Dell is essentially a PC manufacturing company.
Bill, you make it sound so dull.:-) Actually, what is different about DELL and AMZN is not that one is a manufacturer and one is not. The difference is that one has a business model that works and one does not. What makes DELL so successful (measured by real financial results, not by it's stock price) is less a result of how well they build boxes and more a result of how they sell them. Of course it's important that they maintain quality of product and service and keep up with technology, but their products are hardly unique and DELL is not a developer of cutting edge technology, but a packager of it.
Marketing and super fast inventory turns.
But, that was supposed to be AMZN's advantage too, wasn't it? Now, AMZN is opening distribution centers so that they can carry more inventory and, as they grow, they keep moving breakeven farther and farther out. Could it be that their commodity products are just not suited to an online selling model? Shipping costs are much larger in proportion to the sales price of the products they sell, requiring heavy discounting just to match conventional channels. Costs of marketing, i.e. obtaining and retaining customers, are also very high relative to the revenue from those customers (compared to bigger ticket items like PCs); and, the cost of processing an order eats up a bigger chunk of the revenue from that order.
In short, IMO, PCs are well suited to online sales while books and CDs are not. Of course, AMZN can keep looking for a business model that does work. Maybe, one day, they will find one. |
