Not quite. Their business strategy seems to be "we don't make significant profit on anything, but we'll make it up in volume". Growth for growth's sake is not turning out to be a winning strategy. Year after year after year, they keep telling investors "look at how much we've grown. Now that we've grown so much, we'll start making money next year". And year after year after year, the profits are disappointing (they're actually losing money now).
It is totally unfathomable how they were getting P/E ratios of several thousand last year - and the stock hasn't suffered much even when their profits disappeared entirely. Why in the world would you pay a massive premium for a company which has nice revenues, but has never figured out how to make a profit on them? And what little advantage they have is going away - as more and more states are taxing Internet sales.
I think that's the reason Amazon is so heavily betting on things like the Kindle and services like Prime. These help make their system "sticky".
Otherwise, simply being the best price garners no loyalty, and is incredibly difficult to maintain.
I think it's worked to a certain degree, as personally I'm more likely to buy something on Amazon without shopping around (and it may not be the cheapest price) because I'm conditioned to think the deal is good and Prime makes things so stinking convenient.
If Amazon doesn't make their system sticky, they'll be in a world of hurt as they eventually lose their low cost advantage. Which they will, because someone can always go cheaper, internet sales tax is inevitable, and Amazon can't lose money indefinitely.
It's so stupid how their stock is valued, even if they flip the switch to profitability, they'll NEVER generate the profitability to justify the valuation. Obviously investors like blue sky vs cold hard fundamentals.