Ztect, Konichiwa,
Two points I want to make right away:
1. I agree with all arguments against Amazon IN THE LONG RUN.
2. Amazon is just ONE example of how competition could emerge. The more likely case is that it comes unexpectedly from a totally different direction.
>> Buy.com is
actually taking this "volume" strategy one step further, and
basing their business on selling at below cost to be the low cost
provider because they believe they can make the money from
advertising.
Isn't this strategy just the kind of thing that can kill a company like TSIG? Will TSIG one day have to lower cd prices when people at Babe Ruth or the NMF, etc., complain that "We can't sell enough cards because your prices are higher than Buy.com!". We are all, myself included, hoping that TSIG will be able to remain anonymous and not have to face stiff competition. I don't see how TSIG's temporary lead in their niche will help them any more than Amazon's lead.
>> Some problems with Amazon's strategy or the "volume" marketing
approach. First problem is that the cost of web real estate has
been decreasing due to the proliferation of e-commerce sites.
Second , the Internet allows for quick access to the low cost
provider regardless of name or brand recognition (Inktomi actually
now has search engines for just providing the least cost site for
a product). Plus positioning to be on top of a I-mall's site or
top in a search engine's list doesn't get some one off line to an
on line site.
Yes, I agree, as mentioned above. However, I have a track record of being dead wrong in such judgements. I cannot for the life of me figure out why people pay more money to drink Coke when they can buy a generic brand that is just as unhealthy! I always hated Subway subs, disgusting pieces of plastic in my opinion. I could list so many examples, but in the back of my mind, I can't help but wondering if maybe Amazon will pull it off. I hope the internet works as you describe above, but the tendency of human beings to "follow the leader" is stronger than I sometimes want to admit.
>> Now the premise that Amazon can therefore just "add a card" does
look at any of the premises behind the volume strategy. Amazon
can't offer more to a company or charity by providing them with a
card. Amazon can't afford to since their money is heavily invested
in a completely different approach (39% of revenues). Remember
charities make the money from card sales not product sales, so
what can Amazon offer other than to give a bigger split of card
receipts.
Amazon ALREADY has the advertising, ALREADY has the popular website, ALREADY has the contacts necessary to offer cards to individuals, companies or promoters. Unlike TSIG, which is still putting together its management team, Amazon has already built their infrastructure, they will not have to go out and develop accounts the way TSIG must. All they need to do is say "Here's a FREE card/coupon, take it or leave it. If you use it, you save money and we keep you as a loyal customer, if you don't use it, WE save money and you might come back anyway. Costs us nothing, what the heck?"
As for charities, just as a possibility, why can't Amazon (or anyone else) give cards away for free, and then give them a percentage from each sale. Far easier for the charities to dump millions (billions?) of cards on potential cd buyers, but it will only bring them money if they work with a high volume web site like Amazon, CDNow, Music Boulevard. Just one idea, I'm sure potential competitors will be able to think up better ideas once TSIG shows them how much is at stake.
>> Plus, if Amazon approached the same leagues and corps
that are already under inked agreements with TSIG, corporate
lawyers and TSIG would be making a lot of money off of Amazon ....
Little old thing called Intellectual property rights and
infringement.
Does that mean that some chocolate company has a legal case against TSIG for infringing on their Babe Ruth account? Does some sports bag company have a legal case against the Tampa Bay Lightning? (I received a beautiful sports bag at a Mets game last summer. Would have just thrown away a music card if I had received that instead.) If Pepsi offers a coupon to Safeway shoppers, is Coke "infringing" by using the same concept?
>> Now that isn't to say that other e-commerce companies couldn't
come out with a "card" of their own. So that is why TSIG needs to
get as many agreements in place quickly.
Thanks, you took the words right out of my mouth! TSIG will also have to work hard, and spend money, to keep those accounts. Did Babe Ruth pay Dixie to attend one of their functions or did TSIG foot the bill? Will the NMF ever bring in any revenues if TSIG does not spend the time and money on some hand-holding? How much did it cost to send all those packages to all those schools involved with Lifetime Learning Systems? As I think about it, Amazon is so well known already, and so easy to use, that they wouldn't have to spend any money on helping charities. Just give 'em a coupon and continue business as usual. One more advantage over a little upstart.
And BTW, does anyone know what happened with the Tampa Bay Lightning event? How many cards were given out? Were the cards actually used to buy cds, or just put in with some kid's bubble gum cards? Will this event lead to other teams joining in, or was it a big disappointment? It's kind of dismaying to not have heard anything at all about it.
>>Though I would note that the "card" merely isn't a ploy, it is a
strategy that is very different from the b-model of e-commerce
sites for directing traffic off line to on line locations.
It is a strategy, and hence not limited to any one company. ANYBODY can use the same strategy. Having a head start might help TSIG build a solid foundation, but once others see the success of TSIG's strategy and join in, TSIG's growth stops cold. Increase in revenues and positive earnings will, I think, push TSIG's stock into my target zone ($3 a share or a bit higher), but it will be earnings GROWTH, quarter after quarter, that will be needed to keep investors interested in another little etail company that claims to have a different etail model.
>> Changing to a card means changing philosophy.
Does using a coupon mean Coke must change its philosophy of traditional advertising? As I mentioned before, Amazon already has the infrastructure to "sell" a card/coupon, they don't have to build their infrastructure on the fly as TSIG is trying to do.
>>Simply adding a card
doesn't counteract or offset the hemorrhaging of money from the
"volume strategy" . This "volume" model is being justifiably
questioned by many people, since as demonstrated hitherto, the
volume strategy may never be profitable.
Agreed. But Amazon, OR ANYONE ELSE, can wipe out little companies without ever making a profit themselves. The reality is that Amazon is following this strategy, others are following in their footsteps, and they will not hesitate to crush a little guy along their route to bankruptcy.
I hope I am not being too negative here. I just think some things should be taken into consideration. TSIG's card as it applies to charities and the internet is a unique idea. I like it, which is why I am long. But in the end, is it really that different from the old marketing technique, the coupon?
As I mentioned in my message to Sword, I only need to sell half my shares at $3 to be able to shed my workaholic lifestyle forever. I am not going to count on TSIG's long-term survival, or should I say growth. I would be happy if they prove me wrong!
Time for this workaholic to go back into lurk mode... Good luck to all.
Joe |
