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I take as my text a respected investment column in a respected pink

newspaper: ”If Amazon cannot make it,” it said, ”no e-tailer will.” This

came just after an investment bank had said that as Amazon was losing

money hand over fist, it would eventually run out of money. Clever chaps,

these investment bankers. But the columnist is, I fear, not so clever. He

talks big balderdash.

Because there are many electronic retailers with a better chance of

survival than Amazon.

First, many companies are selling products that are better suited to

e-commerce than Amazon. Books, CDs, videos are really quite difficult to

send down telephone lines. Software, music files, information, pictures,

insurance policies - anything that can be digitised - is a doddle. So any

retailer that sells such things has one immediate advantage over Amazon -

no delivery costs.

Second, Amazon has always had a pretty vulnerable business model. Anyone

can sell the things it sells online, and many people do. Barriers to entry

are minimal. Amazon has set up physical warehouses in an attempt to build

barriers up, but these cut its cost advantage. Three things have kept

Amazon afloat: clever management; an early float; and HUGE marketing

budgets (in which I include the cost of selling books at HUGE discounts).

But it is the first that has allowed it to duck and weave, and continue to

build its reputation in the face of all business logic. I predict that

Amazon will have to trim its marketing and put up its prices; and that

after that it will either be swept away by, or bought by, someone with

genuinely deep pockets (step forward Rupert Murdoch). The brand will

survive; the independent company will not.

So which electronic retailers don’t have a vulnerable business model?

Those protected by genuine barriers to entry. Those with solid links with

suppliers, those with an obscure niche, or with unique technology. My

favourite example, combining all three, is House of Tartan, which is

linked into all the best kilt makers and has built software that generates

17,000 tartan patterns online. If House of Tartan doesn’t make it, then

I’ll agree that no e-tailer can.

David Bowen is editor-in-chief of Net Profit, an e-business publishing and

research company. Tel: 020 7403 1140; www.netprofit.co.uk;

info@netprofit.co.uk.