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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: gjhinc who wrote (56997)	5/17/1999 7:40:00 AM
From: tonyt	Read Replies (1) \| Respond to of 164685

Amazon Plans to Offer 50% Discounts On Hardcover, Paperback Bestsellers By GEORGE ANDERS Staff Reporter of THE WALL STREET JOURNAL Amazon.com Inc. is about to offer 50% discounts on best-selling books -- the online retailer's deepest markdowns yet -- in a move that is almost certain to touch off a price war in one of the Internet's most fiercely contested markets. Amazon officials said the cut-rate prices, to be introduced Monday, will apply to all hardcover and paperback books appearing on the New York Times bestseller lists. That amounts to about 70 books a week, including such current titles as "The Greatest Generation" by Tom Brokaw and "The Courage to be Rich" by Suze Orman. Seattle-based Amazon traditionally has offered best-selling books at 20% to 40% below list price. For more than a year, Amazon and its biggest online rival, Barnesandnoble.com Inc., have kept book discounts fairly steady at the 20% to 30% for most titles and have matched each other's prices quite closely. The two booksellers have focused their rivalry instead on marketing campaigns, more detailed reviews, and various attempts to personalize services to match various shoppers' tastes. Barnesandnoble.com, based in New York, is 50% owned by Barnes & Noble Inc. Meanwhile, a few "no frills" merchants such as Buy.com Inc. of Aliso Viejo, Calif., have discounted books as much as 50% but haven't done nearly as much to promote their Web sites or create a literary ambiance online. As recently as last month, Amazon's chief executive officer, Jeff Bezos, said he didn't regard such merchants as major competition to his company. With its price cuts, though, Amazon appears to be signaling rivals that it wants to expand its already dominant market share in books, and is willing to stomach further losses to do so. Amazon incurred a $61.7 million loss in this year's first quarter but can sustain such deficits almost indefinitely. It has more than $1.4 billion in cash on its balance sheet, as the result of a giant bond offering in January. By contrast, some of its rivals are less well capitalized or are trying to raise money from investors. Barnesandnoble.com has filed plans for an initial public offering of stock, while Buy.com has been meeting with various investment bankers to consider an IPO. In a phone interview, Carl Gish, general manager of Amazon's bookstore, insisted that the price cuts "have nothing to do with our competition. It's not a gimmick. It's not about attempting to start a price war. It's all about passing along savings to our customers and serving them better." Mr. Gish noted that Amazon over the past year has cut back its reliance on book distributors and is buying more titles directly from publishers. While terms of those contracts aren't public, it is believed that Amazon is able to acquire books more cheaply this way. Mr. Gish acknowledged that "it will be interesting to see what happens with other people's prices." Typically, book publishers make titles available to major merchants at about half of list price. Amazon wouldn't disclose its own terms. But if they are in line with industry norms, the new pricing would suggest that Amazon will sell bestsellers essentially at cost, before factoring in its own marketing and overhead. To some extent, Amazon may be able to treat best-selling books as loss leaders that attract customers into its online store, where they can be tempted by other merchandise that isn't priced so cheaply. Amazon in recent months has been diversifying rapidly beyond books, offering new services such as movies, music, online greeting cards and auctions. Even traditional bookstores practice a similar strategy, getting about 10% to 25% of their sales from current bestsellers, which are discounted heavily. Amazon's bestseller share may be slightly lower, given that its customers often buy computer books or older titles. Still, Mr. Gish said, New York Times bestsellers are "not an insignificant part of our business."