Amazon Has “Magical Business Model,” Says Analyst

The New York Times article that I just came across suggests that even Wal-Mart is looking to Amazon on how to increase company revenue. Founder Jeffrey P. Bezos intended Amazon to be an online bookstore, but the company has expanded from its original media products, including books, movies and music to become an online general store.

Amazon’s allure not only lies in its diverse selection of products, from Legos and kayaks to Cheerios and diamond rings, but its ability to ship these orders out so quickly. In fact, Amazon has gotten so good at predicting consumer demand, that the company rarely has to hold products for long in the warehouse, essentially eliminating inventory carrying costs and allowing for the further expansion of product categories.

In addition, even though Amazon’s revenues are not as large as the billions of the Wal-mart empire, Wal-mart is imitating Amazon’s third-party marketplace, which allows individuals to sell their products. The third-party marketplace on Amazon is now a venture that now brings in about 30 percent of the company’s profits.

Amazon has become a greater threat to independent stores, which have no ability to compete with the low prices and high range of products that are available on Amazon’s website. For example, Amazon has been responsible for depressing profits margins at Lombardi’s Sports in San Francisco. The owner of the family business, Ken Lombardi, can only hope to carry some products, like sneakers, at the same price as Amazon, and perhaps offer competitive edge with the store experience that online shopping cannot offer. Independent stores may also be able to compete with Amazon, if they carry luxury brands, such as Nike, Ralph Lauren and Chanel, which refuse to have their products sold on online to prevent prices from being cut.

I think that this article sheds light on how Amazon is able to move quickly ahead of its competitors in the race to deliver any product imaginable at unprecedented rates. Amazon’s success shows our preference for speed, and efficiency in everything we do and our reliance on the Internet to achieve that.