Has Earth's largest store grown too big for its britches? An analyst for investment firm Robertson Stephens questions whether Amazon.com's "product diversification efforts and an exhaustive assortment" of merchandise could impair the Seattle-based firm's "efficiency necessary to drive sustainable, long-term profitability."
In a report released yesterday, analyst Lauren Cooks Levitan says that her firm has been placing complicated product orders with the firm and analyzing the cost of fulfilling them. While admitting that there were limitations to the study, "Our initial results concern us and reveal what we believe is a flaw in Amazon's current business model."
Specifically, Levitan cited Amazon's increasing focus on cross-selling efforts, which could potentially underscore difficulties with its distribution centers. Looking at the company a potential investment property, Levitan said that its stock price already reflects the belief that the company can achieve success with its direct-to-consumer model.
But Levitan also said that, despite Amazon's upcoming fourth quarter results possibly reflecting its ability to handle fulfillment operations, "the company is still swimming in uncharted waters and has many more hurdles to clear before achieving steady-state profitability."
