1999 Throwback Post: Is Amazon.com a Time Bomb?

Posted By Debbie on April 27, 2018

Categories: Business

Tags: Amazon, throwback post

I used to write for a site called Suite101. They would find experts on certain topics and expect you to post at least every 2 weeks.

Here is a throwback nearly 20 years to 1999. Someone predicted Amazon.com would explode when publishers chose to sell from their own websites. I disagreed.

Sadly, I did not foresee Amazon selling me socks, headlamps, microphones, and just about everything I buy. I thought they might specialize in media. I also hoped more money would go to feeding hungry people than bringing more entertainment into homes, faster. I guess I was wrong there too.

Amazon was also holding auctions at the time, trying to compete against eBay. Oh how the tables have turned.

Amazon.Time Bomb?

8 June 1999

One of the “small business” or “internet minute” reports on my local all-news radio station did a story today on how Amazon.com is a ticking time bomb. The commentary guy felt that since at some point, authors (he used Stephen King as an example) will eventually sell their books directly through their own websites (individually), Amazon.com would “explode.” Amazon.com is a model for many of a successful, interesting, and certainly exciting internet business – could this be true?!?!?! I don’t think we’re going to see Amazon.com go out of business any time soon… I see each reason why not as a model of something that might help your business sta out.

1. Diversification
If all Amazon.com sold were books and all you or each author had to do to put Amazon.com out of business would be to sell them yourself, then maybe they’d be in trouble. But considering they sell music, videos, the loosely-termed “gifts,” and now have auctions as well, they provide more reasons than “books” for people to visit their site and use their services. This is why some hosting companies offer website development and why the local dog grooming place sells puppy toys… while you’re here and using us anyway, you may also want…

2. Sale Price
To help you get over the idea that you have to pay for the book to get from Amazon’s secret locations to your hands, the books are highly discounted from their usual retail price. Well, they probably also give a lower price based on the sheer bulk of business they are doing in a pretty easy way! This means that they may be selling Stephen King’s book for less than he may plan to. I mean, he’ll have to factor in shipping and handling costs as well as some sort of figure to cover the cost for whomever is going to fulfill these orders! I can’t imagine Mr. King himself will be boxing and posting your order.

3. Business Model
1998 figures: 2100 employees, over $1 billion (USD) in revenue, 8 million customers worldwide. Stock prices, when at their highest, were ten times earlier opening prices. They are doing something right. 🙂 Part of what makes this model work is that fact that they don’t have to pay for having actual stores like their main competitors. Barnes and Noble, for example, has to pay for retail space, utilities, stocking each location, training and payment of staff, coffee (in some locations) and whatever it takes to run and clean cafes and bathrooms, et cetera. So if vegetarian cookbooks don’t sell well in Texas, Amazon really doesn’t care. 🙂

4. One-Stop Shopping
To me, there are times a one-stop shopping type site works and times when it doesn’t. A site that is so busy and confusing that you don’t know where to click next, or a site that has so many different things it’s plugging and you’re not sure what you need to do first would be an example of one-stop shopping that doesn’t work. I don’t need my local weather when buying shampoo online, so the site that wants to sell me snacks and beauty products and tell me which band is playing at the local bars… well I don’t need that. Chances are I already have at least one website I’ve bookmarked for local event information.

Amazon.com’s version of one-stop shopping WORKS. Most of the items they currently sell make sense being in the same place. I’m not sure “gifts” belongs since I’m not sure how many people are shopping for a PDA while looking for books. Auctions, a popular internet attraction/money maker, doesn’t really have to belong since your transaction there is ultimately with the individual seller and not with Amazon. But books, music, and video make sense being sold in the same place by the same company. You can pretty much guarantee “something for everyone” or just “lots for you.” This doesn’t directly or wholly compete with one author selling his or her own books.

5. It’s a Great Mousetrap
For a site to truly compete with Amazon or even make it implode, as the radio guy seems to warn, the site would have to be as easy to use or easier than Amazon.com. You probably wouldn’t be too quick to buy directly from an author if his/her only ordering method available were to print out a text file, fill it out, and send it with your check. So in a sense, each author or competitor would have to have easy searching, a great shopping cart, and yummy ecommerce…. and that costs money… which may raise the price of that book. See #2. 🙂

What could put Amazon.com out of business?

  • A complete shift in the entertainment business where there are no distributors anymore, no middlemen. The artist sells his or her music, book, video directly, and every time you want that item, you have basically one choice. <- this doesn't seem really likely now does it.
  • A change in technology where you no longer have to buy books, music, or video to have those experiences. If your home and work and car and computer had every song, book, movie, and the like available at your mouseclick, you’d have few reasons to go to Amazon.com. <- this is probably where the future will bring us but probably not for a bunch of years, and personally, I'd rather see big business spending money on feeding starving people and bringing life to suffering communities over getting entertainment delivered to me faster.
  • A competitor buying out their main or only suppliers. If Barnes and Noble owned Amazon’s vendors, somehow this game would be rather different. 🙂

So why did this guy report this?

Who can know. For all I know, the person who pays him or the person who owns the person who pays him also has a piece of someone who competes with Amazon.com. Or, maybe this guy got the idea that other people making books available “directly” could put Amazon.com out of business and ran with that idea. Maybe he figured it was a hot lovely Sunday afternoon and nobody would be listening. 🙂

All I can say is that I don’t agree, and I don’t feel he gave enough information to support his point. Meanwhile, I think there is something we can all learn from Amazom.com now, and if/when they go out of business, there will be something to learn from that too.