E-BUSINESS SPECIAL REPORT

Will There Ever Be Another Amazon?

Many online retailers have spent considerable time and money trying to duplicatethe success of Amazon.com (Nasdaq: AMZN), and some say the market is ripe for a new e-commerce giant to rise from the wreckage of the dot-com economy and take the market by storm.

But the market conditions that spawned Amazon no longer exist, according to Giga Information Group analyst Andrew Bartels. “It is unlikely that any existing retailer would let you take over a [marketplace] now,” he told the E-Commerce Times. “Amazon was the first selling books and music. Retailers like Barnes & Noble just didn’t respond and didn’t respond.”

Roots of a Giant

Amazon attained its lofty position through smart planning and responsive follow-through. For starters, the e-tailer chose the perfect product lines. Buyers did not feel a need to handle its merchandise in person before making a purchase.

“There are not many [retail] categories where people don’t have to touch and feel and the economic structure works,” Bartels told the E-Commerce Times.

In addition, shoppers in the book and music categories tend to be hungry for information when they shop online — and Amazon provided data in spades through reviews and recommendations.

“There is a whole community of people wanting to know about [products] and get feedback,” Andrew Kass, vice president of CRM development at Oracle, told the E-Commerce Times, adding that shoppers are willing to pay for that information, at least indirectly. “Amazon is rarely cheaper than other venues,” he said.

Glimmers of Opportunity

As a product line, electronics shares some of the qualities that made Amazon so successful, but the economics do not work. “If models change, it’s iffy, [and] discounts are prevalent,” Bartels noted.

He said there is potential in online music distribution, although it, too, is a tricky business. “Many forces [affect] it, and the record labels have a desire to control.”

Unfortunately, the music industry has not hammered out a workable business model yet, Yankee Group senior analyst Mike Goodman told the E-Commerce Times. In fact, record labels have spent more time and effort fighting Napster and similar services in court than they have spent creating a model that can satisfy both listeners and business needs.

If a music venture is to succeed online, “it will probably be owned by a consortium,” Bartels noted.

Waiting in the Wings

Going forward, brick-and-mortar retailers may be the ones to exploit existing markets and reap giant online rewards. “A lot of brick-and-mortar companies are getting into multichannel [marketing], and they’re doing significant volume in those channels,” Kass said, pointing to Wal-Mart and CompUSA as examples.

He added that the most successful companies do not “put stuff online for the sake of being online.” Success will come to innovators thatknow how to complement their other channels with online offerings. He citedPapa John’s Pizza as a prime example of a well-coordinated initiative whose online effort truly complements the company’s other selling avenues.

Using the Papa John’s site, consumers can build a pizza to order, then sit back and wait for the pizza to be delivered to their doorstep. Papa John’s keeps a profile of each customer, so employees can access a customer’s order history, delivery instructions and other relevant information.

Mission Possible?

Still, pizza is only a single product, and no company has pulled off an Amazonian ascent to dominance, although Bartels noted that Travelocity and Expedia have performed admirably.

“Are there any other categories where a company like Amazon can emerge?” Bartels said. “In the consumer [arena], probably not.” But just because businesses cannot follow in Amazon’s footsteps, that does not bar them from achieving online success in new and different ways.

3 Comments

  • I see advertising as a way to increase marketshare for online retailers. I do not see too many Amazon.com commercials anymore, and in the past few months, I have noticed more Cheaptickets.com and Hotels.com commercials, so I would expect to see both of those companies growing or at least more people visiting their sites.

  • It’s going to take awhile, but I think it’s entirely possible that Buy.Com could topple Amazon someday as the Net’s top retailer. Buy.Com’s ascendance, ironically, won’t happen until Amazon proves that it can consistently return quarterly profits, at which time Buy.Com will likely restructure itself again as a public company.
    The reason I’m bullish on Buy.Com is because the performance stats that I track clearly show that pure-play sector’s customer acquisition cost is slowly declining, a situation which will likely renew the investment community’s interest in the pure-plays over the next year or so.

  • I still purchase goods from http://www.Amazon.com, but my favorite site on the internet for computer hardware is http://www.newegg.com. There are plenty of large retailers on the internet. I still buy stuff at Amazon dot com from time to time when I have some money to spend. Sometimes they have great prices on Linksy home networking gear and things like a Microsoft Optical mouse or other items.

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