first (Price III, 2013). Then he invested into marketing and tried to issue a customer service to people that could sell products online (Price III, 2013). In 1997, Mr. Bezos succeeded with his small company and made 150 million with online product sales and customer service (Price III, 2013). Mr. Bezos managed to make online selling better then offline selling.
Now, we will discuss one retail store available right now. Gamestop, a gaming retail store that also sells game accessories and hardware. Company started in 2005 from a small video game retail store (2018). The company has stores located in Europe, Australia, and United States (2018). Gamestop also sells digital products for video games. Gamestop is a great place to buy cheap used games. Although Gamestop sells cheap used games, some people on Youtube report that working at Gamestop is stressful and low paying.
Next, we will talk about another retail store named “Toys R Us.” Toys R Us was founded by Charles Lazarus (2017). Toys R US has been in business for about 65 years (2017). They have over 564 stores open in the United States (2017). Toys R Us uses its features and fancy toy experience to bring in more customers. In other words, they let the toys and the family experience do the talking. Toys R Us is one of the biggest tourist attractions in New York City (2017). Parents and kids love shopping at Toys R Us because of the “glow toy environment.”
Now that we have an introduction of the companies being used in this paper, we will now discuss methods for determining the value of a product. A product is something a company sells that produces value to someone who wants it. We will use the depreciation tool used by accountants to determine if each company is worth investing (Investopedia, 2018). We will discuss the business of Toys R Us, Amazon, and Gamestop. Over the years, a company may lose value in income. If an asset of a company be lower then the profit made from a particular cash flow, then a company’s business is not doing well (Investopedia, 2018). Now, a company’s product loses value because of changes in the market, turnover workforce, new technology, people’s demand, people’s respect towards products and brands, and change in fair market value (Investopedia, 2018). In conclusion, we must use the depreciation tool to determine if it is smart to invest in Amazon, Gamestop, and Toys R Us.
Two more methods that should be used in determining which company is a good investment is “Discounted Cash Flow” and “Cash Flow.” Discounted Cash Flow is a method used to determine the attractiveness of a investment opportunity (2018). In other words, its a profit estimated guess of what is going on with a company’s product. Cash Flow method is a process of recording the payments made for a product and the profit made for that same product (2017). To put bluntly, Cash Flow method is determining if the cost of doing business is lower then the profit of a product (2017). We will use these methods and depreciation tool to determine if investing in company’s product is worth it.
Let us first start with online retail store Amazon. The company’s plan is to create a platform that allows users to find, discover, and ask for things involving products (Price III, 2013). Amazon has decided to invest billions of dollars into other companies to help with future marketing for products. Amazon’s products are not just items for people to buy, but investments for other corporations. Cash Flow investigation performed the FASB which is a part of the accounting department. They decided to use the direct method for determining Amazon’s cash flow (Price III, 2013). The reports determined that Amazon’s profits were evolving and getting bigger each day (Price III, 2013). About 2.3 billion was invested by Amazon for different company’s stock (Price III, 2013). This data would indicate that Amazon is not just a online retail store. Amazon is also a investment company for other corporations. So, investing in Amazon’s products would mean that you are also investing in Amazon’s investments. The FASB finds no fault with the value of Amazon’s products. There was a small law suit filled against Amazon, but it has been dismissed by stockholders and people interested in Amazon (Price III, 2013). In other words, the law suit never made it to the public and investors did not have a problem with it. Based on this information, investing into Amazon’s products would be a great idea for many years to come. This information is based on the year 2010. Business data could change in 50 years, but it seems that Amazon has everything under control.
We need to take a look at Toys R Us cash flow. In recent years, kids have not been interested in playing with toys. Toys R Us in serious need of a new business idea. Video games are the main choice for kids in 2018. Video games are very advanced now and people in games look like real life. Kids do not want to play with toys anymore. According to the Cash Flow method for Toys R Us, it seems that their sales have been really low in 2018 (Satell, 2017). Toys R Us filed for bankruptcy back in 2005 for 6.6 billion (Satell, 2017). The company plans to turn the debt around to get the company running again (Satell, 2017). However, they haven’t been able to bounce back and now the debt continues to rise. Reports made by a writer named Greg Satell, suggest that walking into a Toys R Us store is like walking into a ghost town. The store is deserted and is found to be very quiet when you walk in. It feels like a museum instead of a toy store. Toys R Us is failing to keep up with what entertain kids these days (Satell, 2017). Investing in Toys R Us products would not be a smart idea considering they sell products that are obsolete and they are in debt.
Gamestop has not been doing good either according to the depreciation tool (CNNMoney, 2017). Gamestop sells products that are in demand like video games, but video games are in digital form now. This means that people do not have to go to the store to buy video games. In 2016, Gamestop’s stock value has decreased by 30% (CNNMoney, 2017). It could be that people can not afford to pay for gas and video games or it could be that the job market is forcing people to be very conservative. Gamestop’s main competition is Steam which is a online video game company that sells digital games. Although some would disagree, digital video games are the future of video games. People are trying to save as much money as possible and are willing to sacrifice anything they don’t need in the year 2018. Due to video games becoming digital instead of physical, investing in Gamestop would be a long term investment. Kids are still playing video games, but money is something that is hard to come by with the new job market that youth and returning to work people face.
As you can see based on the data given about retail stores, retail stores are on their way out. People are becoming more conservative and leaning to shop online. Toys R Us is in huge debt and Gamestop is selling something that will soon be obsolete in 20 years. Gamestop also has customers that want to shop elsewhere because of bad job market. Long story short, retail stores are struggling to keep up with online retail stores like Amazon. They are hanging by a thread and soon that tiny thread will be broken. Give it 20 more years and these companies will not exist in physical form anymore. Investing in online retail stores like Amazon seems to be the best option for the long haul.
How to stakeholders look at this situation? A stakeholder is someone who bets or invest in a company or company’s product. Stake holders look at a few things before deciding to invest with a company. They look at company’s relation to business people, public’s eye of the company, profits, products they sell, intangible assets, and fair market value (Friedman, 2012). Stakeholders would look at this shifting business situation and invest into Amazon. Amazon is making the money and Amazon has investments into other companies. The point is, Amazon is always going to make money in one way or another. These other corporations might not last for another 20 years or so. Stakeholders would only consider investing into Amazon. The economy is shifting to be more and more digital. Stakeholders can not afford to invest in physical products that are losing value in retail stores day after day. They need to invest in digital products so they can have investments in 50 years.
In conclusion for this business report, retails stores are becoming obsolete because people are not willing to go to the store anymore. People are willing to make major cut backs to make sure their bills are paid. People do not want to buy something physical that can be bought online. Amazon, a online retail store, might be what stakeholders need to put their money on. Amazon has invested into other companies and their profits keep rising year after year. Retail stores like Gamestop and Toys R Us are becoming a relic and are in huge debt. Debt that they can not pay off. To make matters worse, people are buying the same products at a different store. The economy is shifting and people are adapting to it. Job markets are changing and people are realizing that they need to change with it or they will die. People are starting to realize that time goes on and you need to as well. Retail stores are finished.
Reference:
(2017). About Us. Retrieved from URL: https://m.toysrus.com/skava/static/customerservices.html?serviceType=aboutus.
(2017, Aug. 02). Cash Flow Statement Direct Method. Retrieved from URL: https://www.accountingtools.com/articles/2017/5/17/cash-flow-statement-direct-method.
(2018). Discounted Cash Flow. Retrieved from URL: https://www.investopedia.com/terms/d/dcf.asp.
(2018). GameStop Corp (GME). Retrieved from URL: https://www.reuters.com/finance/stocks/company-profile/GME.
CNNMoney. (2017, March 25). Gamestop to Shutter 100+ Stores. Retrieved from URL: http://money.cnn.com/2017/03/25/news/companies/gamestop-stores-closing/index.html.
Friedman, John.(2012, June 13). Stakeholder Relationships: Key to a Sustainable Enterprise. Retrieved from URL: https://www.huffingtonpost.com/john-friedman/managing-stakeholder-rela_b_1415255.html.
Investopedia. (2018). How Is Impairment Loss Calculated? Retrieved from URL: https://www.investopedia.com/ask/answers/101314/how-impairment-loss-calculated.asp.
Price III, R. A. (2013). “Cash Flows at Amazon.com.” Issues In Accounting Education, 28(2), 353-374. doi:10.2308/iace-50182.
Satell, G. (2017). Toys 'R' Us Might Be Dying, but Physical Retail Isn't. Harvard Business Review Digital Articles, 2-4.
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