Boston-based online furniture and home goods retailer Wayfair Inc (NYSE:W), investors got a rude shock a week ago when Amazon.com, Inc. (NASDAQ:AMZN) announced that it plans to build massive warehouses that are to be used as distribution centers for bulky items such as home appliances and furniture. The new initiative by AMZN stock is part of the company’s strategy to expand its furniture offerings as well as speed up delivery times. According to a top Amazon executive, furniture is one of the company’s fastest-growing retail categories.

That was definitely a shot across the bow for the furniture and home furnishings sector, and one that led to Wayfair stock tanking nearly 7%.

Wayfair bears, though, did not have much time to celebrate — the news came on the back of a healthy earnings beat and therefore failed to do much damage. Wayfair stock has managed to claw back almost everything it had given up, and now sits on an impressive 78.5% tear-to-date return.

Is AMZN Stopping Wayfair Stock?

Many brick-and-mortar retailers whose merchandise has a large degree of overlap with Amazon’s have suffered the brunt of cut-throat price competition with the online retailer.

Amazon is referred to as the suicide bomber of retail due to its practice of cutting prices to the bone — even to its own detriment. Consequently, Amazon’s retail margins are nearly nonexistent — but so is growth for so many traditional retailers. AMZN of course now has its AWS cloud to take care of the bottom line.

Wayfair, on the other hand, is largely inured from the Amazon threat due to its unique marketing model.

The company is the largest online-only furniture retailer in the country, owns no physical stores and only has minimal inventory. Wayfair undercuts traditional retailers by providing faster and cheaper shipping options.

Despite holding only minimal inventory, Wayfair offers customers an almost bottomless assortment of products ranging from rugs to furniture that it ships directly to customers’ homes from a network of more than 7,000 suppliers. The company has figured how to manage its suppliers as well as the dropship process, so that vendors link up directly with customers.

Unlike Wayfair, AMZN sells nearly 50% of its merchandise to customers directly from its stores. Being a first-party seller means carrying lots and lots of inventory, which inevitably increases operating costs. Additionally, Amazon’s distribution network is mostly optimized around less-bulky goods of less than 50 pounds.

Further, doing home delivery of furniture requires doing setup and installation, which increases the risk that its customer service will be stretched to the limit. Wayfair keeps things simple and passes the cost savings to the customer, and it shows on the bottom line.

Wayfair has been struggling to turn a profit ever since going public. The furniture retailer sports gross margin in the mid-20% area compared to the high-30% range for Williams-Sonoma, Inc. (NYSE:WSM) and more than 40% by IKEA.

Short W Stock at Your Own Peril

But don’t let Wayfair’s lack of profits fool you into thinking of shorting the stock — with Amazon-esque growth, Wayfair stock is likely to remain a hot property. The company posted revenue of $960.83 million for the first quarter, good for 28.3% year-over-year growth.

W stock’s annual sales have more than quadrupled since 2011, compared to only double for the e-commerce furniture and home furnishings sector.

Indeed, the shorts have been piling up on W stock, and getting badly burned in the process. Short interest in Wayfair stock in 2017 has reached 46% of outstanding shares. The shorts have suffered losses of nearly $220 million in the year-to-date. Long-term investors never seemed to be particularly bothered by Amazon’s lack of profits in the past, and appear willing to extend the favor to Wayfair stock by giving it a get-out-of-jail-free card.

Ultimately AMZN might one day manage to build a supply network to rival Wayfair’s in the home furnishings space. But this might take years and does not appear likely to become one of the company’s forté, meaning W stock is safe, at least for now.

As of this writing, Brian Wu did not hold a position in any of the aforementioned securities.