Feeds

Amazon biz model flawed, says dotcom guru

Spreading itself too thin

  • alert
  • submit to reddit

Choosing a cloud hosting partner with confidence

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

Choosing a cloud hosting partner with confidence

More from The Register

next story
Scrapping the Human Rights Act: What about privacy and freedom of expression?
Justice minister's attack to destroy ability to challenge state
WHY did Sunday Mirror stoop to slurping selfies for smut sting?
Tabloid splashes, MP resigns - but there's a BIG copyright issue here
Google hits back at 'Dear Rupert' over search dominance claims
Choc Factory sniffs: 'We're not pirate-lovers - also, you publish The Sun'
EU to accuse Ireland of giving Apple an overly peachy tax deal – report
Probe expected to say single-digit rate was unlawful
Inequality increasing? BOLLOCKS! You heard me: 'Screw the 1%'
There's morality and then there's economics ...
While you queued for an iPhone 6, Apple's Cook sold shares worth $35m
Right before the stock took a 3.8% dive amid bent and broken mobe drama
4chan outraged by Emma Watson nudie photo leak SCAM
In the immortal words of Shaggy, it wasn't me us ... amirite?
prev story

Whitepapers

A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Beginner's guide to SSL certificates
De-mystify the technology involved and give you the information you need to make the best decision when considering your online security options.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.