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Amazon Ignores Rumors, Builds Its CE Business

Seattle – Ignoring bankruptcy rumors and a plummeting stock price, said it will remain at the forefront of a struggling e-commerce marketplace and will continue to grow, especially in the consumer electronics arena.

Amazon, the world’s largest e-tailer, has been under increased scrutiny since announcing layoffs in January.

Last month, CEO and founder Jeff Bezos received a letter from security analysts asking that he reveal financial information to allay fears that the company was preparing to file for bankruptcy in the near future. In addition, rumors circulated that Amazon was considering a new survival tactic by partnering with Wal-Mart, and when that rumor was squelched, Best Buy.

Officials from Amazon and Best Buy declined to comment on a possible strategic alliance. However, the e-tailer acknowledged through spokespeople that it had been contacted by numerous brick & mortar retailers interested in partnerships, and that plans for a CE alliance akin to Amazon’s link with Toys ‘R’ Us were “not out of the realm of possibility.”

In an interview at its corporate offices here last month, Carl Gish, the recently named Amazon’s technology product group VP, reiterated Bezos’ claim that the company is focused on one thing right now: realizing a first-time profit in 2001.

Gish, formerly consumer electronics VP, succeeded Chris Payne, a three-year veteran of Amazon who was promoted on Feb. 1 to VP of U.S. hardlines, including technology, toys and home products. Payne- who is credited with the development of some of Amazon’s largest projects, including its auction site initiative – resigned for personal reasons, adding more fuel to the rumor-mill fires.

Electronics is Amazon’s fastest growing business ever, and Gish predicts it will become a multibillion-dollar business. Of the site’s 25 top-selling items for December 2000, 20 were CE products, and the other five were products that require CE devices, such as DVDs or CDs. For this reason, he said, the company is honing in on the category and working hard to give its customers what they want before any of its competitors.

Just last month, Amazon announced the formation of its worldwide digital group, formalizing the continued development and deployment of the company’s global digital distribution platform, which includes music downloads, e-books, software downloads and online photo development.

“We’ve always planned to develop an aggressive digital offering when the experience was truly valuable for customers,” said Jeff Blackburn, general manager of the group. “Even though this channel is still in its very early stages, major publishers and record labels have the right teams and plans in place to drive rapid progress. We intend to work with our content partners to quickly improve the digital download buying experience and available selection. We expect tremendous upside for all stakeholders as the format matures.”

Amazon strives to give its shoppers what they want, said Gish, who added that reading and considering all e-mailed suggestions from customers, and conducting in-house studies of buying habits are some of the reasons the company’s CE website is effective.

Another reason is selection. According to Gish, the company’s CE store carries more than 400 SKUs, “about three times what the typical big-box retailer even has in stock. We realized that we had become a destination for consumer electronics… the place to come for the newest products, the place to come to place orders for products be-fore they were even available.”

Preordering is just one way Amazon thinks it surpasses many brick & mortar retailers in satisfying customers, he said. According to an in-house survey, 80 percent of its customers said they prefer buying on Amazon to buying at a big-box retailer.

Surveyed customers listed commissioned and aggressive sales forces, parking, a lack of information and uncertainty regarding “good deals” as the turnoffs of the big-box stores. By contrast, Amazon shoppers can avoid those negative elements and enjoy easy access to expert buying guides and consumer discussion boards.

Jason Shaw, group program manager of consumer electronics, said customer reviews are one of the site’s most noteworthy strengths. “Customers feel like there’s a camaraderie or bond [with other customers], and they feel they’re unbiased,” he said, adding that this feature is hard for other online CE stores “to duplicate because they just don’t have the volume that we do.”

“We’re always pushing out quick, incremental changes,” Gish said, pointing to recently enhanced search and browse functions, as well as additional product information.

Many of these changes are so small that they go unnoticed to the average shopper. For example, when Amazon introduced a software download store in February, making Intuit’s TurboTax program available just in time for tax season, developers compressed the files so customers wouldn’t become discouraged by long download times.

“When we built it and developed it, we explicitly took into account what kind of connections our customers would have,” he said. “You won’t see a lot of plug-ins.” The company also tried to eliminate customer frustration by letting them know how much time a download would take before it began.

One chief disadvantage remains Amazon’s inability to secure authorizations from key CE manufacturers, such as Sony. Gish acknowledged this problem, but emphasized that the company has partnerships with more than 200 distributors. And although he would not comment on any specific deals, he allowed that “we continue to talk with [the vendors], and discussions are ongoing.”

Since introducing electronics products, Gish added, “we have more than tripled the business year over year,” a feat that could make manufacturers more inclined to add Amazon to their authorized retail roster.

Without revealing details for CE growth, Gish noted that personal computers is one category the e-tailer currently doesn’t offer and would like to. “We will continue to focus on those categories that consumers are interested in,” he stressed, “digital cameras, digital audio, digital video and PDAs. Those are the hot new categories, and those are the ones we see growth around.”