A. They have a larger stock than a B&M.
B. Vs a true B&M and not a B&M's website, they have better prices on many things.
C. If in no hurry, click, click, 2 days later product. Convenient.
It's very popular for a real reason, not some omg everyone's blind, I can see why can't they?
Now can others compete? Well they will have to break habits and is there really room to be more competitive to the point people are willing to break habits? Then they have value adds as well with digital content. Good luck. Amazon only goes down any time soon is if they really can't afford it and people start demanding better results.
A.) They are stocking for nationwide customers. Of course they're going to have more stock but really, there is very rarely a time when a B&M store in my city does not have what I want. In that case, I wait the 2 days, much like I would with Amazon and it comes in for me to pick up.
B.) Many things Amazon stocks that are a better price than B&M can be found on other sites for less than Amazon offers. Prime example: HDMI, USB, ect. I can usually get all of those on monoprice and even with me paying the exchange rate and shipping, the price comes in lower than I would have paid on Amazon.
C.) I noted that the one reason I see the appeal is you don't have to leave your house. If one has no problem handing over their money and waiting, God bless. I much rather have product in hand when handing over money. The few times I have used Amazon, delivery seems like a crap shoot. You may get one item in two days, other items might take two months.
There are few times when I am blown away by Amazon's prices. If Amazon has something on sale, odds are I can head down to the local Best Buy, ect and get it for the same price, maybe a few cents more. I'm really not worried about spending $.30 extra and I can have the product that day.