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October 6th, 2000

The Rise and Fall of Amazon.com

Several years ago, Al Gore helped create the Internet. And people thought it was smashing. But then, companies started realizing the potential in the net. It started small, with the equivalent of online brochures. Then, e-commerce came through. The early adopters had to fend off accusations of insecure connections and consumer fear. Today, you can set up a store at no cost. You don’t have to deal with anything: supply, demand, credit card transactions. Nope, it’s easy now.

Of course when business gets involved in something, the goal is to make money. Amazon.com came around, said, "We can sell books online at a good price." And they did. Then they added CDs to the mix. They sold well. Soon, videos were added. "Sure, we aren’t making money now," they said, "but we will in the future." This, as other things like auctions, home and garden tools, toys, electronics, software, and everything short of food became available. With it grew problems: navigation became a pain in the rear, people were getting charged different prices, and lots of other debacles.

Somehow, Amazon explained its way out of everything and came out looking sharp. "Sure, we aren’t making money now", they said, "and our stock has lost about 70% of its value, but we will in the future." Now Amazon had added cameras, but not furniture due to the death of living.com, its partner. Need a PDA and the new Radiohead disc, along with a stuffed animal for the kids? Got it.

But a business is supposed to make money. Amazon hasn’t made a cent, and there has been wild speculation about when they’ll make a penny. Some people have predicted that Amazon will wither and die very soon because of this continued expansion.

If Amazon stays in business, chances are they’ll continue to expand until they’re a "soup to nuts" operation. They already have ties with Kozmo and Webvan (both of which have been hurting lately), but have yet to really exploit them. While the idea of making all of Amazon’s inventory available in a particular time window like Webvan offers is tempting, it’ll cost even more money. Where’s it gonna come from? I’d suggest, instead, that Amazon break off its expansion plans and go back to doing a few things well: books, music, DVD, software.

If Amazon goes under, it’ll be a sad event. Not because of their silly 1-Click Shopping patent, or Affiliate Program patent, but because someone really gave this whole net business thing a go and failed. We’ll have to rely on brick-and-mortar stores and BNM online storefronts instead. And there’s a good chance the stock market will take a dive on the demise of Amazon.

All told, I like Amazon. I buy from them semi-regularly, and while their site isn’t a piece of cake to use, it’s not horrific. Customer service is pretty sharp too. But, if you’re not making money and not getting any money… it’s time to go home. -pm

Posted in Technology

FROM: Robert
DATE: Friday October 6, 2000 -- 9:09:42AM
Amazon is good for finding info on books, etc. but Buy.com beats their prices every time I comparison shop. I hope it continues to live even if I never order anything again. Otherwise, how would I have known that "My Secret Life" is still in print?



FROM: Terry Murphy
DATE: Friday October 6, 2000 -- 11:33:10AM
I fully agree that a company with losses (and, moreover, that has never had earnings) should not have a $10 billion valuation.

However ... Amazon.com has on extremely valuable asset: their brand name. The brand is one of the most valuable of any dot-com company, and that will bring them in sales that won't be brought in by books4sale.com (etc.)

Some of Amazon's divisions, such as the book division, are profitable. When Amazon comes to the point where they are seriously hungry for funding, they can simply shed the excess business units. Then they can grow the business slowly at a rate then can handle.

There's absolutely no way the fall of Amazon (if it happens) will crash the stock market. Amazon is a tiny drop in the bucket compared to Intel, Microsoft, Cisco, Sun, etc., and its devaluation would not pull down anything besides the internet sector.

Besides, the dot-com crash has ALREADY happened, and it left the rest of the market (including the rest of the tech sector) untouched. I doubt there will be another serious one. There just isn't that much more money to lose. Amazon will have to be one of the survivors.

Finally, I don't see the failure of online commerce to be a tragedy. If business doesn't work, close shop and move on. There's nothing sacred about buying anything online. And it gives a good slap in the face to the people who just last year were saying all BnM stores would go out of business.



FROM: Paul
DATE: Friday October 6, 2000 -- 11:48:54AM
I take issue with the idea that a stock market without Amazon just goes on. While it's true that a lot of investors have moved on, there are even more who haven't. The online sector is intertwined with hardware and software... it will affect it, I believe.

And while "there's nothing sacred" about buying online, it is very difficult to top it for convenience on many items.



FROM: Terry Murphy
DATE: Friday October 6, 2000 -- 1:12:48PM
Do a 52 week plot of INTC, SUNW, AMZN, TGLO, and PCLN. Note that where the dot-com stocks start going down the hardware stocks are going up.



FROM: Phil W
DATE: Monday September 26, 2005 -- 7:06:25 am
i am doing a report for my I.C.T class on the same topic. i think that like most other e-based shops they are condemed to death because the people have not heard of them via an advert or from tgoing to their shop. i think that Amazon is one of the lucky ones.



FROM: Sammy Reed
DATE: Wednesday February 15, 2006 -- 9:55:18 pm
I got the Amazon "Home Improvement" catalog today.

6 different kinds of ceiling fans on page 5, a plethora of doorknobs to choose from on pages 12-13, sump pumps on page 19, power drills on pgs. 22-23, sanders on pg. 29, wrenches on pg. 41, lawn mowers, chain saws, weed eaters...

Listen to the man, guys.
"a [i]few[/i] things ... books, music, DVD, software." (and I might add, the occasional VHS's of obscure things you can't yet get on DVD's.)



Faye July 29, 2009, 4:43 pm

Jest saying: it’s 2009, and Amazon is still around.
i don’t know about their stock or whatever, but to my eyes they seem to be going strong (i bought a few things off there 2 weeks ago)
and, now they do sell food…

strange how times change, huh?

Paul October 7, 2010, 1:59 pm

Indeed Faye, visitor from over a year ago!

This particular line from my Ping was prescient: “If Amazon stays in business, chances are they’ll continue to expand until they’re a “soup to nuts” operation.”

…and they pretty much have and, more importantly, they’re doing it well. I’m glad they’re still here and didn’t listen to my advice to going back to selling just books, DVDs, and CDs.

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