Cybercrime

Amazon in the Right Place, Wrong Time

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 completelyovershadowed by horrific terrorist attacks on New York and Washington, D.C.

It’s clear to anyone following along that Amazon is making a full-courtpress to get to pro forma profits in the fourth quarter, as it hadsaid it would earlier in the year. And it’s also clear to casual observers ofthe U.S. economy in general, and online retail in particular, that Amazon’s job isgetting 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 itsindependence as ships sunk around it. It has made the tacit admission thatit can’t do it alone. That no matter how big its warehouses are, they won’tbe big enough to store everything that customers will want.

Unfortunately for Jeff Bezos and his company, investors aren’t in aforgiving 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.


2 Comments

  • pro forma profits are a lot of bs. even if jeff reaches that, AM azon will still go chapter. if we pay for stocks we expect profits and dividends or we will sell our stocks and short the company.

    • As a former frequent customer of Amazon over the years, I have increasingly experienced the site being down and having a lot of computer glitches, orders not arriving on time, etc. So much that I go on to somewhere else to order my products. I predict that if things do not change in the 4th quarter they will not be around much longer after that. I had high hopes for Amazon and used to own stock.

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