Friday, July 30, 2010

....And Amazon Has Its Own Problems

In today's prior post, I excoriated Barnes & Noble for not being able to deliver on its business model's implicit promise of having books in stock.

As I promised the B&N help desk staffer, I went to Amazon to complete my birthday gift purchase when I returned home that afternoon.

Even there, however, I was met with confusion and, frankly, gross misrepresentation.

I found the book easily enough. And, for once, was actually grateful for the one-day shipping option. Costly though it was (more than the value of the book), I selected it, then proceeded to the payment screen.

Imagine my surprise when the concluding screen informed me that I'd been charged for one-day shipping, but the expected delivery date was six days later!

I next went to a very useful feature on the website, where I was able to type in a phone number and be called instantly by an Amazon help desk employee.

After a heated exchange following the third unique personal identification question, the staffer went offline briefly, then returned to explain the seemingly-contradictory information on shipping of the gift.

She contended that the fulfillment vendor on this book wouldn't have it in stock until five days from now, at which time it would be shipped in one day.

I was, to say the least, not at all happy about this. I told her bluntly that this was grossly and deliberately misleading.

To, on one hand, charge me a huge premium for 'one-day shipping,' and contend that is what it is, then, on the other hand, inform me this means 'one day after the book is in stock,' is just wrong.

What customer orders and pays a premium for next-business day shipping, thinking it means anything else but just that- next day?

Given the option on Amazon's website, I modified the order and replaced the premium shipping with standard delivery. Why double the order's price for no benefit?

I was frankly very surprised at Amazon's obvious attempt to bait and switch on shipping charges. There wasn't any specific warning on the out-of-stock condition when I chose the premium shipping option. Instead, I had to dig further and spend about ten more minutes on help screens and the telephone to arrive at the truth.

However, as the accompanying five-year price chart for Amazon and the S&P500Index indicates, the company has been nicely outperforming the latter for most of the past five years. It's even made the short list of my strategy's equity portfolio recently.

The borderline-fraudulent delivery option pricing/performance is a minor problem, when compared to Barnes & Noble's more glaring issues.

Still, Amazon's recent price cuts on its Kindle give one pause. I wrote in that recent post,

"You have to wonder, with Amazon having so much less control over its Kindle development than Apple does over the iPad, if that difference will have ramifications for its content sales in the years to come.

One thing is sure. The Kindle is in a direct fight with the Nook and other e-reader-only devices, while Apple's iPad floats above them, offering a different set of features which clearly differentiates it and commands the typical premium Apple price."

After my Barnes & Noble experience, I drove to my nearby fitness club to work out. Ironically, as I was moving between weight lifting stations, I heard/saw an interview by the hapless CNBC anchor, Maria Bartiromo, she of the annoying speech impediment, with a senior exec from Amazon.

Maria was tossing softball questions to the Amazon VP who was showing off the company's latest version of the Kindle, priced at an all-time low.

With the company's recent revenue miss only a week ago, and the resulting swoon in the equity's price, you'd think Bartiromo would be well-positioned to grill the VP about the seeming weakness in Amazon's strategy. It is quite obvious, by now, that the company is cutting price on the Kindle to maintain share, while charging less for ebooks (than physical ones), which are forecast by Jeff Bezos to become more than 50% of the retailer's book sales by next year. The recent revenue miss suggests Amazon's margins are being squeezed and its investments in the Kindle will be yielding less than in the past.

A competent business media interviewer would have used these pieces of information to create a much more interesting and potentially revealing interview than the one Bartiromo held with the Amazon senior executive.

But just because Bartiromo failed, typically, to highlight Amazon's problems, doesn't mean they don't exist.

It seems both physical and electronic book retailing have become overly challenging for the vendors engaged in both endeavors.

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