By Keith Regan E-Commerce Times
09/21/01 2:18 PM PT
Amazon has made a series of deals, but has yet to make the deal that
will change investors' minds about its likelihood of reaching profits.
High Performance, Low Cost Solutions for eCommerce Surviving and thriving in today's competitive online retailing world is not getting easier. This white paper provides insight on technology that scales eCommerce applications to support more advanced end-user functionality and a rapidly growing user base.
Timing is everything in life. And for Amazon.com, the timing lately couldn't
be much worse.
First, Amazon launched a personal computer shop on
its retail site, despite severely slumping computer sales and a weakening economy.
Later, on September 11th, Amazon announced a
partnership with retailer Target, a deal that
could actually do something for Amazon's bottom line. But that deal was completely
overshadowed by horrific terrorist attacks on New York and Washington, D.C.
It's clear to anyone following along that Amazon is making a full-court
press to get to pro forma profits in the fourth quarter, as it had
said it would earlier in the year. And it's also clear to casual observers of
the U.S. economy in general, and online retail in particular, that Amazon's job is
getting harder every day.
Ambivalence Reigns
The PC sales experiment met with a mixed response. Some analysts noted that computers have
slight profit margins, but others pointed out that they cost more than books and CDs, so
the relatively lower margins will still be a boost to Amazon's bottom line.
Then came a deal with Circuit City. Analysts shrugged
at that one because it didn't seem to do too much. Yes, customers could pick items up at
Circuit City stores, but otherwise, the two retailers were keeping their distance,
not even going so far as to blend their inventories.
Dark Tuesday
Then, on the fateful day, the Target deal. Amazon ventured into something pretty
impressive with this partnership. In contrast to the Circuit City deal, the Target deal
actually introduces new products into the Amazon mix. For example, customers can now buy
clothing from Target through Amazon.
Meanwhile, Amazon gets a piece of the action for every item sold, as it does in other deals. The
Target agreement also calls for Amazon to take over the online operations of other Target
online sites, another boost to the bottom line, though not one to be seen until next year.
Pressure's On
Amazon has talked itself into a corner, to be sure. The profits expectation is on the
table and the excuse of a softening economy isn't likely to cut it with investors. In
fact, many believe that even if Amazon meets its profit goals, investors will only shrug
and do little to move Amazon stock off its yearly lows.
Yes, Amazon shares are trading below US$10 each, in case you haven't looked lately.
Excuses aren't what investors need to hear, but even so, Amazon has had some bad luck.
Two To Tango
Even as the highest-profile pure-play e-tailer stood to gain from the shakeout that
claimed so many smaller companies, it took hits of its own. Sizeable investments went
down the drain.
But Amazon has adapted. It didn't cling to its pure-play status or its
independence as ships sunk around it. It has made the tacit admission that
it can't do it alone. That no matter how big its warehouses are, they won't
be big enough to store everything that customers will want.
Unfortunately for Jeff Bezos and his company, investors aren't in a
forgiving mood right now. Nor are they in a long-range, growth-over-time
frame of mind. Instead, they are ready to see results.
And if those results don't materialize, the going will only
get tougher for the Internet retail king.
What do you think? Let's talk about it.
Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.