Well Chuzz, as you know we could go around and around on this. But for an example if you look into some of the work done by piper jaffray etc on logistics costs, you will see that, for example, the cost of your average Whirlpool or Maytag appliance to the consumer can contain up to 30% logistics. This would be post pick-release of the product, in the distribution cycle, not the inventory cycle. The shipping cost alone of these types of products is enormous - first you move the goods to the distributer, then the retailer then the consumer, plus the shortage/return rates for each jump. If otoh you could set up a sort of hub and spoke distribution network where the factory could move the product directly to the consumer, or to maybe one distribution center and then to the consumer where the retailer holds little or no inventory that 30% would be gone. Thats the premise behind the DRP stuff going on at the online retailers - its all distribution (imo most online retailers are simply distribution pioneers anyway). Your post deals with inventory primarily an I have no arguments with you there - in fact you know more about inventory than I do, but I am talking distribution here. I think the key variant is that there are economies of scale for those retailers that are first to the game, and the value proposition diminishes pretty dramatically for those that are second or third. Anyway whether or not you believe this is a profitable business model I think you will agree that it is this that is driving amzn stock, and not the fact that they will or wont be the biggest bookseller in the world. In fact, amzn stock really started taking off at about the same time the Walmart execs were hired so its pretty easy to trace the runup to that.
Michelle |
