Amazon.com, Inc. (AMZN) Trades One Competitive Advantage for Another

That’s key at a time when rivals eBay Inc (NASDAQ:EBAY) and Wal-Mart Stores, Inc. (NYSE:WMT) are both testing their own same-day delivery services. eBay has a strong working relationship with local retailers that it can parlay into instant gratification with online order delivery. And Wal-Mart has thousands of stores that can double as mini distribution centers. Amazon lacks those advantages, so it needs to build out its fulfillment centers to bring speed and efficiencies to its shipping. It has made real progress there. As company CFO Tom Szkutak explained in a conference call, “we have expanded in our fulfillment network pretty extensively to the point where we are closer to customers.”

And the results have already started to show up in Amazon’s earnings. The company’s net shipping costs tanked over the holiday quarter, down to 4.5% of sales from the 5.4% it booked a year ago.

Foolish bottom line
Quirks in the law can become big competitive advantages for companies that aren’t shy to apply them. Netflix, Inc. (NASDAQ:NFLX), for example, made full use of the copyright provision called “first sale doctrine,” which allowed it to purchase DVDs and rent them out without owing anything to the original owners of the content. But these protections don’t usually last forever, and the challenge is for companies to adjust to life without them. Amazon looks set to lose its tax tailwind when the law finally changes, but its competitive retail advantage is intact.

The article Amazon Trades One Competitive Advantage for Another originally appeared on Fool.com and is written by Demitrios Kalogeropoulos.

Fool contributor Demitrios Kalogeropoulos owns shares of Netflix. The Motley Fool recommends Amazon.com, eBay, and Netflix. The Motley Fool owns shares of Amazon.com, eBay, and Netflix.

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