August 10, 1998
No mere bookstore, Amazon.com wants to be an online retail giant
I have seen the future of Amazon.com, and it looks like Wal-Mart.
This may come as a surprise to those who are accustomed to thinking of Amazon.com as a bookstore. After all, books are what the company is known for, and Amazon.com promotes itself as "Earth's biggest bookstore."
But books are just the tip of the iceberg. It's widely known that founder and CEO Jeff Bezos, when he was starting out, made a list of products that would be well-suited to Web sales. Books topped that list -- but they're clearly not the only things on it.
In fact, Amazon.com's recent acquisition of Junglee Corp. (announced as this column went to press) confirms the bookseller's intention of getting into a broader retail market: Junglee makes software agents that facilitate online shopping.
Why do you think Bezos chose a generic name like "Amazon" anyhow? It's sheer size that Bezos cares about, not just books.
Turning the page
Amazon.com recently started selling music CDs on its site. Video rentals and sales can't be far off, as Bezos has indicated in recent interviews. That's why he bought the excellent Internet Movie Database (http://www.imdb.com).
Amazon.com's course during the next year will be to increase its market share of online audio CD sales while maintaining market share in book sales. Also, I expect it to open a video store within the year.
But Bezos isn't likely to stop there. The next target for Amazon.com will probably be online software sales. Software, like books, CDs, and videos, is an information-rich commodity, is easy to order online, and can be shipped straight from the distributor to the customer.
Expect Amazon.com to get into software sales in much the same way it's getting into video sales: by acquisition. Amazon.com's three recent purchases indicate that it prefers best-of-breed companies with strong brand names.
The leading brand names in Internet software sales right now are Software.net and Egghead.com. But with current market valuations pushing half a billion dollars, these companies may be too expensive.
Another possibility is privately held start-up Chumbo (at http://www.chumbo.com). Like Amazon.com, Chumbo has many retail partnerships with other companies, with which it hosts a co-branded online software store and shares a slice of the store's revenue, just as Amazon.com does with its Associates program.
A killer supply chain
Another piece of the puzzle: Amazon.com recently hired Wal-Mart's logistics chief, Jimmy Wright, as vice president and chief logistics officer. Logistics and supply-chain control are Wal-Mart's secret weapons -- they comprise the technologies and business relationships that allow Wal-Mart to undercut and demolish small-town competitors throughout America.
That's why Wright is a major coup for Amazon.com. His hire suggests that Bezos takes seriously the challenges of establishing a powerful, rapid supply-and-distribution network.
But once Amazon.com has made the investment needed to distribute products globally and rapidly (and it's already partially there), why limit this infrastructure to shipping books? Why limit it to CDs, video, and software, for that matter?
That's why it's so intriguing that Amazon.com has been rumored as a potential partner with Drugstore.com, a start-up Internet-commerce venture headed by former Microsoft executive Peter Neupert, as The Industry Standard reported on July 27. Like Amazon.com, Drugstore.com is backed by venture capital company Kleiner Perkins.
Although an Amazon.com representative wouldn't comment on this rumor, it's easy to see how Amazon.com's expanding infrastructure could benefit an online retailer of drugs and sundries.
With a Drugstore.com partnership, Amazon.com really might start to resemble an online superstore. When that happens, its competitors won't be the like of Barnes and Noble or Borders -- Amazon.com will be competing with real-world superstores such as Wal-Mart itself. It might even drop the "book" part of its motto, and start calling itself Earth's biggest store, period.
Dylan Tweney (email@example.com) has been covering the Internet since 1993. He edits InfoWorld's intranet and Internet-commerce product reviews.
Previous columns by Dylan Tweney
Sex scam points out lack of safeguards in online business
August 3, 1998
SkyMall aims high, shows Net results in order processing
July 27, 1998
Retail dilemma: balancing security, ease of ordering
July 20, 1998
Every column since August, 1997