When giant e-tailer Amazon.com announced Monday that it would be hawking everything from software to home improvement items, its stock shot up more than $13 (US$) a share, closing at $78.
However, reality set in on Tuesday. By the end of the day, Amazon’s stock lost more than 50 percent of what it had gained the day before.
Amazon has grown from a company that just sells books via the Internet to an online equivalent of Wal-Mart. Jeff Bezos, Amazon’s founder, has publicly said that he wants Amazon to be the place where customers can find anything.
And, that’s “anything” with a capital “A.”
Even with all the fanfare and positive hype surrounding Amazon’s latest product expansion, Bezos refused to give specifics on what effect the new product lines would have on Amazon’s bottom line. That is, except to say that he expects the new offerings to drive in more revenue.
So, once again, in typical Amazon.com fashion, the company’s positive expansion is juxtaposed against the reality that it has yet to turn a profit.
Stockholders Ready To Stay The Course
Somehow, despite the Damoclean sword of red ink hanging over the company’s head, stockholders still react positively to each new Amazon announcement and appear ready to stay the course with the mighty e-tailer.
Although I have been critical of Amazon.com in the past — and still have difficulty understanding a company where profit seems to be a dirty word – I can see why stockholders remain enchanted with the company.
New Stores Have Much Potential
Amazon’s concept of offering software using only offline delivery shows me that it is unwilling to risk providing poor customer service in its quest for a fast buck.
Additionally, the concept of a home-improvement site integrated into Amazon’s extremely user-friendly site has the potential to be a big winner.
Seeing Is Believing
All things being equal, I have to admit that there is another reason why I’m beginning to warm up to Amazon’s ever-expanding online store. It’s because I recently began ordering some items from the e-tailer.
So far, I’ve been amazed by how speedily my orders have been filled. In all cases, the products I bought online were delivered to my front door sooner than promised.
I’m also impressed with Amazon’s one-click system. Any service that remembers all my previous information and allows me to just point and click to buy something is all right by me.
I suppose that, despite my instincts to the contrary, I have to concede that Amazon.com has already become an efficient, hard-running e-commerce machine with great potential.
At least until the next quarterly report.
Columnist Rob Spiegel concurs: I don’t think that Amazon cares as much about operating losses as it does about its brand. The company is not bleeding all this red ink to beat CDNow or even barnesandnoble.com. I think that Amazon is chasing Wal-Mart and Sears so that it may become one of the world’s leading retailers.
Sounds ambitious, but it certainly explains the company’s moves. I wouldn’t be surprised to see Amazon launch a few brick-and-mortar stores of its own in the next year or two.
Long Term View
Perhaps profits don’t matter at all in a cyber-world of constant expansion. Maybe all that matters is brand. When the Internet expansion levels out and the inevitable shakeout comes, it could be that brand will be the deciding factor as to who is left standing.
If so, Amazon may eventually be the only major e-tail dot-com left.