Amazon.com last week told the world that it entered into a strategic alliance with brick-and-mortar bookseller Borders, and that it expected to exceed analysts' estimates for its first-quarter earnings, with numbers at the top of the range it most recently predicted.

The manic-depressive markets boosted the company's stock price on the day of the earnings announcement. But the really good news is that Amazon is making inroads toward becoming profitable by the fourth quarter.

As the biggest online-only retail brand -- the bellwether for all e-tail businesses -- the move from deathwatch to slow progress is encouraging.

Consumers who have come to rely on the convenience of online shopping shudder at the thought that these companies might go away because investors don't like business-to-consumer e-commerce anymore.

But study after study has shown that online sales continue to grow in spite of the market's cold shoulder to e-tailers and the frenzied death rate of dot-coms. For the survivors to succeed, they need to evolve to the new market conditions.

That's what Amazon has done in the past several months. Amazon has made small adjustments to the way it does business to meet the goal of becoming profitable by the final quarter of 2001.

But the real question is, What can other dot-coms learn from big daddy Amazon's experience and recent evolution?

Let's take a look at some of the measures Amazon has taken.

* Amazon completed some small cost-cutting measures at the beginning of this year. Rather than wait for the quickening of a corporate apocalypse to slash operations so the company could no longer function, Amazon took a measured step. Making the responsible move that any retailer does after a disappointing holiday season quarter, Amazon made small staff cuts and shut down a distribution center and a customer service center. Another center went to seasonal operations.

* Amazon has continued to investigate partnerships with brick-and-mortar operations. The company's first major partnership, Toys "R" Us, proved to be a tremendous success, giving Amazon a recognized and trusted toy store brand. In turn, Toys "R" Us, which suffered embarrassing distribution problems when it tried e-commerce on its own, gained the logistics infrastructure of a company that had proven it could do the job.

Although the terms of Amazon's deal with Borders were not disclosed, it may include an option that enables customers to order online, then pick up their orders at a Borders location for same-day service.

Rumors also have been flying recently about Amazon talking to both Wal-Mart and Best Buy about partnerships. Although no announcements have been made, these rumors are probably true. Amazon recognizes that partnering with brick-and-mortars is a successful strategy. For example, Amazon has specific experience with Web site operations, and the logistics involved with being an online retailer. Interestingly, WalMart.com also recently announced some staff cuts and consolidated its two offices into one.

* Amazon continues to invest in innovations that take advantage of its status as a pure-play dot-com retailer. One good example of this is the software download store launched in March. Through the new program, consumers download software titles instead of waiting for the CD-ROM to arrive via standard shipping methods. Titles such as Intuit's TurboTax and Macromedia's Dreamweaver and Flash are some of the programs available for download purchase.

As an Amazon outsider, those are the three major lessons I've learned about e-commerce: Take measured responses to market changes; diversify your channels through partnerships; and continue to innovate, taking advantage of the unique advantages of your primary channel.

Anyone else have some e-commerce best practices to share?

» posted by ITworld staff

InfoWorld

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