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

AMZN 235.70

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1:07 PM EST

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To: Randy Ellingson who wrote (107394)	8/23/2000 12:21:32 PM
From: Glenn D. Rudolph	Read Replies (1) of 164684

I seem recall seeing a "study" (or an article) suggesting that price is in fact down the list a ways from reliability, trustworthiness, customer service. Randy, You are correct. Pur price is never the deciding factor in retailing. Being close is enough. The other factors are reliability, customer service and selection. There has never been a retailer that survived marketing purely on price. We'll see -- it's just going to take a few years to see how the then-leading e-tailer gains (or retains) its leadership. The question that comes to my mind is will the equity markets give Amazon more money next spring. Otherwise, there will not be a few years. The brick and mortar firms using dual channel marketing are now gaining on Amazon in the on-line e-commerce space. Specifically, there has been decent sequential growth at Sears, Macys.com, gap.com and many others. My guess is the on-line market of retail sales will end up being about 4% of the entire retailing market. That 4% will be split between a variety of specialty retailers using dual channel marketing. Amazon will not be part of the equation. Amazon errored big time trying to get big too fast. Errors of importance in order of importance are: 1. Spending huge marketing dollars causing large debt before on-line selling was close to mainstream. The "first mover advantage" means nothing when it comes to retailing. This first mover advantage was spun by Amazon management and the analysts. 2. The addition of product lines in rapid fashion before Amazon had a good handle on what they were already selling. Toys and tools come to mind not to mention gardening marchandise. 3. Build out of the distribution center to be sufficient for 5-10 years down the road. The lease obligations on these now will make profitability about impossible. They so not need nearly that much capacity. 4. The fourth issue is their huge debt which was caused by the above three blunders. The debt service will prevent profitability. There is not enough margin in retailing to service large debt. There never has been. All retailers with large debt in history have failed. Not an exception exists. See RAD for an example of a retailer in a much higher margin retail environment or Zales in the early 1990s.. Glenn

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