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Strategies & Market Trends : Mr. Pink's Picks: selected event-driven value investments -- Ignore unavailable to you. Want to Upgrade?

To: Ashley800 who wrote (7776)	4/18/1999 12:59:00 PM
From: J.Y. Wang	Read Replies (1) \| Respond to of 18998

<AMZN> There is word going around that AMZN's last quarter may disappoint because of marketing costs, margin pressure, and vicious competition from the likes of buy.com. AMZN's current business model will NEVER be profitable. Why? Zero barriers to entry, no product differentiation, no competitive advantage -- all of which affect margins and customer loyalty (or lack thereof). I use AMZN's web page to check out the book reviews but then buy from buy.com. Why? Because buy.com is 20%+ cheaper. (Buy.com will never make money either -- they are selling stuff below cost and trying to make it on advertisement.) The nature of the internet and AMZN's business model makes it pretty much impossible for AMZN to be profitable. AMZN is a good company to buy long-term puts for, IMO. EBAY is obscenely over-valued, but EBAY does have barriers to entry, is profitable, and can remain profitable in the long run. YHOO and others are offering free auctions, but people still choose EBAY. Those who use EBAY know why; Those who don't should go check it out and think about why. Most internet retailers today will never make money. Who is making money selling stuff over the internet? DELL, GAP, IBI, etc. Why? You can only buy Dells from DELL, Gap jeans from GAP, and Victoria's Secret lingerie from IBI. buy.com can start selling generic jeans for $5 each, but people are still going to buy Gap jeans from GAP for $25+. AMZN can start selling panties for $0.25, but people are still going to buy Victoria's Secret panties for $10 (or whatever). Does anyone give a crap whether they buy, say, Tom Clancy's newest novel from amazon.com, borders.com, barnesandnoble.com, or buy.com? How are people going to choose? Price. And that's why AMZN will never be profitable.