To: llamaphlegm who wrote (10579 ) 7/16/1998 11:00:00 AM From: Rob S. Read Replies (1) | Respond to
Agree, this looks like a good hire to start filling in the gap and become an infra-structure based company. Anyone out there who thinks that Amazon can compete based on a "virtual" sales model needs to go back to school, stop doing drugs, quit putting their hopes on winning the lottery, or all of the above. The "Virtual sales model" was used to build early e-tailers such as OnSale.com and Amazon.com, but the 10% to 25% gross margins available with re-sale of goods is only is capable of taking a company to the starting point to compete with larger rivals. When an e-tailer grows past the start-up phase, they must add layers of management and employees, do more advertising to attract customers, use more expensive facilities and management information systems, and take on the other typical costs of a large company. The re-sale mark-up is not sufficient to grow the business to the next stage. Amazon's costs will mushroom over the next few years even as compeition heats up. Amazon won't have the cost of retail stores but they also won't have the profits coming from higher book prices and other products. They also won't have the built-in name recognition and advertising that comes along with the retail establishments or the posibility, as Borders is starting to do, of using the stores as a tie-in to internet sales via multimedia e-cam interviews with authors. Several of Amazon's competitors have already paid for similar infrastructure and have experienced management in place to deal with the challenges.
