c. AMZN is like AOL.
* Just bombard the public and secure accounts. Unfortunately, AMZN does not collect monthly subscription fees as does AOL and shoppers can price shop for any one purchase with AMZN and switch among AMZN, BKS, books.com, acses.com, etc. These are not accounts. This not a subscription service. If went there once. but never returned, you're still an account. The "accounts" can never decrease because they do not post "active customers."
c. Proprietary Filtering Technology
* Whereas the company had relied primarily on internally developed software
systems, it has recently installed "collaborative filtering software" from Net Perceptions. This software enables detailed analysis of user preferences and site surfing habits. The point here is that the more advanced internet e-commerce features are being developed by specialized software firms, such as Net Perceptions, FireFly which in turn service all etailers.
d. AMZN is not a book company.
It will broaden its product offerings.
* The press has reported numerous analysts and portfolio managers in the past two weeks who have attempted to justify AMZN's share price by claiming that AMZN would expand into toys, cigars, perfume, software, and some have even claimed that it would evolve into the Walmart of the web. A wonderful idea, but apparently not in the Bezos' plans.
* Expansion into software sales. If Amazon.com tries to sell software, they will also become a competitor of some of the very same companies that they are trying to establish niche market advantages with for book sales. Many of these companies are already Amazon.com associates to whom Amazon pays roughly 10% commissions. So now Amazon will turn them from allies into competitors? Bezos says he doesn't think so and no analysts opposed that view.
* Despite analysts' predicting movements into areas such as toys, cigars, and software, the company clearly stated at the conference call that it would be focusing on books, music, and to a lesser extent videos, all areas where it faces increased competition. Moreover, it would appear that Barnes & Noble has already leaped into the on line software sales since it announced on July 9, that Navarre Corporation, a leading distributor of music, computer software and interactive CD-ROM products, has become a strategic supplier of consumer software to barnesandnoble.com. See the URL below for more detail. biz.yahoo.com
* David Gardner of The Motley Fool publicly posted, hours before AMZN's earnings release, that if it wanted to, AMZN could be the top lobster seller on the web and claimed that: " Amazon isn't just a bookseller, no. They sell a lot of books, yep. But they also sell music now, and if they're not already #1 in market share in that business (I think they are), they will be shortly." Once again, Bezos made no claim even approaching such market share. For Gardner's full comments and retort, see:
boards.fool.com
boards.fool.com
* In commenting that he sees the music business as being more diverse and competitive than book e tailing, Bezos said, "It is unlikely that the music business will ever be as profitable as the book business . We expect lower margins and more aggressive competition than we are seeing in the book business."
* In response to a question from an analyst at Goldman Sach's, Bezos said that Amazon would be more likely to bring out new products within the areas of books, music and videos and continue expansion in Europe and other international markets. His rationale, among other factors, was that he feared stretching, what he called Executive Bandwith or the ability to effectively manage new ventures effectively.
* CD Demographics & Challenges
In June, it began offering music CDs on its Web site. Videos are next. But providing a slew of items on the Internet isn't easy. The people who buy CDs generally make less money than book buyers, and are less likely to use credit cards, said Rick Ayre, Amazon.com's vice president executive editor. That's a marketing challenge with no easy solutions, he said. Despite the booming stock and investor enthusiasm, Amazon.com is still a young company with an uncertain future. Barnes & Noble and Borders are both aggressively marketing their Web sites, and the competition will undoubtedly become tougher. (Source Seattle Times article, Sun. 7/26/98).
* Video Market Competition
It appears that Paul Allen is going to compete with Mr Bezos.
Now Amzn might have $325 in debt to burn but the last time I checked Paul Allens pockets are so deep he can reach all the way down to Australia.
7/31/98
PORTLAND - Hollywood Entertainment said it will buy Reel.com for $100 million in cash and stock as the second-largest U.S. video-rental chain expands its business onto the Internet. As part of the deal, an investment group that includes Paul Allen's Vulcan Ventures also will take a stake in Hollywood Entertainment.
.
The transaction gives Hollywood Entertainment the edge on Internet video sales over No. 1 video-retailer Blockbuster Entertainment. Just 14 months old, Reel.com is the leading Internet video retailer, with about 2 percent of more than 200,000 visitors a day making a purchase, the companies said.
* More on Executive Bandwith & Number of Product Lines
* Finding enough programmers, writers and warehouse workers to fuel its rapid growth is a constant challenge. Given the vastness of the Internet, Amazon.com must also keep focused on doing a few things well. The stratospheric stock price may prove a temporary distraction, but company executives know the real danger may lie in trying to do too many things at once. Without discipline and a clear vision, the plain wooden desks and no-frills office become nothing more than a corporate gimmick. "Not only do you have to avoid the bad ideas, but you have to avoid many of the good ideas for reasons of focus," said Bezos. "Ideas are important, but they are relatively easy. What's hard is taking that list of hundred ideas and ranking them and picking the three that we're actually gonna do." (Source Seattle Times article, Sun. 7/26/98).
* AMZN is one of the fastest-growing retailers in history and this, in the company's 10Q's words, is "expected to place a significant strain on the company's management." Amazon's employee head count has risen fivefold, to about 800 from year-end 1996 to the end of the first quarter. AMZN must hire more labor in the tightest labor market in the US (nationally) and in an area of acute labor shortage (Seattle) |
