Amazon’s direct to customer retailing model has redefined logistics, warehousing, and e-commerce in general, while at the same time redefining customer expectations of online ordering.
As its Prime membership has grown, more and more users expect faster and lower cost shipping and this is not only putting a strain on their ability to execute, but is also now starting to hurt their bottom line.
Amazon posted its lowest quarterly profit in over a year this past week. This is largely due to investing to keep up with the demand.
http://www.wsj.com/articles/amazon-posts-smaller-than-expected-profit-1477599108
While this caused shares to fall the overall outlook for Amazon is still positive. The problem will be how well it can balance surges in demand, like the upcoming holiday season, with new offerings like Prime Now that promise two hour delivery.
Amazon continues to push the envelope of its capabilities with these offerings but they are taking quite a risk at a time of year when consumer sympathy and tolerance for failure is typically at its lowest.
Amazon has never shied away from challenges. To stay ahead they have to push, but the costs associated with those efforts may be too much to bear.