Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: umbro who wrote (10823)	7/19/1998 2:32:00 PM
From: Glenn D. Rudolph	Read Replies (3) \| Respond to of 164684

Like Dell Computer and other direct sellers, Amazon enjoys some advantages over traditional retailers. Gary, This comparison to DELL is totally out of line. I have been for many months wondering if I am the only bright person in the world or is every analyst, columnist, etc. too stupid to know the Amazon business model is light years away from DELL's I know I am not the only bright person<G> Let me explain this as though the analysts and columnists are five year olds. I want them to be able to understand: DELL and AMZN both are retail. This is where the comparison will end. DELL has a very fast inventory turnover because they do not stock the completed product. They make to order their product from parts on hand that they can replace by re-ordering quickly. The parts DELL needs to keep on hand are motherboards with various speed processors, RAM cards, hard disk drives, monitors, plastic boxes in various sizes, etc. Once a component supply becomes low, DELL can order a large quantity from the OEM. DELL likely needs no more than 50 to 100 different components in stock and a lot of each component. DELL may re-order the component at competing price as does CPQ does when they manufacture their boxes and order their components. DELL does not have a component price disadvantage to CPQ, etc. AMZN is different. The book or CD is not made of various parts they assemble. To obtain the lowest price per book or CD as their competitors, they would need to stock a minimum of 250 million different items and that of course, excludes multiples of a faster selling item. Therefore, AMZN is forced to buy from Ingrams and B & T at a 8-10 percent higher cost for the product. This 8-10 percent is compounded monthly so the money up front collected and pay the bills later is a worse return on investment. It makes them unprofitable. There is a huge difference between needing to stock 100 different items in quantity compared to 250 million items and some in quantity. Therefore, DELL's model works. They have everything they need in their factory and can re-order at a competing price. In addition, they collect the money first and pay the supplier later. AMZN looses a lot of gross margin by going through Igrahms and B & T. AMZN has no way to get around this problem without changing their model and starting to carry a huge inventory. If I was not clear in my explanation, please let me know. I want people to understand the difference. Particularly analysts and columnists. Constructive criticism is requested. Glenn

To: umbro who wrote (10823)	7/19/1998 3:25:00 PM
From: steve bruce	Respond to of 164684

How about the individual buyer and his/her needs?Does that not REALLY count? I include some correspondence from a REAL transaction that I attempted as a REAL (un-virtual) end-user. C'MON PEOPLE, this company has a terrible business model WAKE UP!! orders@amazon.com wrote: > > Thanks for writing to us at Amazon.com with your comments about our > shipping prices. > > Our shipping charges reflect the handling costs for assembling and > packaging each order, as well as the cost of shipping. > > Shipping costs are an inherent feature in any mail-order service, and > we understand that, on some occasions, shipping costs may represent a > large percentage of the overall price of an item. The cost is exorbitant - why should I pay $3.96 for a book and $3.95 for shipping when I can get the same book locally for far less? Is the Amazon operation really that inefficient? Just FYI, I have posted details of this correspondence in one of the Amazon message groups concerning the AMZN stock price (which is just as inflated as your shipping charge). Maybe some of the Internet stock valuation "geniuses" out there will be touched by reality, let's hope so. :-( -s