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

To: Jan Crawley who wrote (14041)	8/19/1998 11:59:00 AM
From: Bill Harmond	Respond to of 164684

>>Are you holding the Amzn you bot @121 tight, no short-term exit target? I'm looking to buy more over time.

To: Jan Crawley who wrote (14041)	8/19/1998 12:10:00 PM
From: Rob S.	Read Replies (1) \| Respond to of 164684

Amazon's fairy tale will have an unhappy ending - they will be overtaken by direct sales through the internet rather than their inefficient, middle-man business model. The market already believes in the Amazon fairy tale although they have only written the first chapter. Much has been built on the idea that the internet is the most efficient way to deliver products and services: cut out the need for bricks and mortar store fronts and sell via computer directly to the end purchaser. That theoretically eliminates much of the handling and inventory costs and allows a closer tracking of inventory and ordering. A few months ago bulls on this thread were echoing some analysts rose tinted ideas (with blueish smoke wafting up) that Amazon's business model would allow the company to circumvent the need to build much in the way of warehouses or have their own inventory - instead the AMZN could simply have products drop-shipped to the customer from publishers and distributors. The company then indicated that it must increase inventory and warehousing in order to remain competitive but expected the increased costs to off-set any savings in the cost of goods. As a result, inventories have risen while losses have widened. The CEO said that the company expects to eventually turn profitable once it grows to allow the 'economies of scale' to spread out costs over a larger amount of business. That's expected sometime around the year 2001-2002. Capturing the early growth of the internet at a period before major retailers and suppliers have responded with effective entry sounds very exciting - huge growth that is expected to result in profits at some point in the future. But wait a minute. If the fundamental capability of the inet is to reduce the costs of operations and deliver products directly to the end user without some of the physical apparatus needed for conventional retail sales, why don't publishers and other manufacturers sell directly to the public? They already have large staffs, huge distribution centers, computerized inventory systems, huge cash flows and large reserves of cash to mount competition. Michael Dell commented this morning on DELL's recent report of increased sales and profits. When asked how the company can continue to grow even while HP, IBM and others were losing business, Dell pointed out that his company's business model was to sell direct to the consumer and that he was able to do that at lower cost while making fatter profits than his competitors. Dell makes the products it sells in the US and increasingly in Asia and Europe. They don't rely on anyone elses' warehouses or distibution or on resellers like OnSale or other e-tailers. Dell said that the reason why he expected to grow is because his business model is the most efficient and that will always win out over less efficient models. Amazon.com is a re-seller. They manufacture nothing other than nice web pages. Very pretty and slick. But internet technology has grown so that any well directed company with sufficient funding can build competitive web sites and do the advertising and offer associates and similar programs to spur sales. "If you pay them, they will come". What Amazon.com must do is pay publishers and distributors their mark-ups for the products it sells. If they sell other products, that applies to them as well. If Amazon.com builds out their own distribution infra-structure, then they take on the costs of the distributor but must still pay the publishers. Mark-ups on top of mark-ups. Manufacturing and market channel inefficiencies on top of inefficientcies. But now Bertelsman, the worlds largest publisher, has announced that they will spend over $200 million to establish a book, publication and music e-tail business that sells directly to the consumer. Chop out the distributor, chop out the e-tailer. If they want to gain market share quickly, they can sell products at 60%+ discounts - 30% less than Barnes & Nobel, Borders and Amazon and still make a profit. They can offer associates 15%-25% commission plans and still make profits while Amazon will continue to amount debts. "The most efficient business model wins out in the end". Bertelsman's efforts can be expected to force other large publishers to join them in selling directly to the consumer. Either that or they will fall victim to the same forces that are propelling DELL Computer to meteoric sales growth AND profits while their competitors lose market share. Amazon.com will go the way of many other short-lived, half-cocked fairy tales. They will get eaten by the big bad wolf (direct e-tailer). Anals, WAKE UP!