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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: geoffrey Wren who wrote (6928)	4/24/1999 1:20:00 PM
From: Bob Rudd	Read Replies (1) \| Respond to of 78476

geoffrey Wren <<AMZN has market cap of $34b. My rhetorical question: Could you not put together an equally good website with good software and then inundate the web with advertisements to let people all know you are there for less than $2b? I think so.>> Yes, you could do all that for the $2b, but you wouldn't take over AMZN's "Mindshare" as a result of those activities. The bull case for Amazon is that it has positioned itself as the premier net bookseller, and some think premier net merchant and that it's very hard and very costly change the consumer's mind. It's possible that Amazon may shoot itself in the foot transitioning from premier bookseller to premier net merchant, since that name can't stand for 2 things at once. [Read "Positioning" by Trout and Ries for good background on this area] The key issue, IMO, is whether customers will continue to BUY from Amazon at prices higher than competing alternatives as they become aware that these alternatives are a click away. Several competitors are offering books, auction services, etc at 0 margins to make money on ad flow [Buy.com, shopping.com, Yahoo auctions]. Word of mouth, news articles, and shopbots help customers find these sites. So consumers read reviews on Amazon's site, then use a shopbot to find the best deal and buy there. Longer term, recent studies have shown net customers are generally very price sensitive and in 2 or 3 years, when the sales tax advantage is eliminated, 25% of those price sensitive shoppers will return to local retail. Wonder how many earnings models have plugged that in? Some additional thoughts, Bob

To: geoffrey Wren who wrote (6928)	4/30/1999 2:49:00 PM
From: John Stichnoth	Respond to of 78476

Reading some "old" posts (yours from last Friday)--I agree that the barriers to entry to the internet are smaller than people appreciate. Compare the online brokers against the traditional brokers. The software to go online for the traditionalists is not all that complicated. They have the financial resources to make it happen. They have name recognition. The biggest problem for them is their internal mindset. How do they handle the infrastrucure base of brokers that they have? They're scared of that. But, Schwab has shown you can make the transition. When the others do the same, there will be real pressure on the Dateks and etrades. And, the odd thing, about Amazon, is that so many of their costs are variable--ie., the cost of shipping the book. I think they have realized this, and thus the push into auctions or other products less shipping sensitive.