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

To: Skeeter Bug who wrote (28947)	12/4/1998 8:21:00 PM
From: llamaphlegm	Read Replies (3) \| Respond to of 164684

ooh, i hate when reality intrudes on the dreams of delusionary bulls fantasizing about how easy and profitable it is to expand one's product line ad infinitum Even after Barnes & Noble went online, it was slower to take advantage of the Net's ability to customize its site to each shopper. That allowed Amazon to use its appealing customer experience as a branding tool far more powerful than conventional advertising. And Barnes & Noble? Despite its well-known name and huge online marketing campaign, only 37% of Internet users recognized the brand without prompting, vs. 50% that knew Amazon, according to Intelliquest Information Group. The result: 18 months after Barnes & Noble went online, Amazon.com's $153.6 million in third-quarter sales, up 306% from a year ago, still overwhelm the book giant's online sales by 11 times. And Barnes & Noble's online customer base rose 29%, to 930,000---still less than a quarter of Amazon's. Still, the bottom line is that Amazon needs to get customers to buy more. Indeed, with the bruising price wars that are sure to come, getting each customer to spend a tad extra may be critical for survival. It's just that the next step--the first beyond entertainment media--is a doozy. For one thing, it's unclear that the Amazon brand will extend into, say, toys or consumer electronics. ''I get the combination of books and music and videos,'' says Robert Kagle, a venture capitalist who invests in Internet startups for Benchmark Capital. ''Beyond that, I don't know how far their brand goes.'' Even if the brand does travel well, it's almost guaranteed that other products won't be as profitable. Take CDs: They have lower margins than books. Same for videos. Toys have the disadvantage of not having as established a distribution network as books and music. So Amazon may have to stock more on its own, increasing its inventory costs and skimming off some of that nice float. Already, established competitors are forcing it to do just that. Reel.com says 96% of the 20,000 titles it stocks are on the backlist. Those videos constitute most of its sales--and by far the most profitable portion. ''If Amazon wants to ship them in a reasonable time, they'll have to stock them,'' says Reel.com CEO Julie Wainwright. And some products, such as cars, real estate, or office products, are simply too cumbersome or expensive to ship. Or they may require too much aftersale support--which makes software a dicey product for Amazon to sell. That's why Bezos will likely branch out beyond retail. In August, he spent $270 million for two companies that steer Amazon even more firmly toward becoming a shopping service rather than just a retailer. One of them, Junglee, has technology that makes it easy to scour the Web for products and compare prices or other features. ''We don't even necessarily have to be selling all those things,'' says Bezos. ''We just help people find things that are being sold elsewhere on the Web.'' Amazon might take a cut of revenues from other retailers if its customers buy their products. Says marketing prof Rogers, who is a partner in consultancy Peppers & Rogers: ''Their next mission is to be a service agent.'' TENUOUS ADVANTAGE. It's a tricky mission. Why? It will be tough to guarantee that the entire customer experience will measure up to Amazon's standard. Any glitches could quickly damage the company's carefully crafted brand name. ''In three or four years, they'll be known for 'big,''' says CDnow CEO Jason Olim. ''Well, whoop-di-do.'' In the end, Amazon's success or failure will ride on maintaining a delightful experience for all of those new customers. Indeed, satisfied Amazon customers may well be helping more than most people realize: Analysts say one key to the sky-high stock price, which underwrites so much of its coming opportunity, is that investors can get a personal feel for Amazon's prospects by trying it out--something that's tough to do with most technology companies. Says Halsey Minor, CEO of online network CNET Inc.: ''His greatest advantage is a lot of people who buy his stock buy his books.'' But Bezos knows that advantage is a tenuous one. ''There are plenty of opportunities to stumble and become a VisiCalc,'' he says of the pioneering spreadsheet that is now all but forgotten. Bezos is acutely aware of Amazon's place in history. He carries a camera in his pocket, snapping a photo a day to provide a reminder years from now of what really happened--though it seems unlikely anyone will forget.