Amazon (AMZN) Gets More Efficiency as Service Costs Rise

According to research by analyst Ross Sandler of Deutsche Bank, Amazon.com (NASDAQ: AMZN) is getting more efficient in shipping thanks to an increase buildup in the number of fulfillment centers over the past three years. Gains in this area are being offset by higher service levels required by Prime customers.

"There are three factors driving greater shipping efficiency from the fulfillment center build-out: 1) reducing the mix of air shipments, 2) increased ability to bundle multiple items per order, and 3) optimizing the last mile with lower cost vendors and AMZN delivery (ie – the locker)," said Sandler.

Sandler estimates that Amazon.com generates 9 percent lower contribution per order from each Prime member order compared to Non-Prime. This is a result of higher shipping cost per order. However, Amazon has higher volume orders from these customers.

Overall, changes are transforming in Amazon's business model, but the stock remains Deutsche Bank's top pick in the e-commerce.

Deutsche Bank has a Buy rating on Amazon.com with a price target of $335.00.

For an analyst ratings summary and ratings history on Amazon.com click here. For more ratings news on Amazon.com click here.

Shares of Amazon.com closed at $253.39 yesterday.

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