5. More Numbers & Quotes
1. Jeff Bezos quotes:
* "It is still early-on in the development of internet commerce . . . we do not expect
growth rates to continue at historical rates.
* "It is extremely unlikely that the company will be able to
maintain the same level of market share . . . as the business grows further . ."
* "It is extremely unlikely that Amazon can maintain the current growth rate . . ."
* "It is impossible to predict the impact of new competition several quarters in the future .
. . we urge caution in interpreting current levels of growth . . ."
Joy Covey speaks:
* Gross margins are expected "to decline in the remainder of 1998."
2. Zero sequential growth is projected for the first time in the company's history.
* This coming quarter will be the first one that AMZN will see the full impact of
B&N and Borders competition (with Borders launching an ad campaign this fall) and the company therefore expects sales to be flat to marginal sequential growth over this just reported quarter, according to Joy Covey.
* To go from over 33% sequential growth from 1st qtr to this past one ($87 mil to $116 mil) to near zero growth is quite dramatic and both Bezos and Covey repeatedly warned that is was "extremely unlikely" that Amazon would maintain past growth rates. AMZN's revenue grew sequentially 33%, margins were flat, yet the stock price tripled since the last report
* Amazon's costs are growing faster than their sales or margins.
* A minor point perhaps, but it would appear that the very success of the Web is helping cause the potential market size of book sales to stall out and perhaps decrease.
New York Times, July 16, 1998, Thursday, Section: Circuits
Survey Finds TV Is Major Casualty of Net Surfing
By MATT RICHTEL
MOST of us know that Internet use is up. But what is down?
With only 24 hours in a day, is cyberspace stealing time from sleeping, stepping on the Stairmaster, watching television or working? The answer, according to a new survey, is all of the above. The activity taking the biggest hit is television- and VCR-watching, according to the survey by Strategis Group, a Washington-based research firm that studies patterns in telecommunications use. Nearly 65 percent of 500 Net users surveyed said they had sacrificed time in front of the TV for time in front of the computer monitor. Forty-eight percent said they spent less time reading, and 29 percent said they slept less.
3. Customer Acquisition Costs.
* In response to analysts questions, Joey Covey, CFO, said that customer acquisition
costs were higher than the company had expected.
4. On "Beating" Estimates
* Estimates for Amzn's loss were ~.20 just 2-3 months ago. The company guided estimates up to .44 so that they could "beat estimates." That does not change the fact that the company DOUBLED its loss estimate.
5. Spectacular Sales Growth & Customer Loyalty
* Repeat sales are now at 63%, up significantly from past quarters. While impressive customer loyalty rates, (though no better than CD Now or NTKI), this too signals that sales growth rates will decline sharply in the future. As well, given a 33% quarter-to quarter growth rate in sales, if 63% are repeat customers, then approximately the entire difference between Q1 and Q2 is comprised of new sales totaling $30 million.
* Year to Year Comparison 97 to 98
1Q 2Q
Revenue 446% 329%
Accounts 446% 410%
Rev/Share 355% 281%
Stock Price 300% a 1000% b
a. The rate of growth in revenues and accounts is 1.5 times the stock
price appreciation during first quarter.
b. The rate of growth in revenue is .3 times the stock price
appreciation.
* Sequential Comparison (1Q to 2Q)
97 98
Revenue 68.9% 33%
Accounts 79% 34%
Rev/Share 54% 29.5%
Stock Price na 300%
This last table is significant; the sequential quarter rate of growth
has dropped in half, but the stock has tripled. Losses have increased,
share creep has continued. Dilution is troubling. Losses would have
been over .46 if they hadn't added 1.4 million more shares.
6. E Commerce & retail profits?
It seems to be far more profitable for companies in business-to-business relations than in relation to retail consumers.
True Success in E-CommerceComes From Low-Profile Firms
By MARK BOSLET and JOELLE TESSLER
Dow Jones Newswires
Internet luminaries Amazon.com Inc. and CDNow Inc. are identified with
the new age of Web commerce. But many of the real -- and profitable --
electronic-shopping success stories stand outside the limelight.
.
"Consumers are looking while businesses are buying," said Steven Bell, an
analyst at Forrester Research of Cambridge, Mass. "Businesses are finding
that the Internet is driving cost savings and is more convenient for
customers."
.
Already, the business-to-business electronic commerce market
overshadows the business-to-consumer e-marketplace -- by $7.9 billion
to $2.5 billion in 1997, according to Forrester -- and the gap will continue
to widen.
In general, the economics of business-to-business commerce are more
attractive than business-to-consumer, said NationsBanc Montgomery
Securities analyst Steven R. Horen. Companies such as Amazon.com and
CDNow of Jenkintown, Pa., spend more marketing dollars to rope in a
customer than do on-line merchants catering to the business market,
Horen said.
At the same time, orders from consumers are typically smaller, and buyers
return less frequently, he said. That is in large part why companies such as Amazon.com, Preview Travel Inc. of San Francisco and CDNow aren't predicted to turn profitable until 2000 or later.
7. A few caveats to unbridled growth
* PC Penetration rates
The broad range of book readers don't necessarily even have computers, much less internet access from their home, much less are comfortable buying on line. The home PC penetration rate is ~ 45% now, after stagnating at 40% for two or three years.
* E Commerce: A browsing tool only?
nytimes.com
July 30, 1998
Great for Browsing but Not for Bargains,
The Virtual Mall Is Still Under Construction
By TINA KELLEY
I t was the best of shopping, it was the worst of shopping. When Stephen Kornelis of Waconia, Minn., found the mint-condition vinyl album -- still in cellophane and only $8 -- that he had spent the last 15 years searching for, it made the fruitless, two-month Web search for paintball gear almost worth it. And his discovery of an obscure Keef Hartley CD almost erased the annoyance of those unreturned phone calls from the paintball Web site guys who work from 2 P.M. to 4 P.M. and, he said, were probably "just
trying to hustle a few bucks."
* Security concerns for E Commerce?
* nytimes.com
July 30, 1998
Security Fears Still Plague Cybershopping
By TINA KELLEY
While not many of the 19.7 million Americans who visited retail Web sites from their homes in 1997 have reported problems with Internet credit-card use, some surfers -- and security experts -- say they are concerned enough about Internet crime that they would rather auction off their firstborn child than use a credit card to buy something on the Web.
* Sizing the Market
Time in a Day & Internet impact on leisure activities
Alan Abelson cited a figure of flat to 2% growth/pa in the book industry and the New York Times recently cited this study which indicates that the growing use of amzn's medium of choice, the web, actually leads to a decline in reading and hence its potential market.
July 16, 1998, Thursday Section: Circuits
Survey Finds TV Is Major Casualty of Net Surfing
By MATT RICHTEL
MOST of us know that Internet use is up. But what is down?
With only 24 hours in a day, is cyberspace stealing time from sleeping, stepping on the Stairmaster, watching television or working? The answer, according to a new survey, is all of the above. The activity taking the biggest hit is television- and VCR-watching, according to the survey by Strategis Group, a Washington-based research firm that studies patterns in telecommunications use. Nearly 65 percent of 500 Net users surveyed said they had sacrificed time in front of the TV for time in front of the computer monitor. Forty-eight percent said they spent less time reading, and 29 percent said they slept less. The survey results, issued at the end of June, seemed to validate a trend reported in a similar poll last year by a New York research company, Cyber Dialogue. It found that in addition to spending less time with their television sets, 22 percent of Internet regulars were also spending less time making long-distance phone calls. Cyber Dialogue further found that 16 percent of Net surfers were less time reading newspapers; an identical percentage spent less time reading magazines.
* Amazon.com's president looks at the future
Q Can I ask you to look into your crystal ball for moment? What's the
future of e-commerce? Will it reach a point where there are no
physical stores? Would 50 percent of the market be online? What does
the future hold?
A It's too hard to tell at this point, and the landscape is littered with the
bodies of people who have made such predictions.
My intuition is that over some very large number of years -- and I won't
even try to predict how many years -- some 10 to 15 percent of the
book market will go online. So, in my own mind, I'm not seeing a huge
fraction of the book market being online.
mercurycenter.com
* Segmenting the Market
Customer Buying Habits
Some people like going to bookstores and skimming a book that they might buy
Electronic-commerce companies addressing the consumer market also
have to deal with what analysts refer to as the social side of shopping.
Many consumers enjoy making a shopping trip an event, and they want to
handle merchandise, such as clothing, before buying.
* In store book buyers v. On line purchases.
* Within On line purchasers, price focused v. internet-experience focused buyers.
* Time sensitive buyers v. price sensitive v. experience focused.
* Purchase by business v. by individual consumer.
* Impulse v. planned purchase.
* One book at a time buyers v. Buy a lot at once (shipping cost less of a concern).
* Buyers who enjoy browsing.
* Buyers who enjoy the social aspect of book shopping in a store.
* Purchases for self v. as a gift.
* Buyers who want to buy calendars and Coffee Table books (more likely in store).
Someone, please segment this market, as well as CDs so we can understand how much amazon would be worth if it controlled 100% of these markets. |
