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.
Comment - House of Tartan provides real test.
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.
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