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

To: Robert Rose who wrote (24573)	11/5/1998 2:23:00 PM
From: Glenn D. Rudolph	Respond to of 164684

But don't you think it's possible that your goals for your business differ from Bezos' goals for his? Robert, My goals are different. They are to be successful in the retail market. If your goal was to become the WalMart of the Web, don't you think that you might have to invest such that you would post growing losses and negative tangible book value (I'm trusting you on this) for years before things turn around? I am not doing this. However, I have seen many firms grow very rapidly in the retail segment. They expand their business by infusion of capital by either bank loan or an IPO. They incur losses initially on each expansion. They wait until that segment is at least financially stable. Then they expand again. This keeps tangible book value positive. It does slow growth compared to trying to capture the world in a few years. On the other hand, it is good money management from a retail perspective. The customer can be well serviced and the company does not become undercapitalized. The perception of first to market in retail as being extremely important is flawed regardless of the business one is in. I would like to give a few good examples. Walmart is the most known so let's start there. Their largest competitor was Kmart which was already nation wide if not partly world wide. Let's liken this to Amazon competing with Barnes and Noble. Walmart added markets a segment at a time. They did not go nationwide or try to overnight. They added outlets and waitied before adding more until those outlets were operating correctly. They entered markets that were dominated by Kmart for years. They did this every time they expanded. Walmart was not concerned that Kmart was already there. They focused on satisfying the customer in service, selection and price. As they did this, customers defected from Kmart to Walmart in the new market in which Walmart added. The defection was due to the fact that Walmart was offering better slection and more importantly, service. Walmart had someone at the front door, likely at minimum wage, to greet the customer and help them locate something if the customer was not familiar with the store. There was no concern about how fast Walmart needed to expand. They waited until they were operating their new stores well before moving on. Other examples of firms that expanded in the same way are: Office Depot, The Gap, Banana Republic (part of Federated I believe. I would have to look that up), Tiffanys, Sacks, JC Penney. There are a lot more. Note that J C Penney moved into markets already dominated by Sears. Both survived but Sears is not as dominent at they once were. I do not run Amazon nor have an interest in doing so. I do believe it would have been wise to use capital to make the domestic market at least break even before going to Europe. Amazon could have entered the European market later and taken market share from whomever was there when Amazon was ready. Amazon just needed to supply good service, price, etc. Customers would have defected to Amazon. Amazon is now financially strapped. I know I will hear about the junk bond money but that will go fast. Further expansion will be difficult because it has to be done with stock which is dilutive. This dilutive affect will show. Amazon's service has suffered domestically due to trying to expand too quickly. They have had difficulty filling some orders correctly and the more one irritates a customer, the more likely the customer will defect. In the book market BKS and BGP are retailers. They did not open superstores everywhere all at one time. They financed much of it from profits of existing stores. They were not concerned with being first. They were concerned with being best. That is how a retailer is successful. One needs their customers and must satisfy that customer. The customer is always right fits. Good retailers know that. Glenn