Is Amazon.com, Inc. (AMZN) Living Up To Its Name?

Online retailers have played a crucial role in making shopping easy for us. Nobody could have thought of buying anything at just the click of a mouse. Moreover, the convenience came in at a lower price too, since these retailers were not like the traditional ones who have to splurge on maintaining their stores.

Emergence of online giants such as Amazon.com, Inc. (NASDAQ:AMZN) has given a hard blow to retailers such as Wal-Mart Stores, Inc. (NYSE:WMT), who fail to keep their prices as competitive as the former. Moreover, Wal-Mart and other similar retailers have been suffering from the problem of “showrooming,” wherein customers try the product in its stores and then buy it online. Huge costs made it difficult for Wal-Mart to make its prices competitive to Amazon so much so that Wal-Mart has started keeping smaller stores. These stores are more accessible to the customers as well as low on cost.

In fact, the online giant has not only given stiff competition to other super market operators but also companies such as Best Buy and Barnes & Noble, Inc. (NYSE:BKS) who are facing problems in selling electronics and books, respectively. Barnes & Noble has been witnessing sharp decline in footfall since people find it easier to read books online. With the emergence of e-books, people don’t even have to carry the books with them. However, Barnes & Noble has been able to find a way out and has taken initiatives such as the launch of Nook, an e-book reader, which can prove to be detrimental to Amazon’s Kindle sales.

Some Obstacles Seen…

Because of Amazon’s unique business model, the company was enjoying a number of benefits, the most important being the absence of sales tax. This enabled the retailer to offer lower prices and attract customers in hordes. However, with the imposition of sales tax on Amazon recently by the Government, there seems to be some respite for these retailers. This will act as a major obstacle for the online giant since this will make Amazon’s products expensive.

It seems that the new rule has already affecting Amazon. Its recent results failed to meet analysts’ expectations as the earnings took a sharp dip of 45% over last year. But the most interesting part is that though the company registered a lackluster quarter and gave a dull outlook, its stock prices shot up. This is mainly because of the company’s stunning operating margins as well as investors’ belief in Amazon’s future.