Problems At Amazon

With the Christmas season rapidly approaching and the US economy going strong, e-commerce sites scramble for what will be another record buying year. No company holds a better position to capitalize on the ensuing annual buying binge than Amazon does. However, a series of recent missteps generates dark clouds on the horizon. Each incident, if taken by itself, would be a minor annoyance. Taken as a whole, a more troubling picture emerges.

At its inception, Jeff Bezos, Amazon’s founder and lightning rod for controversy, put forth a business plan forecasting a very long period before profits would result. That was 1995. Until recently, the investors on Wall Street bought the concept and watched as the company burned through plenty of money. By the end of June 2000, Amazon had taken on a debt of $2.1 billion with profitability not yet in sight. With a steady stream of upbeat “everything is great at Amazon” from the charismatic Bezos, until recently, he was able to hold back an impatient investment community. Sledding, however was not always smooth. In June, Ravi Suria, a debt analyst at Lehman Brothers, wrote a scathing review of the wild spending at Amazon, predicting they would run out of cash in first quarter, 2001. Bezos brushed off the dire predictions as lacking substance. The price of the Amazon stock tumbled from a high of $115 to where Amazon trades in the $25-30 range at present. Perhaps more significantly, the shot fired across the bow of the Amazon boat signals Bezos and company had better start showing a profit – and quickly. Essentially, the heretofore money well has gone dry.

Caught With

 Dynamic Pricing

When some Amazon customers learned (via online bulletin board postings) they were charged as much as $50 more for a DVD player than other customers, outrage ensued. Caught in the deception, Amazon not only refunded the overcharges, but promised not to do it again. This was their second attempt at this unpopular, perhaps unethical, practice. Not only did Amazon reap a harvest of bad publicity over the affair, but also the confidence of loyal customers was shaken. After all, Amazon had used confidential information (purchase patterns) to determine the uneven pricing levels. The reward for loyalty could very well have been higher pricing. Essentially, if buyers had not been checking prices, the practice could have continued unnoticed.

There is more. In early September, many of Amazon’s 23 million customers received what appeared to be a benign e-mail. Amazon informed its registered customers the privacy policy had been modified. A hot-link directed the reader to the new policy. When arriving, the Amazon customer was forced into agreeing to the policy. This did not sit well with some “Internet Info” readers. In addition, the new policy states Amazon considers customer information an asset and should the company be sold, the asset would be transferred. Many people (including Electronic Privacy Information Center) viewed the new policy as severely watering down privacy. EPIC terminated mutual programs it had in place with Amazon. Critics speculate that Amazon will sell privacy information to raise much needed cash. This leaves many Amazon customers very uncomfortable. Again, more bad press for Amazon.

In My Experience

Recently, I purchased a replacement laser cartridge (part# 20122) for my NEC 870 printer. After shopping the Web, I purchased the item from EggHead.com. While the item was easy to find on the Amazon Web site and the order could have been conveniently placed with the famous Amazon one-click method, the price from EggHead was over $20 lower. Amazon lost my business on the item. I suspect Amazon, feeling the heat from The Street, raised prices in an attempt to staunch the river of red ink flowing from the company. Many people now find Amazon’s former bargain books to be elusive. If a potential buyer wants the best price, they cannot be assured that Amazon will have it.

Will Amazon

Weather The Storm?

In the face of its fumbling and missteps, Amazon continues to provide very good service. Essentially, it sets the standard for customer service on the Web. Stephen King used the Amazon infrastructure for payments to his cyber-book-in-progress, The Plant. Few problems have been reported in this area to date. Nevertheless, Amazon must make adjustments in order to attain profitability. As the new Christmas season arrives, Amazon will be again put to the test. The bloom is off the e-commerce lily in part because of Amazon’s problems and miscalculations. From all indications, Amazon will weather its financial storm. However, it will emerge a different company. I have not cancelled my Amazon account. At least not yet. Stay tuned.

(This is the 228th of a series of elementary articles designed for surfing the Internet. Next, “News from the Net” is the subject on tap. Stay Tuned. Until next week, happy travels through cyberspace. Previous issues of Internet Info for Real People can be found: http://www.thebee.com. Please e-mail comments and suggestions: rbrand@JUNO.com or editor@thebee.com.)