Has Amazon lost its way by diversifying?
A few weeks ago, I characterised the most recent phase of the
Internet era - where the dotcom became the defining feature of its
landscape - as starting roughly in the mid-1990s. Among the many
landmark events of that time, none was more significant than the
foundation of Amazon.com, in July 1995.
Since then, Amazon has rarely been out of the headlines in the
Internet world. Its ambitions, its apparently ever-rising share
price and constant stream of innovations made it the real
bellwether of the e-commerce world.
Against that steep ascent its current fall is all the more
striking. But it remains a powerful force in the online world, not
to mention a key Net icon. This makes its actions during the
current dotcom downturn particularly interesting, since more than
most, Amazon needs to re-invent itself in the light of the new
order.
One of the key elements of Amazon.com's previous strategy was a
constant broadening of its base. More and more stores were opened
under the Amazon.com banner, including some (like garden furniture)
so far removed from the company's main business, that they looked
like bad ideas even during the headiest days of the dotcom
delirium.
Despite this, Amazon has continued to add new sections, but now
they are noticeably closer to its core business of book-selling.
These include an e-
documents store, and one for
magazines.
Amazon has continued to innovate: it has added the simple means for
making
donations to charities; and made available images of
sample pages from books
More importantly for its economic health, perhaps, Amazon has
extended its practice of forging alliances. Some of these are
fairly small-scale affairs, and amount to a branding exercise
within the main Amazon.com site. Others, like the $100m (£71m)
investment from
AOL, with a related link-up in
Europe seem to portend something much bigger. Now that
AOL has acquired with Time-Warner as much content as it could ever
need, the obvious missing piece of the online puzzle is a top-class
e-commerce system for exploiting both that content and its huge
global user base.
Amazon.com could certainly provide that expertise. Indeed, the most
significant moves in recent months have involved the company taking
over other people's e-commerce operations. First there was
Borders, and then
Waterstone's.
Visiting the respective sites (at
www.borders.com/ and
www.waterstones.co.uk/)
is a rather disorienting experience, since the effect is of viewing
Amazon pages with a little extra branding and content.
This loss of the main brand, or indeed any sense that you are
visiting a site belonging to another company, means that Amazon's
current approach to handling e-commerce for third parties is
unlikely to flourish. But what is really significant about this
move is that it sees Amazon building on what is perhaps its key
achievement and competitive strength - its online selling engine.
If it can get the front-end details sorted out, it may finally have
a profit-making winner in selling not books or birdbaths, but its
own highly-tuned e-commerce platform.