Feeds

Amazon biz model flawed, says dotcom guru

Spreading itself too thin

  • alert
  • submit to reddit

Top three mobile application threats

A bubble economy guru has slammed Amazon.com's strategy to be all things to all men.

Lauren Cooks Levitan, analyst at Robertson Stephens, criticised the e-tail giant for spreading itself too thin - and said this could have the knock-on effect of damaging its long-term profitability.

Amazon currently carries merchandise across 14 different categories - and Cooks Levitan reckons this results in costly order processing and shipping.

She analysed Amazon's prowess at handling orders with products in different categories by placing one order every week and tracking its progress. She found Amazon lost an average $2.91 per order - or a negative 30 per cent shipping margin - because it often filled an order from more than one distribution centre, CNN reported.

"We believe our results raise legitimate concerns about Amazon's long-term strategy and are an early glimpse of issues which are likely to become more evident as Amazon increasingly attempts to cross-sell products to its huge customer base and increasingly stresses its complex distribution infrastructure," Levitan wrote in the report.

She recommended the following changes to the Seattle-based company's business model to spur it to long-term profitability:


  • Smaller assortment of goods in its more recent categories - such as lawn and patio
  • More partnerships with other e-tailers
  • More deals like Amazon's co-branded site with ToysRus.com
  • More muscle regarding merchandising and product suggestions

"While we continue to believe that the online advantages can surely drive superior returns and profitability, we believe Amazon's breadth-efficiency conundrum is likely to eat into these gains unless business model revisions are made," Levitan added.

Amazon started to move away from its core books, audio and video market last July, selling consumer electronics and toys. It currently lists 18 million items, with about 10.6 million of these in its distribution centres. ®

Related Stories

Amazon chooses AOL over Yahoo
Amazon reneges on DVD prices
Oh aye! Amazon's Highland PR stunt
Bubble economy gurus rate Amazon's pricing wheeze
Amazon makes regular customers pay more

Build a business case: developing custom apps

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Amazon Reveals One Weird Trick: A Loss On Almost $20bn In Sales
Investors really hate it: Share price plunge as growth SLOWS in key AWS division
Bose says today is F*** With Dre Day: Beats sued in patent battle
Music gear giant seeks some of that sweet, sweet Apple pie
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
Too many IT conferences to cover? MICROSOFT to the RESCUE!
Yet more word of cuts emerges from Redmond
Chips are down at Broadcom: Thousands of workers laid off
Cellphone baseband device biz shuttered
Twitch rich as Google flicks $1bn hitch switch, claims snitch
Gameplay streaming biz and search king refuse to deny fresh gobble rumors
prev story

Whitepapers

Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Seven Steps to Software Security
Seven practical steps you can begin to take today to secure your applications and prevent the damages a successful cyber-attack can cause.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.