Truck and Barter: The Economist advises Amazon

The latest edition of The Economist looks at the prospects of Amazon;

“Amazon's product range is expanding in much the same way as online sales are. As people become more accustomed to shopping on the internet, they are ordering a greater variety of goods and services from a wider range of websites. In America online sales were up by 25% in 2005 over the previous year, reckons Forrester, a research company. Travel is now by far the biggest category, worth some $63 billion last year, followed by computer equipment and software ($14 billion), cars ($13 billion), clothing ($11 billion) and home furnishings ($8 billion).
Amazon's challengers come from two directions. First, other online retailers are growing rapidly and appear in various forms. Many of the dotcoms are invading each others' turf. From auctioning people's old stuff, eBay now also hosts fixed-priced virtual shops offering new goods for sale. And Google is adding more shopping-type services, such as Froogle, a shopping-comparison service, and more recently its new Checkout payments system, which rivals eBay's PayPal.

Second, traditional retailers are rapidly getting their online acts together. This pits Amazon against giant retailers with huge purchasing power, like America's Wal-Mart and Britain's Tesco. These “multichannel” retailers make a virtue of their ability to offer both “bricks and clicks”. Many provide online customers with the option of picking up goods from the shop down the road. This is proving popular with web buyers who want things immediately or are keen to avoid shipping costs and staying in to accept a delivery. Circuit City, a big American electricals chain, expects in-store pick-ups to account for more than half its online sales this year…

The battle for downloads is becoming more intense. The market for digital music is dominated by Apple's iTunes, which is also likely to expand into video. Microsoft is entering the music-download business with a digital player, called Zune. On August 8th Nokia bought an American digital-music distributor, Loudeye, to develop its own service for its music-enabled handsets. The Finnish telecoms-equipment company says these are now selling roughly twice as fast as Apple's iPods. Video downloads are available online from some sites, such as Movielink.com, which is owned by five big film studios. News Corp's websites, including MySpace.com, are planning to sell films and shows from the group's Fox network. …
A video service could resemble a downloadable version of Netflix, a Californian company that pioneered online video rentals. Netflix's customers compile online lists of videos they want to see and receive them in the post. When the DVDs are returned in their pre-paid envelopes, the next titles are sent. With no late fees, Netflix has pummelled Blockbuster's store-based video-rental model.

Netflix is also exploring how to deliver movies online. Amazon has already copied the Netflix postal model in Britain and Germany and it has dropped hints that it may launch a postal service in America: Mr Bezos told Wired magazine last year that Amazon was well placed to do so “...and we wouldn't have to pay heavy marketing fees.” The same could be said about video downloads. Although Mr Bezos has discussed his strategy in the past with The Economist, the company did not respond to requests for an interview…

“The need to own music in a physical form, whether it's to play in other music systems, to minimise the chances of losing it or just because they like to have a physical collection, remains very strong amongst internet users,” says Alex Burmaster, the research company's European internet analyst…

a subsidiary called Amazon S3 rents out temporary storage by the terabyte to other websites…

Another Amazon subsidiary, BookSurge, is busy courting publishers to have their works scanned into digital files…

A new “e-reader” device from Sony has a special screen that mimics the way light falls on a printed page. The size of a paperback, it can store several hundred novels…

Unless the pioneer of online retailing can provide downloadable media it risks being “disintermediated”—rather as only a decade ago high-street bookshops, music and video stores were disintermediated by Amazon itself.”

My bet is on Amazon’s BookSurge.

"Now, a small Minnesota startup is trying to shake up the status quo in the $6 billion college textbook industry. Freeload Press will offer more than 100 titles this fall _ mostly for business courses _ completely free. Students, or anyone else who fills out a five-minute survey, can download a PDF file of the book, which they can store on their hard drive and print.

The model faces big obstacles. Freeload doesn't yet have a stable of well-known textbook authors across a range of subjects, and it lacks the editorial and marketing muscle of the "Big 3" textbook publishers (Thomson, Pearson, and McGraw-Hill). Its textbooks don't come with bells and whistles such as online study guides that bigger publishers have spent millions developing in order to lure professors _ who assign textbooks and are the industry's real customers."

Truck and Barter

The Economist advises Amazon

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