The strategy conversation you can only have here
Isn't it amazing how we take things for granted once they become a permanent part of our lives? A few years ago it wasn't possible for one bookstore to stock 2.5 million books in one place. Now it is a reality with Amazon.com's web site which allows you to browse, review and purchase any one of the titles in it's database. Almost everyone I know now accepts that Amazon is an option when buying books on the Internet. With a 40% discount on most books it certainly is appealing.
A characteristic of the digital age is that success doesn't always beget success. In the analogue only days - if you were successful it was quite likely you would remain successful for a long time. Take a look at IBM - in the 1970's their business seemed impenetrable. They must really have thought that they had a winning formula - which is probably why they stuck to it for all those years.
This illustrates the point that in the digital age it is not sufficient to have something working without thinking about the next step. In fact if something works - break it and build it a lot better the next time - because if you don't someone else will. Only in the last few years when they have been forced to, have IBM pulled their business apart, looked at it critically, and are now rebuilding it in a fashion which suits the digital age.
So getting back to Amazon, the success that they have achieved thus far begs the question - what do they do for an encore? Some things are obvious such as offering more intuitive and interactive searching and ordering facilities, which they have already done. More discounts and more information about the books are also obvious development.
Amazon's model works because convenience and cost have drawn consumers to their online store. Technology and specifically the Internet has made this possible. The efficient handling of ordering and information save them money that they are able to pass on to consumers.
I believe that they now have to look at how Internet technology can take them to their next level of efficiency. Currently they take orders centrally (on their web site) and then books are dispatched either directly out of stock or ordered on from a printer. In the future orders can be routed directly to the printer nearest to the customer and the order despatched from there.
Another development which would further enhance Amazon would be to provide customers an opportunity to group together to get economies of scale for ordering and delivering. Let me give you my example to illustrate the point. I live in Cape Town and whenever I order books I eMail my friends to ask if they want to order anything from Amazon. I then submit one order for a number of books reducing the shipping costs for each of us. Now imagine if Amazon provided us the facility to do that but instead of just my 5 friends they deliver all books going to Cape Town in just one shipment which gets sent either weekly or when there are enough orders for Cape Town. The amount saved would again be considerable.
Looking at the power of grouping together consumers from another angle, imagine how much could be saved if all the people wanting to purchase a particular book grouped together and made only one order. It would then be possible to do one order for hundreds of copies of any particular book - again reducing costs through an increased buying power.
These are two ideas that could fundamentally change just one business that is using the Internet as a delivery mechanism. Just as a hiker climbing a hill can only see the mountains that lie when he has reached the hills summit, so too opportunities will present themselves as steps are taken to develop business on the Internet. The opportunity exists for Amazon to evolve their business to the next level. If they don't, then I'm sure somebody else will.