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Amazon – As Seen on TV!

30 May, 2002 By: Joan Villa


Although Amazon.com is growing a little slower than the rest of the online retail world, the company has been able to finally leverage its size into operational efficiencies that will achieve pro forma profitability as promised by year-end, CEO Jeff Bezos told investors during a Web-based shareholder meeting last week.

“We grew so fast in the first four years, I'm not embarrassed about the fact that we weren't doing things in the most efficient way,” Bezos said.

In the most recent quarter, however, “sales were up 21 percent year over year, and that's a significant reacceleration of the business,” Bezos said. Active customer accounts, or those that have purchased in the past 12 months, are up 27 percent, to 22 million, he said.

To drive sales, Amazon will grow selection and emphasize lower prices, Bezos said, adding, “It's all about figuring out what people want and inventing on their behalf to make it easy.”

Amazon's video customer base is active, indeed. Last week, the company reported it presold more than 100,000 copies of Harry Potter. The company also is looking to boost its consumer reach through a test of TV ads in two markets. Bezos said the tests make sense because of lower ad rates, although TV ads remain a low priority overall for Amazon.

“Our best marketing dollars have been spent not on ads, but on improving the customer experience,” noted Bezos, who said Amazon has gained more sales from word-of-mouth that favorably “surprises” potential customers. “If push comes to shove, you build the customer experience and let the product do the talking.”

Bear Stearns analyst Jeffrey Fieler believes TV advertising might work for Amazon now that U.S. Web usage is climbing.

“Typically, online commerce companies have found advertising online is a more effective customer acquisition tool than television advertising, just given the percentage of customers online,” Fieler noted. “With Internet penetration now up over 60 percent of the population, it starts to get to the point where advertising on TV could make sense, and that's why they're looking at it again.”

Fieler also noted that online growth has slowed this year to a projected 30 percent versus more than 40 percent last year and 70 percent two years ago. However, Amazon's projected growth is a slower 20 percent to 22 percent rate this year because its primary base of books, music and video have been widely adopted by online consumers. To get further growth, Amazon needs to bring new users to the site, he explained.

Bezos defended Amazon's practice of offering used books, CDs and videos on the same page as new product, which the Author's Guild protested out of concern that used sales are depriving authors of new book sales.

“It is true that when offered more books at a lower price point, people are willing to experiment more and get introduced to new authors,” he countered.

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