What the Future Holds

Amazon

Amazon stands at a critical juncture today. Profits have proven to be elusive. For the longest time, Jeff Bezos has argued that focusing on profits would mean giving up on growth opportunities and is not in the interest of the company. However, this has now changed with Bezos saying, "This is the right time to focus on the fundamental economics of our business, even if it means sacrificing growth." ^[23] The vast majority of investments in online firms have been written off. The company does not have adequate cash to operate for a long period of time. The company has accumulated a vast deficit.

However, this has not stopped the company from making new acquisitions and forming new partnerships. A key partnership was announced with Target on September 2001. Target agreed to use Amazon.com technology for order fulfillment and customer care services on its Target.com, MarshallFields.com, Mervyns.com and GiftCatalog.com websites ^[24]. It acquired the operations of the defunct Egghead.com on December 19, 2001. This provides Amazon.com another channel to reach customers ^[25]. The company also announced a partnership with Circuit City on December 11, 2001 ^[26]. Customers can now place an order for an electronics item at Amazon.com and pick it up at their local Circuit City.

The company continues to add innovative features on its web site. It added the "millions of tabs" feature in September 2002. Customers now have a tab that is their own and is completely customized to their needs. Amazon.com also added computers and e-books to its site.

One problem that analysts have identified is that the growth in the number of customers has slowed down. One analyst has been quoted as saying, "Everyone who wanted to buy a book online has already heard of Amazon." ^[27] An expert within Amazon has come up with this solution—"Amazon should increase its holdings of best sellers and stop holding slow-selling titles." ^[28] He sees this as the way to reduce costs and move toward profitability.

The company has attracted a $100 million investment from America Online fueling speculation that this may be the first step towards a merger ^[29]. Moreover, there is some sentiment that the long-term future of the company may be as a technology provider. This is really based on the alliance with Toys 'R Us where Amazon runs the online storefront and Toys 'R Us controls inventory and logistics.

eBay

The company is totally committed to the Internet. As CEO Meg Whitman put it: ^[30]

"The Internet is not dead. When I talk about the future of the Internet many people say, 'What future?' But I believe the Internet's best days are still ahead."

eBay realizes that it has a very powerful place in the market with a loyal customer base. On January 17, 2002, the company announced that it was increasing the Final Value Fee which is the fee paid to the company when an item is sold ^[31]. This had previously not been increased since 1996. Such increases in fees could be expected in the future leading to strong profits.

A clear direction of growth for eBay is in foreign markets. It is currently operating in eight of the top ten countries by online market size outside of the U.S. eBay currently has a presence in major Asian markets, Japan, South Korea, Singapore, and plans to expand to Taiwan and China soon. It is gaining users 50% faster in Europe than in the U.S., and gross merchandise sales are growing 135% faster ^[32].

eBay has also identified m-commerce as a potential growth area. Specifically, eBay is working with Microsoft's .Net initiative to provide access to its auction services to cell phone users ^[33]. With this technology, consumers will be able to bid on auctions using their cell phones. This will make it even easier for users to participate in auctions and is expected to increase usage.

There are some indications that eBay feels that sticking to the auction format alone limits its growth prospects. As a result, it has said that it will pursue fixed-price retailing, something it started with its purchase of Half.com.

However, eBay will always be known as the auction site that was the last man standing in the dot-com movement due to a prudent business approach.

^[23]Hansell, S. A Front-Row Seat As Amazon Gets Serious. nytimes.com. May 20, 2001.

^[24]http://www.iredge.com/iredge/iredge.asp?c=002239&f=2005&fn=Target_Release9_11_01__689.htm

^[25]http://www.internetnews.com/ec-news/article/0,,4_942931,00.html

^[26]http://www.iredge.com/iredge/iredge.asp?c=002239&f=2005&fn=CCInstorePU1211__810.htm

^[27]http://www.nytimes.com/2001/07/24/technology/ebusiness/24AMAZ.html

^[28]Hansell, S. A Front-Row Seat As Amazon Gets Serious. nytimes.com. May 20, 2001.

^[29]http://www.nytimes.com/2001/07/24/technology/ebusiness/24AMAZ.html

^[30]Jacobus, P. (2001). eBay's Whitman: Net has lots of fight left. March 14. http://news.cnet.com/news/0-1007-200-5137192.html.

^[31]Cox, B. (2002). eBay Hikes User Fees. January 17. http://www.internetnews.com/ec-news/article/0,,4_957321,00.html.

^[32]Bjornsson, M. (2001, Spring). eBay's Position in the Industry. http://www.cs.brandeis.edu/~magnus/ief248a/eBay/fiveforces.html.

^[33]Kenedy, K. (2001). The Future's In Portability, Say Sun, EBay Execs. March 15. http://www.internetweek.com/story/INW20010315S0001.