There’s no doubt that most retailers view Jeff Bezos and Amazon about the same way that Gandolf The Grey viewed Sauron The Evil One and the gates of Mordor. The industry definitely wasn’t ready for the speed with which the mega-aggregator built up immense influence over the whole industry. But no one can deny that the Seattle company has been a game-changer.

So it shouldn’t have been a surprise when after last Friday’s announcement of disappointing third-quarter results and soft fourth-quarter guidance, there was a visceral reaction, a strong desire to kick ‘em while they’re down. I suppose that’s understandable, given some of the brazen headline-grabbing tactics that Mr. Bezos has employed in the past (his stunt to do the CBS 60 Minutes interview about his drones the night before Cyber Monday 2013 – and Charlie Rose’s embarrassing fawning over Bezos – comes immediately to mind). As it is said, “what goes around comes around. “

My favorite “thermometer ” for the U.S. investment community is Jim Cramer of CNBC. Here’s what he said (actually, yelled) on Friday 10/24, the day of Amazon’s analyst call: “I regard Alibaba as Amazon, but it also has earnings. So you have to long Alibaba, short Amazon … Amazon likes to spend, spend, spend. “

And that points to a bigger issue, that while publicly traded companies of all sorts are measured by Wall Street on earnings per share and the expectation for more in the near-term future, Amazon has managed to impress the market with its capital spending plans in the name of “innovation “. That’s because, as the NY Times so succinctly put it on Thursday 10/23 (the day before Amazon announced its earnings), “Amazon is above all a story about the future, about the glorious moment when the e-commerce giant will sell everything, whether electronic or digital, to everybody. And so the focus in the earnings report will be on Amazon’s huge investments in trying to make that moment come true. “

If nothing else, legacy retailers might wish that they could get away with the same story, and not have analyst opinion be weighted down by such things as oh-so-20^th-Century metrics as same store sales. I remember a presentation that Kevin Turner, now COO at Microsoft but at the time the CIO at Walmart, gave at a retail tradeshow in Chicago in 2002. He got a laugh from the audience by showing a picture of a panhandler holding up a sign that read, “I must be in eBusiness ‘cause I ain’t making any darn money. ” That might have been funny in 2002, but it’s not funny now. And during the same presentation, Turner quoted Bezos as proclaiming in 2000 that, “Improvement in the year 2000 will not only be visible in terms of new products and services, but should also likely be financially as well. “

Well here we are in 2014, and storm clouds are gathering. The NY Times article goes on to explain: “Even with Amazon likely to hit $100 billion a year in revenue in 2015, it is not throwing off all the cash it needs. Last month the company revealed it had taken out a $2 billion line of credit with Bank of America for ‘working capital, capital expenditures, acquisitions and other corporate purposes. Meanwhile, losses are mounting. Three months ago, analysts thought the company would lose 7 cents a share in the third quarter. Then, after Amazon ratcheted down expectations, the estimated loss swelled tenfold, to 74 cents. It is getting to be a familiar story. The last time Amazon made a profit in the third quarter was in 2011. “

Recent investments have caused some to wonder what’s going on with the digital marketplace leader. For example, Amazon’s notable failure to get into the mobile smartphone business with its Fire is now public record. Many scratched their heads at the October 2014 report by the Wall Street Journal that Amazon would open a store in Manhattan (although it really sounds more like a forward-positioned customer order fulfillment center to me). And then there are the delivery drones; in June 2014 the U.S. Federal Aviation Administration (that controls U.S. airspace traffic) quietly but clearly mentioned in a document that it wouldn’t be allowing Amazon, whose drones it considers a “model aircraft “, to deliver products to consumers with drones anytime soon (Amazon has applied for an exemption to FAA limitations put on model aircraft). Of course there’s the not-so-high-flying expansion of the company’s DC network. In 2012, Bloomberg reported that “Amazon spent a staggering $13.9 billion on fulfillment expenses, including 50 new distribution facilities, between 2010 and 2013 alone. “

The new skepticism about Amazon can be summed up this way: the company simply cannot live off of its cashflow forever. But valuations based on traditional measures such as P/E ratios don’t work, since the company doesn’t report a profit. And according to an analysis of the numbers posted on Motley Fool on November 4, 2013 (Can Amazon Be a $1 Trillion Company? By Travis Hoium), ROIC ( “return on invested capital “) is a stretch too; the company would have to achieve a 30% return on invested capital based on a cashflow from sales equivalent to Walmart’s (> $400B), in order to achieve a sustainable operating cash flow – by 2018! But since most analysts are projecting the company’s 2015 revenue to be $100B, matching Walmart by 2018 looks a like a major leap of faith.

Bottom line, the Wolves of Wall Street are not happy.

Amazon’s True Value to the Retail Industry

Nonetheless, every retailer knows that Amazon is a fearsome competitor for sales. And it’s tougher because they have gotten benefit from some incredible “get out of jail free ” cards, from governments (the sales tax issue that was only recently resolved), from investment analysts (as mentioned above), and even from customers (for example, my family has learned to not buy anything from Amazon marketplace sellers – for whom Amazon makes no attempt to resolve customer complaints. But they love Amazon. Go figure!).

So what’s the upside for the industry? I think it’s got to be that the retail industry has learned a lot from Amazon, and will probably continue to do so. For example, it’s a staple in many of the presentations that I make to retailers to point out that I read Amazon reviews while shopping in their stores. “Wouldn’t you rather have me reading reviews curated by you? “, I rhetorically ask (the answer is, “of course! “). Retailers got over their irrational fears of showrooming a couple of years ago, and began the very-necessary discussion of how to harmonize their digital and physical selling environments. It had to happen – and Amazon was the reason it did. If legacy retailers had ignored the issue for much longer, the unpleasantness of the old shopping experience would (and still might) force formerly loyal customers to Amazon.

There are other benefits to having such a game-changer; the growing acceptance of “cloud computing “, the ubiquity of “affinity ” shopping recommendations, 1-day shipping, etc. All of these ideas were popularized by Amazon and have gained a high level of acceptance in the retail industry. Most of all, Amazon has for years been one of the highest ranked retailers in customer satisfaction, and that has caused other retailers to decide to up their game (one can only dream that Amazon will decide to get into the commercial airlines industry – that might be the one thing that gets United, American, Delta, et al, to up their game!).

Netting it out, the competition has been good for the industry. Now, if the investment community would only start evaluating retailer innovations a little more like it evaluates innovators like Amazon, we could get something done.