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Non-Tech : Barnes & Noble (BKS) -- Ignore unavailable to you. Want to Upgrade?

To: Stephen who wrote (287)	1/21/1999 1:46:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 1691

Stephen, thanks for your reply. I think the key issue to focus on here is the fact that neither Amazon nor barnesandnoble.com show positive operating cash flows. But if you look at web-based selling as an extension of vertically integrated structure the concept makes sense for companies like Bertelsman and BKS because they own those pieces of the infrastructure likely to make real money -- the wholesaler/distributors and the publishers. Consider this fact: a retail customer buys books one at a time, which means that there is no economic incentive for the wholesaler to hold inventory (rather than the web-based retailer). That means that the retailer must hold significant amounts of inventory, and that also implies that there will be a lot of inventory carrying costs associated with this activity. So, the more Amazon sells, the greater BKS profits will be (through ownership if Ingram), and the worse Amazon's cash flow will be. And barnesandnoble.com can simply be used as a stalking horse (requiring AMZN to maintain low prices). TTFN, CTC