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

To: Robert Rose who wrote (27663)	11/22/1998 1:45:00 PM
From: peter michaelson	Read Replies (1) \| Respond to of 164684

To All: It seems to me that the structure of internet retailing differs from on-the-ground retailing in terms of capital investment. The high capital investment required to establish presence on a geographical level is astoundingly high as compared with internet. The same is true of mass communications - email is so much cheaper than direct mail. Therefore, a major barrier to entry in retail may have fallen. New competitors can enter at a low capital investment. Therefore there will be more competitors. Any competitor who can establish a reputation for honesty and customer service can compete. As long as the product sold is identical, regardless of who sells it, then market share will go to the low cost producer. Profit margins will shrink and stay shrunk, since if margins rise new competitors will enter. The end result is that goods will be less expensive to the consumer because the distribution system will become more efficient - fewer construction and maintenance people to pay to erect and occupy buildings. If this all seems painfully obvious, it is as true as it is obvious. The point is - goods will be cheaper, margins will be lower, and volumes will be higher. How this basic view can be used to value AMZN I am not sure. I think if they use their stock price to raise capital for a superior low-cost distribution system, that is a powerful advantage. But, they are a new operation, and mis-steps will occur. On the other hand, they don't have a lot of 'legacy' cost structures that existing competitors have, e.g. SW Airlines vs. the industry. OK, random thoughts so far. Best to all. Peter