• Investors Business Daily reports that at least one stock analyst believes that Amazon Fresh can be a big performer. It quotes Carlos Kirjner, an analyst for Sanford Bernstein, as saying:
"Amazon Fresh is an important element for Amazon to address a large, largely untapped opportunity. We believe Amazon Fresh can be highly profitable. We believe that at scale Amazon Fresh incremental margins could be as high as 16%. If Amazon reaches 4% penetration of the CPG (consumer packaged goods) market in the areas where it launches Fresh, fixed costs will be around 3% of sales, and operating margins could be as high as 13% ... Amazon has a strong track record of tinkering with new businesses and getting the model right before ramping them up ... We think operational challenges led to the spectacular failure of entrants such as Webvan and to the fact that (recent entrants) such as Ocado and FreshDirect are still unprofitable after many years of operation and relatively large infrastructure investments."
"Amazon Fresh is an important element for Amazon to address a large, largely untapped opportunity. We believe Amazon Fresh can be highly profitable. We believe that at scale Amazon Fresh incremental margins could be as high as 16%. If Amazon reaches 4% penetration of the CPG (consumer packaged goods) market in the areas where it launches Fresh, fixed costs will be around 3% of sales, and operating margins could be as high as 13% ... Amazon has a strong track record of tinkering with new businesses and getting the model right before ramping them up ... We think operational challenges led to the spectacular failure of entrants such as Webvan and to the fact that (recent entrants) such as Ocado and FreshDirect are still unprofitable after many years of operation and relatively large infrastructure investments."
- KC's View:
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I don't think Amazon Fresh is a slam dunk. But I do think that Amazon is sufficiently committed to making it work that it is more likely than not that the service will be successful.
