Average Selling Price Decline Is The Smoking Gun That Sinks Amazon's Business Model
by Timothy Phillips
Amazon's (AMZN) paid units sold has far outpaced revenue growth over the past several years. This has led to a precipitous decline in the average selling price (ASP) of each unit sold for the company (see chart). I contend that this decline in ASP is what has led to the significant outpace of fulfillment expense to revenue rather than the explanation provided by Amazon management that it is a temporary investment to fuel future increased profitability and growth. My research and analysis will show that Fulfillment Expense is by far the primary driver of net income levels (with inverse correlation), and although Amazon's business model has been driving higher revenues and gross margin percentage, fulfillment expense will continue to scale faster than gross margin dollars, thus pressuring earnings potential for the foreseeable future. read more »
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