To: Lizzie Tudor who wrote (88309 ) 1/9/1999 7:49:00 PM From: Chuzzlewit Respond to
Michelle, I still must disagree, and let me point out why. First, your example of a home appliance is one where your model would work well because of the limited number of choices available, and because it lends itself to drop shipping. But books are a different matter altogether. Have you noticed that AMZN needs to build a new (gasp! its made of brick and mortar) distribution center? And guess what's going to be in that center? Books! Hundreds of thousands of them. Millions of them. Thousands of individual titles. And because people buy books one at a time, they must be unpacked and repacked for shipping, and that represents a considerable logistics expenditure. So, your premise that AMZN ... could set up a sort of hub and spoke distribution network where the factory could move the product directly to the consumer, or to maybe one distribution center and then to the consumer where the retailer holds little or no inventory that 30% would be gone. is simply inconsistent with the nature of the book business. This clearly underscores the difference between DELL which does just that in part because of the limited number of SKUs it handles, and AMZN which is precluded from that approach because of the astronomical number of SKUs it must handle.Anyway whether or not you believe this is a profitable business model I think you will agree that it is this [efficiencies in distribution] that is driving amzn stock . I think this is simply a greater fool game in action. I have not seen a demonstration how this company will generate positive cash flows. I have asked people for such models, and have yet to see one. So why are people buying the stock? Ask gc or ask Voltaire. Neither of them will talk about cash flow or profits. Voltaire in fact agreed that he is playing the greater fool game. When you can show me serious investors who are making investment decisions in this company based on the fundamentals of the business model I will happily concede that I was wrong.
