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

To: Randy Ellingson who wrote (28134)	11/25/1998 1:25:00 AM
From: Satellite Mike	Read Replies (1) \| Respond to of 164684

Keep in mind that their 150 million sales includes $5.00 per order(minimum) postage & packing. This means that approx 50 million of their sales are actually shipping, handling charges. Actually sales were probably 110-115 million. Mike

To: Randy Ellingson who wrote (28134)	11/25/1998 8:26:00 AM
From: Glenn D. Rudolph	Respond to of 164684

OK, so I'm not quite gone on holiday yet <g>... The customer of Amazon.com actually pays for the fulfillment. They choose their book, and add $4 to pay to have the book selected, packed, and shipped. At a buck a pop to wrap, stamp, and address it, Amazon can hone their efficiency to the point of profiting even on the fulfillment. Or can they? I don't know that it's quite accurate to state that Amazon's fulfillment is or always will be a money-loser. Just some thoughts -- I realize they've not shown (or shone) much in that 'fulfillment efficiency' regard. Randy, If you read the 10Q and break down expenses, you will find that fulfillment costs exceeds gross margins at present. Much pf that $4 goes to UPS or the postal service. AMZN is buying their shipping boxes from Gaylord Container. These are a thicker cardboard box compared to a gift box only. I am assuming that their payroll for labor only is above minimum wage in Seattle. My assumption is based on the numbers in the 10Q. AMZN makes it a point to give as little information as possible in their 10Q. It was difficult enough to decipher fulfillments from read advertising costs. They did have a sub note giving the dollar amount for advertising. Their marketing expense line contains fulfillment and advertising. I subtracted the advertising from this line item and came up with fulfillment costs which would include shipping materials, labor, etc. We have no breakdown as to how much is labor and how much is material. Every package shipped goes in a box so I am projecting (That is what Forrester Research does) that labor is half and the material is half of their costs. Presently, the paper industry is in a slump due to Asia. The cost of these boxes are as low as they have been in ten years. The paper industry is consolidating to help with this oversupply and to improve gross margins in the paper industry. The future will bring an increase in the cost of the boxes. A 10% increase would be very significant to AMZN. I also am assuming that labor costs will not decrease. The only way AMZN can get out of this hole is to either increase their gross margins significantly or to automate fulfillment which would be some form of machine that would pick the book/books, box it, etc. This problem is also prevalent in the music and video category. I suppose if the cameras have enough gross margin and they well a very large amount, that may help. I can see they are not stocking most of those higher end "gift items" so their margins have to be slim there too. None of this has anything to do with the stock price as I believe we all know. It is important for the long term viability of selling commodity items on the net. Specifically for a net based operation only. Please keep in mind this is not specific to AMZN alone. BKS and BGP both have the same problems in their online divisions. Glenn