The real source of Amazon's competitive advantage, if any

From Bain partner Darrell Rigby:

Analyzing the profitability of public e-commerce retailers, including the mighty Amazon, Bain finds that e-commerce’s pricing advantages mostly stem from unsustainably lower profit margins rather than from lower costs. The information technology, distribution centers, shipping, and returns processing required by e-commerce companies can actually cost as much as running physical stores.

It is common to hear that Amazon is at the forefront of innovation in the book industry. Traditional publishers are the dinosaurs. But innovations are here to stay, and are good for the trade and the customers, only if they are efficient. In a market, the only real proof that they are is that the innovators are able to profit from them. As a matter of fact, Amazon is not profitable, while traditional publishers are.