Blodget can never anything wrong with Amazon. It is time to accumulate just like ETYS LOL:
"Amazon.com (AMZN; $31.25; D-2-1-9)
Dec00E d$1.20; 01E d$0.63
Analyzing the "Free Shipping" Thing
• Yesterday, Amazon announced free standard shipping on orders of more than $100
between now and November 22.
• Although our first reaction was to cringe ("free shipping" is usually code for "revenue
shortfall in progress"), upon further reflection, we aren’t too worried about it.
1. The offer lasts only through November 22, it is only for ground shipping, and it is
only for orders over $100. We believe Amazon’s intentions might be as follows:
Increase order size. The economics of pick-pack-and-ship are tied to units, not
revenue. The larger the order, therefore, the larger the fulfillment margin.
2. Smooth out the quarter’s revenue by enticing customers to buy early. At peak times,
Amazon’s fulfillment costs as a % of revs rise because additional temp labor is
required. If Amazon can move some revenue before Thanksgiving, therefore, it may
actually save more in fulfillment costs than it loses in shipping revenue.
3. Inexpensive marketing. Ground shipping per $100 order probably averages about
$10-$15. This is less than Amazon’s average customer-acquisition-cost.
4. Remind competition that Amazon not afraid to discount to protect franchise. When
barnesandnoble.com appeared in 1997, it cut prices drastically. Amazon matched.
Two quarters later, both companies raised prices again (and Amazon didn’t lose
market share). Wal-Mart.com just launched its new site…
Amazon also recently launched a Gift Store
• The Gift Store is an aggregation of existing content and products already offered on the
site and should not be considered a new product category or expansion of the market
opportunity. The new Gift Store format should help customers find what they are
looking for more easily and, through suggestions, could potentially lead to gift
purchasing on the site that the customer may not have found otherwise. This type of
content aggregation, presentation and added functionality is consistent with some of the
initiatives highlighted at Amazon's most recent Analyst Day — "creating a single store
environment and focusing on existing customers".
(H. Blodget)
Bulletin
United States
10 November 2000
Investor Support Intra-Day Special Note
AMZN
Merrill Lynch & Co.
Global Securities Research & Economics Group
Global Fundamental Equity Research Department
RC#11231528
Research Summary" |
