The Internet's Degrading Impact On Margins
This is not to say that some Internet retailers will not have higher margins than others. Those that lower their costs below those of other companies in their industry or that find a niche that is difficult for other potential competitors to imitate will earn above normal returns, just as superior brick-and-mortar companies earn above normal returns.
Therefore, when estimating future profits, use lower margins for Internet businesses if lower costs are a benefit of the Internet model. Don’t get suckered by the claims to the contrary. Otherwise, you will overpay if you are purchasing an Internet stock or business, or you might overestimate the benefit to your bottom line if your Internet business is developed in-house.
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