Re: Barrier to entry.

From: Brad Jensen <brad_at_elstore.com>
Date: Tue 28 Mar 2000 10:27:18 -0600

ROB FRANKEL WROTE:
> I'd disagree here. Amazon has no barrier to entry
> from where I sit.
 
TO WHICH JAMES SANTAGATA REPLIED:
> Amazon has several barriers to entry. Please consider
> the following:
> 1) Differentiation via a solid brand -- they created
> and own the category of "online bookstore".

TO WHICH ROB FRANKEL RESPONDED:
> Okay...are booksamillion and bn.com shaking in their
> boots? I think not.

I've never heard of these sites.
is bn barnes and noble?

JAMES SANTAGATA CONTINUED:
> 2) Patent: The USPTO just awarded Amazon the patent for
> their 1-Click technology. It's very powerful and B&N
> has decided not to fight this patent for now.

TO WHICH ROB FRANKEL REPLIED:
> Technology is no big deal. It may be convenient, but
> it's hardly the stuff that's gets people to stand up
> and swear allegiance. Besides, name one web technology
> that was supposed to be invincible and hasn't been
> surpassed since the claim was made.

Not only that, but I really wonder if that patent is
defensible.

However, I do love oneclick, and it does enter in to my
consideration of using amazon.

JAMES CONTINUED WITH:
> 3) Technology: highly scalable, available system.
> Excellent search functions and shopping cart.

TO WHICH ROB THEN WROTE:
> Puleese...everyone has that or something like it. Or
> promises it. But again, it's not the stuff on which
> you hang your branding hat. Can you imagine hearing
> this on your radio: "Amazon.com! Where you find
> highly scalable technology, excellent search functions
> and shopping cart"? Nah.

Amazon.com - think of the book you want, and order it with
a single click.

JAMES THEN WROTE:
> 4) Switching costs: one click is easy to use, my info
> is already in Amazon's database. I don't want to have
> to re-input all of this at B&N for instance.
> Psychological switching costs: Amazon has not done
> anything to incentivize me to leave the fold and B&N
> has not done anything to incentivize me to join their
> fold. So, put, I'll stay.

AND ROB REPLIED:
> Inertia is no substitute for good branding. The way
> you say it, it almost makes me think that if Amazon
> were to suddenly withdraw their one click system,
> you'd leave. As opposed to Apple, who (can anyone
> remember this?) pissed off an entire nation with their
> VX series and still managed to enlist fans.

Yes Apple, the 'chip on your shoulder' brand.

AND JAMES AGAIN:
> 5) Supplier relations: Amazon not only has strong
> relationships with material suppliers, but also with
> the investment/VC community. They were able to cajole
> the investment community to think twice and thrice
> before underwriting the B&N IPO. Amazon also was able
> to send out disconcerting press releases before the
> B&N IPO which really hurt B&N's share price.

AND THEN ROB WROTE:
> Now THAT was funny! Anyone who thinks that VC's are
> any more intelligent than your garden variety prep
> school dropout has to be kidding! Trust me, I've done
> enough road shows to know. Can you say, "Iridium?"

So far the Venture Capitalists seem to be staying in
business.

JAMES SANTAGATA:
> For external focus, the concern is branding. Amazon may
> have started to wade into the dreaded "bland extension"
> trap with Zshops and auctions.
>
> The addition of drugstore.com should not impact
> Amazon's brand, since it is not marketed as Amazon's
> drugstore.com.

ROB FRANKEL:
> Doesn't that strike you as weird? If Amazon WERE a great
> brand, it SHOULD be Amazon Drugs!

Sure, and Walgreen Tacos.

I'm gald you guys are so smart, this is really entertaining
and educational too.

--
Brad Jensen brad_at_elstore.com
President
Electronic Storage Corporation Tulsa OK USA
918-664-7276
LaserVault Report Retrieval & Data Mining
www.Laservault.com




Received on Tue Mar 28 2000 - 10:27:18 CST