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

To: H James Morris who wrote (143573)	7/4/2002 3:25:59 PM
From: Glenn D. Rudolph	Read Replies (2) \| Respond to of 164684

James, A very nice article about retailers. I believe this year and next are going to separate the good from the not so good. The issue of reducing the threshold for free shipping would seem counter productive to me. I am aware that Forrester and others have published studies indicating that shipping fees was one of the main reasons people would abandon a shopping cart. On the other side of the coin, I am of the opinion that most people shop on-line more for convenience rather than price. The group of shoppers looking for both lower pricing and convenience on-line will find eventually that is not available. The cost of shipping is going up not down. Many of the shippers such as UPS, Fedex and USPS are raising rates. In addition to higher fuel costs and labor costs, there are more residential deliveries as percentage to business deliveries than was ever the case in the past. The model for the shipper changes here with maybe the exclusiong of the USPS. The USPS has had the required infrastruction to go to every residence and business every business day. That is not so for UPS or Fedex. An added package to a business to which they deliver every day is hardly much of an added expense. A stop for one package at a residence at which the driver does not normally stop is a money losing proposition. Thus, the reduced net profits for the shippers Amazon has spend billions of dollars in creating fuflillment centers so they could economically deliver their products. It seems ludicrous to not charge for the delivery service. The expense of the delivery has to be covered by higher prices of the product meaning higher gross margins or something will not work. I understand Buy.com is causing somewhat of a price war with Amazon at the moment but I would believe they are not large enough to make a significant dent in Amazon's business. Anyhow, it would seem to me that this free shipping promotion will come and bite all retailers that use it when the dust settles. Amazon has not even established a profitable business model of any kind. Even in Q4 2001, when the currency exchange caused a so called very small GAAP profit, there really was not a real profit. Granted none of the firms are expensing stock options but the issue is being debated. If Amazon had expensed their stock options for Q4 2001 and that was booked as salaries/payroll, they would have had a very large loss even during the best quarter for a retailer. Clearly, their business is still being subsidized by money from the stock market.