Their's was not the Amazon model. Amazon has always had a gross profit http://www.wikinvest.com/stock/Amazon.com_(AMZN)/Data/Gross_... and http://www.nasdaq.com/markets/ipos/filing.ashx?filingid=4268....

The more product Amazon sold, the more money they'd make (or more accurately, the less money they'd lose).

On the other hand, Ecomom never had a gross profit. The more product they sold, the more money they lost. This is the situation you describe in the gasoline scenario. I suspect the gasoline model was not their strategy by choice, but by accident. The controller's assertion is that it's the runaway discounts that did them in. 50% discounts intended to be for one-time-use-only were used on almost all orders.

Whether it was a long-term strategy or a fundamental mistake, whatever they did is not the Amazon model.

Compare.

  $000's

  Amazon - Quarter ended March, 1996

    Net sales:            $875
    Cost of sales:        $695
                          ----
    Gross profit:         $180
    Gross profit %:      20.6%


  Ecomom November, 2012

    Net sales[1]:          $52
    Cost of sales:        $548
                        ------
    Gross profit/loss:   -$496
    Gross profit %:       -45%





  [1]
  Sales:       $1,089
  Discounts:    $(751)
  Warehousing:  $(152)
  Freight:      $(134)
               -------
  Net sales:      $52