Online Retailing Comes of Age

In the wake of the dot-com washout, a lot people nearly wrote off cyberspace as a retailing wasteland. But last week, Amazon reported that it had finally turned a profit, something most of us thought we'd never see, and preliminary figures show a sharp upturn in online sales despite the mild recession. Some other interesting post-Christmas tidbits are popping up, too: for the first time, more women than men are buying things online, a landmark barometer of a bright digital retailing future. Beyond that, in case you haven't noticed, online retailers are getting a lot smarter. The arrogant, customer-abusive tech world could learn a lot from these people, who offer steep discounts, stand behind their products, and actually offer real and free customer support.

The final Christmas shopping figures for 2001 are not in, but some industry analysts believe the new savvy and sensitivity of online retailers might have rescued the U.S. Christmas shopping season in the wake of September 11, when a lot of people either stayed home or tightened their belts. "I can't be quoted on this until the figures are finished," a friend and research analyst e-mailed me, "but I believe online shopping really saved retailing last year. The sites and service are getting so much better, and consumer confidence in them -- especially among women -- is skyrocketing. Online retailing is not only on the rise, it's really getting to be fun and easier. More importantly, they grasp customer service, something almost no software or hardware company yet does."

If that's so, and it definitely matches my personal shopping experiences, it's huge news for the Net. Consumers, chronically abused by the software and hardware industries, were initially anxious about buying things online. They worried about hackers, crackers and security; they faced poor customer service and complex downloading and other problems. But those problems -- unlike similar headaches in the larger computer industry -- are being addressed.

Retailers competing online this holiday season were a lot shrewder, says a story on About.com about the online retailing industry.

About.com cited a survey of 63 retailers who found a successful holiday season marked by a surprisingly effective combination of widespread promotions and discounting. Most consumers hate spam, but it doesn't bother them so much if it's about things they want, and if they're getting something for the attention. Both multichannel and Web-based retailers seemed to have learned a lot from past marketing missteps. The Shop.org/Boston Consulting Group (BCG) found that more advanced retailers, after carefully studying the economics of each online and offline promotion, are finding ways to offer the minimum discounts necessary for increasing sales volume and ways to deliver targeted promotions to the more than 100 million consumers estimated to have used the Net over the holiday season.

Besides that, sites have radically improved their graphics and visual representations of products. As fears about theft and security have subsided, companies have radically upgraded their customer service. This is in striking contrast to tech industries which sell products that are confusing and difficult to use, and either makes themselves unavailable to confused or outraged customers or charge them extortionate fees for "priority service," which is really just the service they would be entitled to for free in any other business.

If you want to see smart web businesses, I'd cite two in particular -- L.L. Bean and Pet Food Direct. L.L. Bean's site architecture is brilliant -- well organized, easy to navigate. It shows clear pictures of all of its products and allows easy customer access to account information, while still providing security. More interestingly, the site offers customers several ways to get instant help -- phone, instant messaging, nearly instant e-mail response. If you're encountering problems, you can simply e-mail or call and a human will respond promptly. This support is crucial to building consumer confidence. A shopper is much more likely to risk buying something online if they know they can get help with any problems. Tech shoppers are among the most distrustful on the planet after years of confusing products and poor service.

Pet Food Direct also offers a different kind of targeted retailing, e-mailing customers weekly about specials, sales and promotions on the products they have already demonstrated they want and use regularly. This isn't quite like spamming, since it's stuff the buyer needs. And the sharp discounts have a way of offsetting any irritation. The site isn't trying to be funny or cute. Rather than promoting a silly sock puppet, it offers heavily discounted pet food and reminds pet owners when they are apt to need it. It also offers sophisticated graphic renderings of products and instant customer service both online and by telephone. The purchase takes seconds. The discounts are heavy enough to attract shoppers attention, but apparently not so heavy to erode profits. One reason is that the site, like L.L. Bean, gives the consumer a variety of shipping choices, from regular mail to next day air. And the customer pays for shipping, choosing exactly how much of a discount he or she wants. In both cases, the sites don't spam -- they target people who have bought and need their products.

Dozens of other sites have similarly polished their presentation, honed their sense of marketing and discounting and, most importantly, invested in tech support and customer service. Shoppers feel secure not only through repeated use, but through the sense that somebody will speak to them if problems arise.

This is something that, alas, computer and software companies still haven't learned.

Comments

In case you hadn't noticed....

[joshamania]

....most wall street analysts panned the profits made by Amazon in the first quarter. As a retailer, the last quarter (Oct/Nov/Dec) is supposed to be their biggest quarter of the year, and by a large margin. Amazon barely made a profit that quarter. Sales for the next three quarters are going to be significantly lower for Amazon, basically until the holiday season begins anew. I seriously doubt Amazon will make a profit for those three quarters, and will still be a bad investment for the next several years.

Online retailing has not come of age.

Re:In case you hadn't noticed....

[ilikedonuts]

Ummmm... nope.

It was a true net operating profit helped largely (and readily admitted by Amazon) by a favorable swing in the euro exchange rate. They expected a pro-forma profit and delivered a bonus profit.

Do you actually know what a pro forma profit is and why people use it? GAAP accounting forces you to account for non-cash charges like the amortization of goodwill.

For example, Amazon bought PlanetAll in 1998 for $250MM. How much money left their bank account? $0. It was paid for in stock, how much stock did Amazon buy on the market and transfer to PlanetAll? $0. They issued new stock that was authorized (and which the market, if it prices based on perfect public info) should factor in to some extent. Now they have to amortize that cost over time. But it wasn't a real $$ cost. So if you're looking at the operating performance of the business and you're trying to decide whether you should invest based on on-going normal operations you shouldn't (debateable of course) look at non-cash charges. Thus you look at Pro-Forma Operating profit.
Oh, and yes, the currency swing is also excluded from pro-forma profitability because it is a non-recurring cost (gain)

Re:In case you hadn't noticed....

[jht]

Not to disagree with your premise (because I also doubt that Amazon is anywhere near out of the woods), but in their defense I'd say that Amazon's costs are also proabaly highest in the holiday quarter. They stock more merchandise directly on-hand, expand their staff to handle the increased volume, and ship more items at promotional rates. They also will generally incur higher advertising costs as well.

The model for retailers seems to be a couple of mediocre quarters, with a big profit during the holidays. Amazon seems to be on their way there, as the losses have been slowing down, but the next year is really the make-or-break year for them, I think.

If their model is to be a catalog reseller, they're screwed. Just look at Fingerhut as a good example. One day they were the shining e-commerce wing of a major brick-and-mortar retailer chain. Now they're being shut down.

I can see LL Bean being a better example, but even they've had tough times. They recently laid off a couple of hundred people, and they've diversified into storefronts and alternative brands (like Freeport Studio for women) to keep the business going. And they're private - Wall Street isn't a factor for them, either.

A bit too early?

[FortKnox]

I think its still a bit too early to talk about ecommerce booming.

This is what happened with the dotcom hype. People jumped on the bandwagon too early, and got shot down. I'd be interested in seeing a report on ecommerce in like 2-5 years.

Good news for us in the middle of nowhere.

[sawilson]

Hello There,

Being in the middle of nowhere (Upstate Pennsylvania), with the closest mall being about an hour away, almost all my shopping for "special" and "hard to find" things takes place online. I easily spend 80 percent of my alloted "mad money" online. If only FedEx and UPS would commit to getting packages here on time. See, if you are in some areas that they deem "remote", they don't honor any type of delivery guarantee.

It's a miracle Amazon is still in business

[alen]

Anyone who thinks Amazon is a high tech company is dreaming. It's nothing more than a catalog retailer like Fingerhut or LL Bean. Jack Welch, ex-CEO of GE even commented on this. Everyone thought that some of these .com's were tech when they were building warehouses to distribute books and CD's like many present day companies. And these same people were calling GE a dinosaur while they were researching the latest in plastics, jet engines and other high tech stuff.

In the crazy times of the last few years Amazon overpaid for the land where the warehouses are based, and for the warehouses themselves. I've heard that they are only at 30% of capacity or so year round except for the holiday season. Instead of being high tech, Amazon has had to master such things as distribution channels and inventory management. Concepts that are decades old and have been perfected by old time competitors suchas Wal Mart.

Then there is the debt. Around $2 billion worth. If Amazon can convert the debt to stock then it would free up tens of millions in free cash flow and really let them invest in the business and grow.

Re:It's a miracle Amazon is still in business

[MSBob]

You're only partially right. To say that Amazon is not a high tech firm is not quite fair. Amazon is the largest e-retailer and their traffic volume figures are quite staggering. I can't remember exactly but I believe that amazon websites handle more than 60 million unique sessions a month in the USA alone. That is a huge volume of traffic that few other enterprise applications have managed to achieve. It takes a lot of high tech know how in the company to build an application that scales to that kind of traffic.

FrontLine's "Dot.Con" edition had some numbers

[Tattva]

FrontLine's "Dot.Con" edition had some numbers that shed some light on the e-retailing situation. IIRC (unfortunately the transcript is not yet on the website), it was a mother nature.com CEO discussing a review of the numbers for his business, and he found that it cost $80 in advertising, etc costs to get a customer, but that customer's marginal value, the odds of the customer having return visits to the site, and the profit margin from that customers future purchases, was only $10.

I suppose it could be that there is enough room for a few big e-retailers since the really big ones get free customer awareness since they have more mind share, but those numbers speak to a real difficulty to get a sustainable business online due to low customer loyalty inherent when there is no geographic locality and hence no physical reality to such retailers. It could be that Amazon is merely reaping the high advertising costs in previous quarters and will tank once that mind share that cost so dearly to develop wears off.

Re:FrontLine's "Dot.Con" edition had some numbers

[0xA]

it was a mother nature.com CEO discussing a review of the numbers for his business, and he found that it cost $80 in advertising, etc costs to get a customer, but that customer's marginal value, the odds of the customer having return visits to the site, and the profit margin from that customers future purchases, was only $10.

This is about the most important thing you can know about your customers. I saw the show (Frontiline is the best thing on TV IMHO) and essentially what he said was that they felt justified in spending $80 to $100 to get a customer because online customers were supposed be to be very valuable. In the end, the average margin he took in from one of these customers was only $10, so the whole thing fell down. This is the single biggest factor in the fall down of most online retailers. Everybody assumed that it was worthwhile to spend $100 to get somebody in the door online but it wasn't true, it is almost the same value traditional retailers get per customer if not less .

This is a very interesting part of marketing, and the reason I am thinking about making a career switch to marketing weasel. It is a really challenging proposition to sit down in front of all your customer data and try and figure out who the valuable ones are and why.

I don't think most people realize what a jewel Amazon's customer information is. When you look at the stuff they track on people's buying habits it is just amazing. Everybody sees the "you might also liek this book" part but think about this, you have someone who has purchased the 5 most popular books this year, all 2 to 3 months before they became hot sellers. Want to know what is going to be the next bestseller? watch what that guy buys. That is a pretty simplified example but this stuff really does work, and aside from maybe The MTV Group, Amazon.com is the very best in the business.

Some sites need to buy a clue

[Dark Paladin]

One of my personal frustrations with some Internet shopping is how terribly some sites are put together.

In too many cases, it's an event of "I want to buy this - where do I go to find it?" And after wading through too many pages just to figure how how to buy an additional battery for a laptop, when all I should have to do is click on "laptops - maker - model - accessories" I'll finally give up and call my CompUSA (hey, not my choice - my company has an account with them) just to get the job done.

Then I go over the Amazon. And while I complain about the whole "targeted ads" market, I like how they do it. They show new anime titles I might not have heard of, or books that I may be interested in, and occasionally buy when I say "Hm...Niel Gaiman's American Gods - I've been wanting to read it anyway", filter out the ones I tell them I own, and generally make it *easy* to find what I'm looking for. I'll usually check them first even if I don't think they carry it, just in the hopes that maybe they do.

The most important thing any online company can do when selling products: Let me find what I'm looking for. That's all I ask for, and all I expect. I don't want shockwave, or animated .gif files, or anything that takes away from me *finding what the hell I want to spend my money on*.

I just can't figure out why so many online stores are dead set on keeping me from buying anything.

Of course, I could be wrong.

sigh.

[Gannoc]

>This is something that, alas, computer and
>software companies still haven't learned.

Gateway and Dell is a pretty big difference from Amazon, LL Bean, and pet food. People buy media, books, food, clothes on a monthly basis.

I mean, do you think Dell should send emails saying, "As someone who bought a hard drive in the recent past, you might be interested in our hard drive specials this week!"

Different businesses, different marketing. Then again, you didn't have to think about it because you're Jon Katz, and its been demonstrated that your articles don't have to make sense.

No one sees a profit?

[sllort]

Amazon reported that it had finally turned a profit, something most of us thought we'd never see

I was pretty sure that I personally would see a profit this year, and I was right. Jon - are you projecting?
--
You're reading Managed Agreement.

It seems pretty simple to me:

[Multiple Sanchez]

1. The www has been pruned. A million tiny/rediculous e-tailers have all chapter 11'ed. echeesegratersolutions.com is no more. Consumers' online shopping has become focused.

2. Juggernauts like Amazon.com have weathered the storm and can finally mark up their goods a bit. They got our attention with low prices and cheap delivery, taking enormous losses. Now we're used to Amazon-ing all our Christmas presents and don't mind paying a little extra for it.

Re:It seems pretty simple to me:

[danger42]

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What the dot-com bust taught us.

[fmaxwell]

The failure of so many dot-coms is not an indication that selling on the Internet is doomed to failure. All that this shows us is that an ill-conceived business won't be made miraculously transformed into a success by simply registering a domain name and putting up a web site.

Look at some of the idiotic failures:

Pet food sold over the Internet. Pet food is normally about 35 cents per can. So people are going to order it over the Internet for the big savings?

The Netpliance i-opener Internet appliance is another great example. They were selling them for $99 and taking about a $300 loss and they intended to make all of that loss back up with subscriber fees to their Internet service. One problem: You could buy the thing and never sign up or decide to stop using it after a few months.

Then there were all of the sites that decided that they would provide expensive, high-bandwidth content for free and support themselves with banner ads. Great idea if you already have a HUGE user base, but pretty dumb if you don't.

Investors may be running scared, but a company with a desirable service or product that is priced attractively (and profitably) is still a good bet. And it doesn't matter if they sell in the mall or on the Internet.

Customer Support?

[greggish]

From the article: "The arrogant, customer-abusive tech world could learn a lot from these people, who offer steep discounts, stand behind their products, and actually offer real and free customer support."

...Don't you realize that one of the cost cutting measures Amazon undertook over a year ago was to eliminate telephone customer support. To the contrary of what the article is trying to point out, I don't think it bodes well for ecommerce, when the larger player in the industry says "DO NOT CALL US".

Re:"Death" of Retail

[2Flower]

While I doubt all retail will die, I can see certain branches of it dying.

For instance, I used to be such a regular customer at EBX that the sales staff knew me by name. I do appreciate that personal relationship and the customer service... but why should I spend 40 minutes driving to and from the mall (which is now farther away thanks to moving a few miles to a new house) when I can go Click, Click, Boom and have the same game delivered to me two days later? The wait is worth the convenience. I haven't been to EBX in awhile, as a result. Amazon gets my buys.

Packaged goods, things that don't change in quality (CDs, books, movies, consumer items, and such) are simply easier to obtain over the web. No need to inspect the box; reviews and opinions are online and the item you buy is the same as the item anyone else would buy. The Yes/No buy decision doesn't need to be compounded by the hassles of real-world consumer retail.

Most retailers are still a bunch of arse, mind...

[handelaar]

Some other interesting post-Christmas tidbits are popping up, too

Yeah, at my house they're all the fucking Xmas presents that didn't show up in December.

cut the chafe away and get to the meat

[Em Emalb]

Sure, a lot of people were skeptical of for example, pets.com, who threw a ton of money into marketing but failed to deliver a decent product. So what this tells us is that the online stores that actually HAVE A LEGIT BUSINESS MODEL can and often flourish. Basic thought must have slipped away from a lot of companies online.

I can see the thinking behind their sites now:

Hmm, people will want to come to our site to browse for clothing. I know, rather than display articles of clothing at a nicely discounted price, let's show them a monkey!

Hey look at the monkey, make the monkey swing!!
btw, if you like our site, or our monkey, here's a way for us to spam you to oblivion with stupid stuff you won't want! Yeah, we are gonna make a profit now!!

Yes, I am slightly exaggerating, but damn, stupid sites won't make money...nough said

Amazon is still WAY in the red

[st0rmshad0w]

Jon, did you happen to see how big Amazon's debt is? As small a profit as they turned is pretty much nothing considering how far in the whole they are as a company. Kinda of like raving about a "budget surplus" while the country still carries a monsterous deficit.

Nothing New

[Prof_Dagoski]

Online retailing hasn't come of age because "online" retailing as a separate type of retail business doesn't really exist. Most of the retailing going on is nothing more than another form of catalog retailing. The only real difference is that the retailer's catalog is more widely available. The people who've done well in online retailing are the people who've done well in catalog sales. LL Bean is a good example that. I dunno if Amazon is an example of much of anything other than how to siphon off VC funds.

The interesting field of online commerce to me is that of retailing services online and brokering. Neither of these has really come of age yet. However, Ebay has been an early success in the area of brokering goods and services. Online travel is another success in this area. I mean how many of us actually buy airline tickets through an agent anymore?

Anecdotal statistics

[Codex The Sloth]

In the wake of the dot-com washout, a lot people nearly wrote off cyberspace as a retailing wasteland.

Yes, people are stupid that way just as before they argued, on slim evidence, that online retailing would change everything.

The final Christmas shopping figures for 2001 are not in, but some industry analysts believe the new savvy and sensitivity of online retailers might have rescued the U.S. Christmas shopping season in the wake of September 11, when a lot of people either stayed home or tightened their belts.

Ahhhh, I see, so the same idiots who wanted to predict the future and have been wrong in the past, are now pontificating on how they were wrong (again) and that they have a new prediction. Tell ya what. How about we wait for a few quaters of profitability (nay, a few years) before we start spouting off on how in the future, all work will be done by shiny metal robots before. Until then, I'm not devoting anymore cycles to analysts, futarists, pundits, Jon Katz or any of the other self-important wankers whose parasitic existence distract those of us who actually, ya know, DO THINGS WITH OUR LIVES!

A new Katz classic

[mttlg]

"I can't be quoted on this until the figures are finished," a friend and research analyst e-mailed me, "but I believe online shopping really saved retailing last year."

Never tell Katz you can't be quoted - that's one challenge you can be sure he'll take on.

At least your spelling was correct...

[Squirrel Killer]

And it's a profit on a pro forma earnings (sp?) ... hardly a true profit.

Not according to CNN.com.

"Amazon didn't even have to resort to controversial pro forma accounting methods. It posted a net profit of $5 million, or 1 cent a share, for the quarter, using standard accounting methods."

Now, I'll be the first to admit that I have no idea what this means. I don't even know if profits shown from "standard accounting methods" would translate exactly into profits as I understand them, so maybe you're correct to say that "[Amazon] hardly [posted] a true profit," but you're wrong about them using pro forma earnings to post that profit. Whatever that means, I'll leave the accounting to the professionals, like Anderson^H^H^H^H^H^H^H^H^H KPMG.

-sk

Price comparisons

[Aceticon]

When buying through the Internet, comparing prices is much easier than when buying in brick-and-mortar(-and-cement) shops. At the same time, as users became more experienced, they discover Price Comparison sites (to find beter prices) and search engines (to find other e-shops) - thus increasing the ability of finding beter prices.

The resulting price erosion decreases the e-shops profits.

In order two compensate for this, e-shops can take one of two paths:
- Reduce costs
- Compete on features - differenciate from the competiotion.

The first path is the one being taken by Amazon - they are trying to use their size to increase efficiency in the package and delivery (ie a small number of big warehouses with efficient - and expensive - automated processes) thus decreasing costs. Since they are competing on prices, prices cannot easily go. On the other end of the scale, it gets increasingly difficult to cut costs (the same rule as in software development applies - the first 10% of investment get you 90% of the improvment). Increasing profits in this situation is thus a difficult task.

The second option is to offer exclusive/improved features than the competition. E-shops have great difficulty in differenciating from the competition in anything other than prices. Site structuring is getting similar, and any e-shop with the necessary basic structure in place (web catalog with search engine) can compete in price with the greatest of the industry. Extra web-based-facilities like costumer reviews are in practice lightly-coupled to the buy - you can easily search books in Amazon, check the costumer reviews, and then go buy it somewhere else.
At the same time, differenciation in more physical properties (like fast deliver and swift costumer service) presents e-shops in a less then ideal light by comparison with traditional shops (the fastest delivery is going to a bricks&mortar shop, buy something an take it home)

In the end this will mostly be good for the consumer:
- The ones that are more interested in spending less money will find cheaper prices.
- The ones more interested in features will be offered all sorts of special (and as of yet unimagined) features by both b&m-shops and e-shops.

Are we there yet? I don't think so!

And lets not forget the money markets

[RodeoBoy]

According to some beyond the usual holiday season spending fest, as mentioned above, Amazon also add to their profits by making money due to the flux of the Europian currencies against the USD in the money markets due to the Euro introduction. So after millions of dollars and several years they still can't create a ligitimate profit. And I am happy because?

Also from my experience internet service has not improved and the interfaces that sites are using to process orders and give service is still generally poor. Unfortunately I do not think that the Darwinian law of Survival of the Fittest really applies to the last tech sector down turn. Unless the fittest means those that still have financing in place. The death rate on the internet may have dropped, but there is still more to come.

Here is where the real "TECH" happens

[ouija147]

I have worked both Wal-Mart and Kmart.

When I left Kmart in 1990 we ordered stock by counting goods on the shelf. Those numbers where then entered on a paper sheet that went back to the office where a worker would enter the numbers into the computer...the next day.

Started at Wal-Mart 6 months later. Ordering new stock went like this. Look at the item on the shelf. Is the count less than low stock count set by the department merchandise manager? If so, scan the barcode label. The scanner then wirelessly sends that information to the computer in the office where an order is sent to Bentonville. About a day or two later new stock hits the shelf. Wham, bam, order placed. And their distribution warehouses...damn little stock. Most items go out just as fast as it comes in, the logistics are phenomenal. Lots of conveyer belts with scanners directing stock, leading from supply trucks to Wal-Mart trucks.

The late Sam Walton knew technology was important to stay ahead of the competition.

Kmart never got it. Now haven't they have filed for Chapter 11 protection? Needed to hire some 'puter nerds I guess.

Why I never buy online

[JahToasted]

1. I like to be able to see the product before I buy it. Pick it up, feel how much it weighs, what it looks like

2. I like going out seeing people, meeting new people

3. I don't want to have to wait a month for them to replace my product, if it doesn't work, I want to beable to go back to the store and return it that day.

online retailing won't replace the real thing the same way television didn't replace the movie theatre. Many people, especially women, like shopping.

Yes - Yes - Yes

[SomeOtherGuy]

I am so happy -- I thought the next article from Katz was going to be about the plight of the Afghan day traders --- and how the taliban had put the hurt on their ability to get out before the dot coms went south.

One does not imply the other

[HMV]

Amazon's likely inability to maintain profit is their own problem and not an indication one way or the other whether online retailing has "come of age" (whatever that means).

There are plenty of us privately-held small companies out here with revenues under 100 million making money consistently even in this economy with online sales - we're just not screaming FOR THE LOVE OF OUR STOCK PRICE LOOK AT US on the cover of (fill in trendy New Economy magazine). We left "dot coms" behind as a benchmark long ago - we were interested in growing a business, not getting a Webby. We do it from small towns you fly over and get no closer to Silicon Valley than changing planes in SFO on our way to meet with a new supplier in Asia. We like Amazon if it gets our customers familiar with the idea of using a website to place an order (and Amazon has our attention and respect by doing many, many things worth emulating in terms of providing service to their customers) - but as far as strategy and finance go, we have much better and suitable models to follow.

Those who have been successful see this medium as simply another another sales channel, a mechanism to reduce expenses (particularly in transactions and support), and the extension of an already successful business model. We did not need 100 million of venture capital, an instant army of programmers, content managers costing half a million dollars, and consultants selling us "solutions". Instead the many silent successful firms grew our online sales channel just as we grew the rest of our business. Small at first, learn and add as necessary.

Catalog companies like LL Bean or Lands End are successful because they have taken advantage of the medium, yes, but also because they already have a super-efficient logistics system in place. That's one reason I'm surprised Wal-Mart is not a bigger online player - distribution and logistics innovations are what made them untouchable in the traditional retail arena.

Why Amazon and Egghead and ...

[Paul Komarek]

Why does everyone watch Amazon.com and Egghead.com and ... I've been happily shopping at Bookpool (they're limited to technical books, but I generally am these days, too ;-) for 4 years now, with no problems to report *ever*. Computers4sure (which has recently been bought by Office Depot, it seems) has filled many of my computer orders during the last 3 years, again with no problems *ever*.

Both have intelligently designed websites, good prices, good availability and, perhaps above all, reasonably priced and quick shipping. Both of these companies have been in business nearly as long (if not as long -- I'm just using my memory) as Amazon, without resorting to the bizarre expansions and gimicks.

Why we should judge online retailing by Amazon.com is beyond me. I suppose one argument is that Amazon sells a wide range of books, whereas Bookpool specializes in a niche market. I bevelive this is a bogus argument: the internet is all about niche markets, and attempts to use it otherwise are stupid. Television is a way to force your message down every person's throats. The internet is a way for people to find what they *want*.

The niche-nature of the internet has been demonstrated many times, perhaps foremost by Katz when releasing "Run to the Mountain" -- if I remember correctly, he even made it into Amazon's top ten for while. Certainly this didn't happen because of anything Amazon did (except to be known as a book seller, which they're leaving behind). It happened because of Katz's niche marketing.

Who cares if Sears fails online? I'll drive to their store and talk to their staff if I don't know which tool I need, but I need it now or want to see it first. If I know what tool I want, or I don't need it now or don't need to see it first, I'll research tools on the web, and then look for an online vendor with good prices and policies. Is Sears likely to be this online vendor? No. When shopping for computer parts, is CompUSA's online service compelling? No -- their prices are sometimes good, but their shipping is horribly slow (their best is "usu. w/in 2 days", as opposed to "orders by 3PST will be shipped same day").

Is Amazon likely to have the best price on technical books while Bookpool is around? No. Amazon seems to be aiming for "online Walmart" status. However, Walmart succeeded because they could keep their prices low and provide a little of everything (though most of nothing) to geographic communities. Online, geography is irrelevant (except when you ship ground, and if warehouses are distributed then even ground shipping can be fast). As a result, finding a sizeable customer base is easier. That means niche retailers can buy bulk and keep their prices down. Furthermore, niche retailers are likely to carry higher quality goods than Walmart and know more about their products than Walmart.

So why would you go to Walmart, unless they're the only store with what you wanted (which is unlikely)? I expect that if Amazon is still around in 10 years, we'll think of them like Walmart or K-Mart, except less convenient than these stores.

-Paul Komarek