Dick's Sporting Goods, Chapter 3: Evaluating Environmental Threats

One of the things that the chapter touches on is creating barriers to entry. One of those barriers to entry is economies of scale.

Because companies like Target and Best Buy have failed to create economies of scale, Amazon.com has taken huge chunks of sales away from many traditional mortar and brick stores. Dick's Sporting Goods could be placed under that category, but unlike many similar to it, Dick's has created economies of scale in relation to Amazon and here's why…

-Dick's has over a 7% advantage over Amazon when it comes to operating margin which means that Dick's is turning its sales into profits while Amazon makes less as it continues to grow.

-Dick's free cash flows are nearly even with Amazon's which is a feat in itself because Amazon is enormous compared to DSG.

-DSG has even surpassed Amazon in net income, even though this can be attributed to different strategies.

-Another reason DSG can still create an economy of scale to Amazon is because they offer products that can't be found on Amazon at all. Of 190 of DSGs top products only 12 were sold and shipped by Amazon, and 55 of the products couldn't be found on Amazon at all. Guns and ammo are a large part of DSGs sales and can take credit for keeping Amazon away from DSG…for now.

http://www.forbes.com/sites/ycharts/2013/06/26/how-dicks-manages-to-fight-off-amazon/