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8.5M US households purchased gifts online this year, up from about 2M last year. [WSJ, 30Dec98. Edupage.]

If you're a geek, Amazon.com (Seattle) might be the place for you. "We tell the temp agencies 'Send us your freaks.'" Green-haired twentysomethings with body piercings run loose, at all hours. The executive staff range "from Microsoft refugees to liberal-arts majors and rock musicians," as well as several from Wal-Mart. Amazon's building is unmarked, with employees sometimes playing broomball among desks made of doors or raw lumber. (That's a step up from Jim Bezos' garage, with interviews conducted at a nearby cafe in a Barnes & Noble superstore.) Amazon has 1,600 employees selling from a list of 3.1M titles (or 15 times more than any physical bookstore). They work hard, and average revenue per employee is $375K -- although the company won't be making a profit for another two years or more. (Dozens of employees are now millionaires, though. Bezos himself is worth about $4.4B, if the stock price stays up.) Part of Amazon's lead is the use of "collaborative filtering" to analyze purchases and suggest related books. Another part is the 800K free reviews he's gotten from customers. Bezos plans to expand on this personalization. "If we have 4.5M customers, we should have 4.5M stores."

Store chains can boost revenues only by opening new stores, but Amazon's economic model is more like a software company: high up-front costs followed by high profit margins coupled to advertising expense. (Speaking of advertising, Amazon has 140K "associates" sites that bring in special-interest customers.) "Basically, these are information-systems companies with a little pick, pack, and ship." However, Amazon may find it tougher to get into CDs (with lower margins), videos (which it may have to warehouse), toys (with less-developed distribution networks), games and package goods (where customers like to handle the boxes), software (with support costs), electronics (with frequent model changes), durable goods (with high shipping costs), health products (available everywhere), apparel or travel services (requiring operator interaction and competing with glossy catalogs), flower delivery or magazine subscriptions (with entrenched competition), or other markets. Hence Amazon's recent purchase of Junglee and its shopping-agent technology, moving Amazon toward being a commission-based shopping service rather than a retailer. The difficulty with that approach is that Amazon can't control the quality of the full shopping experience. [Robert D. Hof, BW, 14Dec98, p. 106.]

Amazon.com's ultimate book competitor will not be Barnes & Nobel but the publishers themselves. Once they get into e-commerce -- and once the Internet develops uniform shopping interfaces -- publishers will be able to increase their profit margins by selling directly. [John T. Reed, BW, 11Jan99, p. 14.] (Will they? Or will the online retail arm of a publishing house have essentially the same overhead costs as Amazon does? There is no uniform answer to whether in-house or outsourced operations are more cost-effective.)

One of Amazon's future competitors is Buy.com, an online computer store that adjusts prices daily -- on 30K products -- to make sure that each has the lowest price on the Web. That way they always come up first in the comparison shopping engines. They also sell advertising space to their hardware suppliers. (A page of 12 ads sells for $3K/month, and the site has more than 600 such pages at present.) In 11 months the company has grown sales to $1M per day. 34-year-old Scott Blum is now planning to move into books, movies, video games, music, and maybe the other 3,000 topics for which he owns Web addresses. He'll stick with low prices for buyers who know what they want, rather than reviews, chat groups, and other browsing overhead. One of his reserved Web addresses is "10percentoffAmazon.com". [Larry Armstrong, BW, 14Dec98, p. 130.]

Business Week has published a way to evaluate the worth of Internet stocks. Amazon has had 306% sales growth, vs. 10% for Barnes & Noble, but it's going to be hard to sustain such growth. Jeffrey M. Laderman claims that Amazon will need to grow 60% per year over the next ten years to justify its current market evaluation. Microsoft has averaged only 43% growth per year since it went public in 1986. [BW, 14Dec98, p. 120.]

Mark R. Anderson notes that some of the Internet stocks such as Yahoo and Amazon see as much as 25% of their outstanding shares traded daily. [, SNS, 18Nov98.] (Much of the recent rise in Internet stocks is due to day traders -- people who hold the stocks for only a few seconds or minutes, limiting the likelihood of getting stuck in a market crash. Someone is going to get burned, though, and it could be any day now.)