From a post on TMF by a TMF rep:
Subject: Re: What's next?
Date: Sun, Jun 21, 1998 11:43 AM
From: TMF Nico
Message-id: <1998062115430200.LAA07263@ladder03.news.aol.com>
SJohn73238 << video's, advertising, expanding into international markets, computer software, computer hardware, repeat customer purchase's , loyal customer's, huge customer base that is growing at an enormous rate. >>
I thought Amazon's expansion into music was inevitable and sensible. Things like software and other media-like items also make sense. But the vision of Amazon as an online Wal-Mart is usually dismissed, and probably deservedly so.
There is another take on Amazon's development which I don't believe I've seen mentioned much. This does not have Amazon selling an ever-expanding line of products. It is instead premised on Amazon's ability to leverage its expertise in developing and scaling online commerce systems, allowing it to host the retail operations of others. In this way, Amazon, the company, rather than the current site, quite naturally evolves to encompass certain
mall-like characteristics and operations. Amazon's operational and business relationship to these hosted operations could vary considerably, from commerce systems vendor and consultant, to landlord at a "Great Amazon Mall," to more of a full fledged partner.
In online space, high traffic volume and visibility functionally correspond to a quality central location on the ground. This, in combination with its technical systems, could make an association with Amazon an attractive option for retailers of various sizes. For instance, it is easy to see an alliance between Amazon and companies such as Egghead or software.net.
Such alliances benefit both parties. Amazon is able to further leverage what it has already built -- traffic and commerce systems -- without actually expanding its own retail operations into new areas, each with its own idiosyncrasies which need to be mastered. Software.net (or whomever) gains from Amazon's expertise in commerce systems, proximity to and spill-off from Amazon's traffic flow, and credibility through association with a leading online
retailer. All this combines to give Amazon a deal-making potential and leverage that goes beyond what would at first be expected of a category-specific retailer.
Software or video offer convenient and easy examples, since they more comfortably fit into the apparent Amazon scheme of things. But while Amazon, the book seller, might not be able to credibly start selling just anything, I see no reason why a credible retailer in a particular product category, e.g., clothing, could not set up shop within, or under, an online structure established and managed by a division of Amazon created for that specific
purpose.
Now consider that Amazon's Affiliate Program can be seen not only as the company's method of colonizing cyberspace with Amazon outposts, not all of them 2-bit, either; but also as a cost-effective incubation (Greenhouse?) program for a time when the most successful of those are pulled more tightly into Amazon's orbit, through tenancy or some other form of association. (The data flowing back into Amazon from its tributaries... I mean, its
affiliates... has got to be sweet.)
All this of course has very little to do with selling books and CDs online, per se. But it has everything to do with online selling, period. Losing sight of that a risk of focusing too closely on Amazon as a book and CD peddler, since it can lead to overestimating the extent and significance of its competition with, say, Barnes & Noble.
In theory, nothing precludes B&N from following a similar line of development. But B&N is first and primarily a book retailer who is extending its established business to the online retail channel. In contrast, Amazon is first and primarily an online mercantilist whose initial offerings "happened" to be books, but whose real product, and core asset, is the developing Amazon system of online retailing and distribution.
In this sense, the spaces in which Amazon and Barnes each operate overlap, considerably, but they do not fully coincide. At the same time, it doesn't seem unreasonable to suppose that those differences could give Amazon some edge over B&N (and others), since it is "native" to the space in which they directly compete. Online is Amazon's natural habitat. That is intangible. But it is also real. Guarantees nothing, of course. (And sidesteps Bertelsmann
and other super big boys, I do realize.)
Still, it's on this basis -- rather than as simply another one o' them tulip web stocks, which it might also be -- that Amazon is most meaningfully compared to, and seen as being in competition with, America Online (whose main business is the concentration of consumer marketing opportunities within the site-lines of aggregated eyeballs), Yahoo (cf. Yahoo's recent acquisition of <A
HREF="aol://5863:126/mB:71850:3415">Viaweb), and even Netscape (cf. Netscape's recently announced Enterprise Service Provider, or "ESP," thang.)
TMF Nico
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