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Technology Stocks : Amazon.com, Inc. (AMZN)

AMZN 234.70

-1.2%

Nov 14 9:30 AM EST

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To: H James Morris who wrote (89831)	1/5/2000 7:16:00 PM
From: Glenn D. Rudolph	Read Replies (3) of 164684

Glenn, even a Seattle baby elephant has left Amazon.com. HJ, Amazon's problems are escalating Not just their stock problem but their business model. We have now come full circle. The "magic" (special sauce) of Amazon was their not needing to carry inventory or at least very little inventory. This served two purposes. One was they did not have capital tied up in the inventory, their suppliers did. Secondly, Amazon would be paid before they had to pay for their inventory. Retailing is a difficult business due to product change due to style and technology. The jewelry business has one advantage and that is the styles do not change that quickly and the product's technology is not oudated for a long time watched excluded. Electronics has the problem that those items that sold well this year will be technologically outdated by next season. TVs, DVDs, etc. Toys is again a "style" issue. The press release tried to make it sound like this inventory markdown will be a one time even since Amazon just entered electronics, toys and hardware. This is very misleading. Markdowns go on forever. The initial start of these businesses was not the cause of the markdowns. It is the lack of ability to project will sell and what will not each season. Manufacturers of the electronics, toys, etc. will not put up with last minute orders from the retailer. Nor will they take unsold inventory back. Either a firm inventories too much and has markdowns or they inventory lighter and may run out of a variety of products. Let's use Wal-mart as an example. They end up with markdowns but their easier to liquidate due to impulse buying by people in the store seeing products reduced a lot. Amazon does not have people "browsing" inadvertantly. Either Amazon will have to markdown further and email their customers about these markdowns or that inventory will sit. Bottom line is the unsold inventory at Amazon has to have a far greater markdown to get attention compared to that of Wal-mart. Amazon has distribution centers but no way of projecting inventory needs. Now what???

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