Amazon Chief Sees Limitations for Web Commerce
Jeff Bezos, who helped create the electronic-commerce revolution by founding Amazon.com Inc., wants to make one thing clear: Sales on the World Wide Web will never approach sales in the whole wide world.
In the long run, Internet sellers may capture 15% of the world’s $5-trillion retail market, the chief executive of the Net’s leading vendor said in an interview with Times reporters and editors on Thursday.
Bezos said there are some natural limitations to the Web that he can see now, even as most people just begin to explore its vast potential and take advantage of its lightning-speed growth.
“The physical world is the best medium ever invented, and betting against it has always proved wrong,” Bezos said. “To bet that people won’t go into stores is to bet against human nature, which is always a bad bet. We are a gregarious species.”
The Internet will never be able to respond to acute needs as well as stores, he acknowledged, meaning that if someone wants something now, he or she will always have to go out and get it.
Moreover, the political forces pushing for taxes on the new technology have the capacity to quash e-commerce even before it has a fighting chance, said Bezos, recently named Time magazine person of the year.
He said Amazon and other Internet companies should have been better prepared politically, and should be doing more now to counter the threat of Internet taxation, which he said would stifle the booming economy his industry helped create.
At the same time, Bezos said he doesn’t really have a sense for whether any particular presidential candidate would best serve the high-tech arena’s needs. He said he blames himself for not knowing more about Washington and its ways.
In the absence of an Internet industry lobbying presence, Bezos said, the well-entrenched opposition has dug in. The bricks-and-mortar retail world, he said, is being dragged kicking and screaming into the age of the Internet and would like nothing more than to squelch the competition.
To Bezos, their reasons are obvious. The 30 minutes it takes a shopper to drive to a mall and park the car is worth at least $3 at the minimum wage--close to what Amazon charges for shipping.
Still, what the techies have going for them is likely to be a decent slice of a very large pie. A 15% stake of total retail sales today would be worth about $750 billion. That estimate, which appears to be the first time Bezos has offered it, is in line with other projections from both the retail industry and securities analysts.
And one area of growth, he said, will come from wireless access--which will allow shoppers to buy online via their cell phones or get a recipe from their stove’s own Internet hookup.
“People are busier and busier as time goes by,” Bezos said. “So a lot of the successes you will see will revolve around concepts that make [life] easier for people.”
That concept has been Amazon’s driving passion.
The Internet vendor, known for its easy-to-use Web site, extensive product offerings and online reviews, this year expanded from its original books, movies and videos to include toys, electronics and tools.
The company has also spent dearly on seven distribution centers comprising more than 3 million square feet. The holiday season is shaping up as a confirmation of Amazon’s decisions.
“Clearly, this is the year that ‘e-tailing’ moved into the mainstream,” Bezos said, citing Amazon’s growth in the third quarter to 13 million customers from 4.5 million at that time last year. “Those aren’t computer experts, obviously, those are ordinary folks,” he said
But on Thursday, the market reacted to reports of a decline in Internet customer traffic this week, as last-minute holiday shoppers turned to the malls instead of the Web.
Amazon stock over the past two weeks has lost more than 13% of its value. On Thursday, its shares tumbled $7.69 to $90 on Nasdaq, knocking a cool $904 million off Bezos’ estimated net worth of $10.6 billion.
Though some attribute the decline to profit-taking, the market has occasionally bristled at Amazon’s hemorrhaging money in the name of driving sales. Including one-time charges, the company reported a $197-million loss for the third quarter on sales that had doubled year over year to $356 million.
For all its growth, Bezos isn’t sure that Amazon will necessarily be one of the Internet survivors.
“There are no guarantees for Amazon,” he said. “If you look at the history of pioneers over time, it’s not that good. Amazon could still end up being a footnote in the history of e-commerce. If that happens, shame on us.”
