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

AMZN 222.69

+0.1%

3:59 PM EST

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To: John Donahoe who wrote (42392)	2/24/1999 11:09:00 PM
From: KeepItSimple	Read Replies (3) of 164684

>Online commerce is new. People will get used to it and eventually it >will become >common place. You better hope not! Otherwise Amazon and all the other inut retailers will not be given such ridiculous premiums in their stock values. If every retailer is also an e-tailer, how will the daytrading hordes distinguish one tulip from another? There isnt enough cash to give EVERY retailer an amazon-like capitalization. Should be interesting! And when you get down to it, online commerce is not new. It's just a more streamlined way of making an order. Instead of stockpiling mini-supplys of a commodity in "malls" and "corner stores" you are simply shipping those commodities individually to the end user. Your shipping costs are higher, and your only hope for profitability lies in the "discount" you are able to give due to the fact you currently do not have to collect state sales tax. Once the sales tax is gone, the internut retailers will be faced with a frightening prospect- one i belive Glenn understands: Some low-margin retail businesses simply cannot achieve profitability or even break-even status when they have to ship products INDIVIDUALLY instead of an entire truckload at a time. The fulfilment costs mathematically just wont work. Let me give you an example. William, I think even you can understand this one. Its such a great example that I can guarantee this example will become commonly used to explain why these companies will fail. Let's start pepsi.com. Now, we have a commodity item that has a reasonably high profit margin. However, can we ship this product to consumers directly? No- the damn stuff WEIGHS too much. The only way to make a profit and not charge 5 dollars per bottle is to ship the stuff in 10 ton trucks to stores, and let the CUSTOMER do the fulfilment and "final-mile" shipping. Glenn understands this. William does not. So in the future- E-tailing will be limited by one thing. A measurement I want to take credit for: the profit:weight ratio. Heavy items will only be successful in e-tailing if they have extreme profit margins. Light items can have smaller profit margins. So make a list of items, folks. It's not that long.

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