Skip to content
The Founder's Notes

Compare

The template only earns its keep if you actually put two cases next to each other.

This is the reason every teardown answers the same questions in the same order. Put a luxury house beside a console platform and the differences stop being vibes — one is refusing sales to protect a price, the other is selling below cost to collect a toll, and both are defending a moat.

Food · NASDAQ: SBUX

Starbucks

Operates and licenses roughly 40,000 coffeehouses worldwide, selling a commodity beverage at a premium because of where and how it is served.

Technology · NASDAQ: AMZN

Amazon

Runs a near-breakeven retail operation at enormous scale, and earns essentially all of its profit from renting out the two things that operation forced it to build — computing capacity and shelf placement.

The thesis in one line

Starbucks was never in the coffee business. It rented you a chair, and the coffee was the ticket.
The store is not the business. The store is the customer acquisition cost for the businesses.

Verdict

Watch it
Own it

Moat

Contested

Brand · Scale economics · Switching costs

Wide

Scale economics · Network effects · Process power · Switching costs

Porter's five forces

Competitive rivalry
Threat of new entrants
Threat of substitutes
Buyer power
Supplier power
Competitive rivalry
Threat of new entrants
Threat of substitutes
Buyer power
Supplier power

Headline figures

Revenue
~$37B
Stores worldwide
~40,000+
Price paid for Starbucks, 1987
$3.8M
Coffee as a share of a latte's cost
Under 25%
Net sales
$638B
AWS share of operating income
~58%
Retail operating margin
~5.4%
Third-party share of units
~60%

Unit economics

One brewed grande latte, US company-operated store

Beans are the smallest line on the page. The two biggest costs — labour and rent — are the third place itself, which is why any decision that degrades the room shows up in the P&L before it shows up in the brand.

One $50 third-party item sold through Amazon

Amazon captures roughly 38% of the sale price and carries none of the inventory risk. The seller took the risk, paid for the warehouse, and then paid again to be found in a search of Amazon's own catalogue.

What would change her mind

Two consecutive quarters of positive US comparable transactions — customer counts, not ticket — with operating margin expanding at the same time. That combination can only happen if the third place is genuinely bringing people back, and it would settle the question the whole case turns on. If comps stay positive purely on price while transactions keep falling, the premium is being harvested rather than earned, and the verdict should be Pass.
If AWS revenue growth falls below 15% for two consecutive quarters while segment operating margin also declines, the cloud business is being commoditised rather than merely contested, and the capex is being spent defending share rather than buying growth. That combination — decelerating growth and compressing margin at the same time — breaks the thesis outright. A single weak quarter on either measure alone does not.

1 mechanism in common

own the customer