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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Mark Fowler who wrote (63045)	6/17/1999 9:28:00 AM
From: Glenn D. Rudolph	Read Replies (3) \| Respond to of 164684

This is a private mail I typed to Mark. I doubt Mark will mind that I post it publically since I wrote. At least, I hope Mark does not mind. He is a good friend:-) "To: Mark Fowler (who wrote...) From: Glenn D. Rudolph Thursday, Jun 17 1999 8:35AM ET Glenn i want to Know what made you change your mind about Amzn? Mark, There were three factors. The final factor was Sotherby's alliance (sp). I was not much of a believer in huge profits in the auction business such as Ebays or Amazons in regular people to people transactions. People will not pay large listing rates or a high percentage of the sale to the listing firm. Validated products auctioned by Sothbys is a different matter. A small percentage of a large sale still adds up. Validation is an important key. The next is I am certain Amazon will be entering the large home appliance business. This along with toys accounts for the large distribution centers. My problem in the past with Amazon's business model was based on a premise that still stands. As long as fulfillment costs exceed gross margins, profits would be impossible. This premise is still accurate. It is simple math. Amazon is overcoming the problem of gross margins not sufficient to cover fulfillment cost. One is the validated auctions which has almost no fulfillment costs at all. The people to people auctions was not a large enough factor to affect this. The second is major appliances. One of the larges problems in that business is having the various refigerator, dish washer, etc. in stock in the prferred color. Sears is the largest player here. Sears tried to keep a reasonable selection in their store or in wharehouses nearby a regional store. This was expensive. Amazon I suspect will be storing a large variety in these large distribution centers. They will end up with a contract with one of the large (non full load) trucking firms to make home delivery on these. The margins in this product line is 42% according to my research. I ahve founf three SZEC filings by various trucking firms that they have been in discussions with Amazon about the delivery of large appliances.I suspect Amazon will go that way. Finally, toys do not need to be discounted to have a large dollar volume in sales. People will even pay a little more so they do not have to go to a toy store during the holiday season. I have a grown son but I recall the days he wanted toys. The same distribution centers will work in this line of products too. Books, music, video, etc. will never add much if anything to the bottom line. That will just become a lost leader to Amazon. The large distribution centers were never intended to handle those products even thought when one is leased, Amazon states delivery speed will be increased. There are small hints in Amazon's press releases. They never state that the new leased distribution center will increase the speed of deliver of books, etc. to the customer. They are referring to toys, large appliances, etc. Books, music, etc. could always have been shipped Fedex. Those are my reasons. Do they make sense to you? Glenn" PS I am entitled to change my mind on a company when I see a change in fundamentals.