Chuzzlewit,
You make two good points from the article. The first is the importance of strategic relationships with a strong portal. The second is the relationship of the internet business to the supply chain, the point being that web commerce reduces costs only in one area while it does nothing for the rest of the costs of doing business.
Right now, it seems that all of the major players already have relationships established with Yahoo, AOL, MSN and the like. But the value of having a more exclusive relationship is undeniable. In fact, those sorts of strategic relationships are mutually beneficial, the more so as both portal and e-tailer get stronger. For example, as AOL extends its offerings to its customers, it can provide a captive base of 14 million potential customers and in turn it can make itself more attractive to both new and existing subscribers.
The second point is quite interesting. It is unknown whether a barnesandnoble.com can take advantage of its position near the source of the distribution chain. It benefits from and may also suffer from its proximity to the old-line business. AMZN is quite nimble and has realized that their position is precarious. Hence the move into music and other areas of commerce. They are trying to make themselves into a retail portal of sorts. You've hit on a weakness in the e-commerce model that I have not thought of before, though.
I believe that the e-tailers and the portals must grow together or die separately. The retailers absolutely need the eyeballs that the portals provide and the portals desperately need the attractive retailers and other providers of services to keep web surfers pointing their browsers at them. It is akin to the way television works, but there is no need for Neilson ratings - there is a more brutal measure of success in the number of page hits. That's why AOL, MSN, Yahoo and others interest me but especially AOL. I see AMZN trying to move in that direction to avoid being crushed by the numerical inevitability of its position in the distribution chain. It's an exciting time to be an investor.
-musea |
