Amazon: What’s the worst that could happen?

From today’s RetailWire blog: All of the doomsday scenarios spelled out by Brian Walker of Forreester are valid exercises in worst-case planning. But I see a few shorter-term threats that Amazon needs to contend with:

1. How and when does the company start to deliver consistent operating profit? Its gross margins are lean yet manageable, but the bottom line results are consistently depleted by its high SGA and investments in infrastructure.

2. Amazon’s key advantage (no sales tax charged to most customers) is threatened, not only by legislators looking for more revenue but also by its own growing network of distribution centers.

3. The Kindle Fire tablet faces more credible opening-price competition soon, depending on the price points chosen by Apple (for its mini-iPad) and Microsoft.

4. The “showrooming” trend has played into Amazon’s hand, but you should expect stores like Best Buy to develop successful strategies to combat this issue.

In short, Amazon is not as invulnerable “here and now” as its growth and dominance make it seem.


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