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>>Amazon.com Unveils Plans to Open
Two More 'Stores' on Its Web Site
By GEORGE ANDERS
Staff Reporter of THE WALL STREET JOURNAL
When Amazon.com Inc. started building giant warehouses across the U.S. a few months ago analysts questioned whether the online merchant really needed 800,000-square-foot behemoths to hold its inventory of books, music and videos. Amazon.com officials smiled, hinting that some new products might show up on the shelves.
Now Amazon.com is ready to show its hand.
The Seattle company Tuesday is opening two more full-service "stores" on its heavily trafficked Web site: one for toys and another for cameras, televisions and other consumer-electronics gear. In both cases, Amazon.com is trying to make a mark in categories bigger than the $20 billion-a-year U.S. book business where the company got its start four years ago.
Analysts Expect Internet Retailers to Post Strong Sequential Gains (July 8)
Amazon.com Steps Into World of Online, Downloadable Music (June 8)
Company Profile: Amazon.com
Amazon.com isn't disclosing its sales projections for toys or electronics. But the company's chief executive officer, Jeffrey Bezos, said he would be "disappointed" if Amazon.com can't establish itself as the leading online store in both categories. Mr. Bezos added that he thinks there are big opportunities to woo customers away from traditional stores.
"Shopping for electronics or toys in the physical world is a terrible experience," he asserted. Stores are messy; clerks don't know much and many popular products are out of stock, he contended. "We want to give people something that's easy to use, informative and very competitively priced."
Fierce Price Competition
Amazon.com's latest expansion has its share of risks. Other online merchants such as eToys Inc. have multiyear head starts on Amazon.com. They have built loyal followings that may be hard to dislodge. In consumer electronics, price competition has been turning fiercer, leading analysts to worry that operating losses may reach unacceptable levels even by Internet standards, where red ink in the name of brand-building is widely tolerated.
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Amazon.com's Many Branches
Amazon.com adds consumer electronics and toys to its online offerings
Branch Date Launch Some Rivals
Music June 1998 CDNow; Buy.com; CD Quest
Video November 1998 Reel.com
Pharmacy February 1999-a PlanetRx; Soma.com
Pet products March 1999-b Petsmart.com; Petopia.com; Petstore.com
Auctions April 1999 eBay; Yahoo!
Greeting cards April 1999 Blue Mountain Arts; e-Greetings
Grocery May 1999-c Peapod; Webvan
Toys July 1999 eToys; toysrus.com
Consumer electronics July 1999 Buy.com; Onsale; Shopping.com
a-Via 40% stake in Drugstore.com
b-Via 50% stake in Pets.com
c-Via 35% stake in HomeGrocer.com
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What's more, Amazon.com's push into toys and electronics commits the company even more deeply to mainstream distribution, shipping and warehousing. While Wall Street likes to think of Amazon.com as a pure Internet company, the company has swelled its payroll to more than 4,500 people this year, in part by hiring staff for its warehouses. Now, Amazon.com's long-term goal of narrowing its losses and achieving profitability depends largely on how well it can run unglamorous areas such as shipping and customer service.
Nonetheless, Mr. Bezos has been betting all year that rapid growth is the right course for Amazon.com. The company this spring launched an online auction service and electronic greeting cards, in an effort to get more mileage from its existing base of more than 10 million customers. Amazon.com also has made minority investments in Drugstore.com Inc., Pets.com Inc. and HomeGrocer.com Inc., expanding its stake in electronic commerce through partners.
Amazon.com said it hired significantly more than 50 people to set up each of the new stores. "We've been working on this for more than a year," Mr. Bezos said. "These are important categories, and if you don't make a major effort, it isn't worth doing."
Well-Informed Salesperson
In the electronics category, Amazon.com is gambling that shoppers want more than just a price quote -- and are willing to pay a little extra to get the cyberspace equivalent of a well-informed salesperson. In a site preview Monday, Amazon.com's director of product development, Richard Chin, noted a profusion of product photos, feature checklists and staff-written articles explaining the fine points of choosing a DVD player or camcorder.
Amazon.com says it is offering many of its electronics goods at 10% to 20% below list price. But independent Internet price-searching tools, such as bottomdollar.com from Bottom Dollar Inc., or shopper.com from CNET Inc., show that Amazon.com isn't the cheapest competitor in cyberspace. Amazon.com, for example, is charging $399.99 for a Palm V personal digital assistant made by 3Com Corp. The identical device is available for $332.95 at Buy.com Inc., though Amazon.com's shipping charges are slightly less.
Similarly Amazon.com plans to sell Diamond Multimedia Corp.'s popular Rio PMP300 music player at $149. That's about in the middle of the prices offered by 49 stores surveyed by shopper.com, and as much as $30 above the cheapest alternatives.
Many of the bargain sites online, however, offer little more than a model number and a price quote. And some have drawn criticism from users because of erratic shipping and refund policies. Amazon.com's Mr. Bezos said he wants his prices "to be competitive with anyone offering even one-quarter decent service."
In the toy category, Amazon.com says it is offering the full product line of industry giants Hasbro Corp. and Mattel Inc., as well as specialty items from dozens of smaller vendors. Harrison Miller, general manager of the toy section, said he wasn't able to line up Brio Inc., a maker of wooden trains and other upscale toys, on opening day, but regards that as his only significant gap.
Amazon.com's toy store will include customer-supplied comments on each product, much the way that Amazon.com invites reader responses for books. But -- in a nod to toy buyers' different tastes -- users will be asked to rate toys on three categories: entertainment value, educational value and durability, rather than simply on overall appeal. "Everyone is looking for different things," Mr. Miller explained.
Amazon.com officials this year have voiced increasing optimism that their diverse merchandise and big customer base will offer prime opportunities for pitching extra merchandise at shoppers, once their tastes are known. But while Amazon.com's strategists usually talk about such possibilities in vague terms, Mr. Miller announced a much more specific goal. "I want to get to the point where no nerd can check out of our bookstore with a Java software manual without being offered a chance to buy a squirt gun," he declared. |
