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It is easy to forget, considering the rapid pace of technology these days, that online retailing is still a relatively recent development. After all, it has only been a mere 19 years since, Inc. (NASDAQ:AMZN) started up. In that short time-frame, the company has gone from being a humble virtual store to becoming the greatest online retailer in the world, a company with a market capitalization of $122.49 billion dollars. Jeff Bezos, founder and CEO of Amazon, is worth around $18.4 billion these days, according to Forbes.

Not bad for a man that started an “online bookstore” in his garage.

What is really interesting, however, is the company’s unique business model. Why is it intriguing? Because it’s utterly confusing to most people., Inc. (NASDAQ:AMZN)Dissapointing performance…

As an illustration, let us look at their last quarter results that came out on Jan. 29.

The company reported 4th quarter revenues of $21.268 billion, which was below the expected $22.26 billion. Usually, missing expectations by such an amount (a billion dollars!) is enough to send people into a panic. Furthermore, their earnings per share ($0.21 per share) was also short of expectations, which were $0.29 per share.

Most terrifying of all was Amazon’s guidance for the next quarter: the company said that first quarter revenues would be between $15.00 and $16.60. Wall Street analysts were expecting somewhere between $16.86 to 27.9%. That’s right, the company’s highest expectations doesn’t even meet the lowest of Wall Streets official expectations. Furthermore, the company’s guidance for their operating income (for those of you who don’t know, that’s the amount of profit realized after taking out operating expenses and depreciation) next quarter was somewhere between a loss of $285 million and a profit of $65 million. In other words, if you average that out, the company more or less expects a loss of $110 million. Now, I’m not really an expert, but that probably means that the expectations of $0.34 a share for the next quarter are optimistic. At best.

In sum: The company missed revenues, missed earnings, lost money in 2012, and issued terrible expectations for the next quarter.

For those of you who don’t understand all that financial talk: it basically means that Amazon is pretty much doing THIS, working more like a charity rather than a profit making corporation. The general assumption would be that the company must have one terribad business model/plan.

How did the market react to all this news? The company’s share price went from around $268 to a high of $290 (though as of the writing of this article, it’s come back down to a more reasonable $266).

The lesson is simple: expectations mean absolutely nothing when it comes to dealing with Amazon. To analysts like me and the guys on Wall Street, this is akin to a form of witchcraft.

…but amazing results.

So Amazon, despite losing money, is continually expanding & growing so much that it practically terrifies all competition. Retail giant Target Corporation (NYSE:TGT) is implementing a price-matching guarantee so that the prices of goods in it’s stores matches with online prices for the same goods. Best Buy Co., Inc. (NYSE:BBY), the big-box electronics retailer that is practically synonymous with buying consumer electronics, also implemented a price-matching guarantee (effective March 3) in order to stop “showrooming” (the practice of scoping out stuff in a physical store and then buying it online at a cheaper price).

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