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

AMZN 220.66

+1.6%

Nov 21 9:30 AM EST

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To: Robert Rose who wrote (103292)	5/11/2000 10:10:00 PM
From: Glenn D. Rudolph	Read Replies (1) of 164684

hardly a sign of wasteful spending. Another example, amzn chose to retrofit an old hospital for its new HQ (in a less-than-chic out-of-the-way neighborhood, no less), rather than build something fancy from scratch. (Not that retrofitting is always cheaper of course.) Rob, You make some good points but some acqusitions were/are really questionable although they were done with stock. Planetall is the one the comes to my mind the most. Other areas that were a large waste of money was overstocking toys and electronics last fall. I know Amazon did not want to be out of stock on many items. The problem is with season products are typically not returnable to the manufacturer and often are out of style by the following season. For example, toy manufactueres almost never will supply merchandise with an agreement to return it after the season. They also will not stock in their wharehouse extra inventory for the retailer. They do not want the risk. Amazon did a "good" job of inventorying these product lines but paid a huge price in inventory markdowns at year end. I am not sure what their plan is for this fall. I am not picking on them here. I do not believe it is possible to forcast well the demand of a certain toy or electronic item in terms of units. Wal-mart is so often cited as an example likely due to their huge market share. For a feew years in the early 90s, they wanted to make sure they had pleanty of product on hand. Wal-mart had huge inventory mark-downs due to this approach. I believe their current strategy is to forecast conservatively and when an item is gon, they hope the consumer will choose something else. I know Wal-mart is the larget toy retailer and likely are the largest electronics retailer too although I do not know that for sure. The point is Amazon has to learn to draw a line too in this area or the mark-downs will always take away the operating profits.

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