Does Amazon.com, Inc. (AMZN) Face More Challenges or Promise?

AmazonFresh is based on the same basic idea as Amazon Prime, except that its membership fee is $299, which will include a Prime membership. It becomes obvious how large of an opportunity this could be when the Bureau of Economic Analysis estimated the produce industry to be a $850 billion market–in America alone. Just like Amazon.com, Inc. (NASDAQ:AMZN)’s normal services, some of the site’s customers can now shop for groceries from the convenience of their own home. In fact, if someone places an order over $35 or more, Amazon promises same-day delivery. For now, AmazonFresh is being tested in the Los Angeles and San Francisco Bay area.

Amazon Prime has captured more than 1 in 32 (3.1%) American citizens in just eight years, as it currently has over 10 million members. If AmazonFresh followed suit and captured 3.1% of American produce revenue, it would generate an additional $26.4 billion of annual revenue by 2021. If that’s not opportunity, I don’t know what is.

Threats

Legislation against tax avoidance may be Amazon.com, Inc. (NASDAQ:AMZN)’s largest threat. Amazon has fallen prey to taxes in 10 states, including New York, Texas, and California. Over time, this list continues to grow with as many as nine additional states considering an “Amazon tax.” This would force the company to collect local sales and use taxes from its customers, which would take away from Amazon.com, Inc. (NASDAQ:AMZN)’s competitive advantage.

Online security could also threaten the company. At the end of Q4 2012, Amazon had 200 million active customers. The more customers they acquire, the more of an attractive target it becomes for hackers. Amazon stores customers personal information, sometimes including bank account information, which could be hacked. Obviously, this could be disastrous, not only for Amazon’s users, but for the company’s reputation.

The bottom line

Amazon.com, Inc. (NASDAQ:AMZN) offers investors some impressive opportunities, as well as some solid strengths. Despite these things, weaknesses and threats still exist for this retail giant. It’s an expensive buy, but also has a lot of upside. What are your thoughts?

Tyler Wofford has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com, Inc. (NASDAQ:AMZN).

The article Does Amazon Face More Challenges or Promise? originally appeared on Fool.com.

Tyler is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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