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  • Global Business Case Study: Wal-Mart's Push to Become Relevant Online

    Wal-Mart is investing resources into trying be more competitive online, where the retail giant has struggled to be relevant against Web-focused Amazon and EBay. Businessweek 's Matthew Boyle and Douglas MacMillan report that while Wal-Mart CEO Mike Duke is making a big push with @WalMartLabs, the company may be too far behind its competitors to become more relevant in the online shopping business. Wal-Mart’s lackluster online history has deep cultural roots. The organization has long been dominated by store managers who feared e-commerce could cannibalize in-store sales, and thus their bonuses, according to a former Walmart.com senior executive. In Walmart.com’s first few years, store managers fought against putting the site’s Web address on shopping bags. Among physical retail outlets, Wal-Mart generally has the lowest prices on the broadest assortment of goods. The company has struggled to replicate that advantage online. A March report from William Blair found that Amazon was the “clear leader” in online pricing. Amazon also has 14 times as many products. In digital camcorders, for instance, Amazon offers 2,016 varieties, vs. Walmart.com’s 96, according to a February report from Wells Fargo Securities (WFC). Shoppers have noticed. Internet traffic researcher comScore reports that Walmart.com saw 35.8 million visitors in June, a little more than a third of Amazon.com’s traffic and half of EBay’s. It seems as though this next year will be a big test for Wal-Mart's online ambitions. Whether the company is successful or not, its approach will make for one interesting case study in Twenty-First Century global business strategies. Read Wal-Mart’s Rocky Path from Bricks to Clicks here .

  • A Tale of Three Startups, Acquired by Amazon

    To the victors go the spoils. In the world of high tech business, Amazon has been one of the victors. And the spoils have been smaller companies. In the past year, Amazon has acquired at least six companies, Julianne Pepitone reports for CNN Money . Pepitone tells te story of three startups that became part of Amazon: Exchange.com , AmieStreet.com , and Zappos . Each acquisition had a different ending. Exchange.com was brought inside Amazon headquarters. Zappos has so far continued to operate largely as it always has. And ArnieStreet.com was basically swallowed up after being acquired last year: In September, immediately after the acquisition, Amazon announced it was shutting down AmieStreet.com and redirecting its users to Amazon.com. Users' downloaded songs were ported over to Amazon, but that was the end of the demand-based pricing -- and the AmieStreet.com business model. "There was no understanding or guarantee as far as a go-forward plan," Roman says. "We didn't know what they were going to do, and we didn't have anything to do with the day-to-day anymore." Amie Street, Inc., still exists and Amazon remains an investor and board member of the company. Without its namesake site, Amie Street now focuses on Songza, a music-streaming service the company acquired in 2008. Read Why I sold to Amazon: 3 startups' stories here .

  • A Time Person of the Year Curse?

    With Time naming Facebook's Mark Zuckerberg the 2010 Person of the Year , Barry Ritholtz reminds us that back in 1999 Time selected another pioneer of the digital business world: Amazon's Jeff Bezos . And what did it bring Amazon? Well, the company seemed to top out--at least for a decade. At The Big Picture , Ritholtz provides this picture of Amazon's market fate following the Time proclamation: Will the same happen to Facebook? Read Uh-Oh: Facebook’s Zuckerberg is Time Man of the Year here .

  • Seth Godin on Spreading Ideas

    In the information age, ideas may be seen as fuel for the digital economy. But only when they spread. And we need people to spread our ideas. The singular Seth Godin has listed 20 reasons people spread ideas. Here are a few choice selections: #4...because I have no choice. Every time I use your product, I spread the idea (Hotmail, iPad, a tattoo). #5...because there's a financial benefit directly to me (Amazon affiliates, mlm). #9...because both my friend and I will benefit if I share the idea (Groupon). #12...because your service works better if all my friends use it (email, Facebook). and #18...because the tribe needs to know about this if we're going to maintain internal order. Read the full list here .

  • A New Landscape for Venture Capitalists in the Tech Sector

    Frank Quattrone , is back on the scene. He was involved in some of the biggest IPOs of the dot.com boom--like the Amazon and Netscape IPOs--and then spent a few years on trial for federal charges of obstruction of justice . Now he is running the tech-focused investment bank Qatalyst Partners. And he thinks confidence in the tech sector is starting to come back. But he cautions that the current recovery is going to be very different from the recovery after the dot.com bust. While he says there were, on average, 62 IPOs per year from 2001-2007--following the dot.com bust (there had been nearly 400 IPOs per year in the "crazy years" at the height of the dot.com bubble), the average dropped to 18 over the last two years. The big problem, he says, is the lack of credit. Quattrone spoke about the state of the tech sector at the Wharton School 's San Francisco campus. Here's an excerpt of the discussion: Read more about the panel discussion here .

  • As Risks in Publishing Go Down, Will Authors Benefit?: Amazon To Give Some Authors 70% Royalties on Kindle Texts

    Amazon announced a new royalty option for authors of some Kindle books yesterday. From the news release : "Today, authors often receive royalties in the range of 7 to 15 percent of the list price that publishers set for their physical books, or 25 percent of the net that publishers receive from retailers for their digital books," said Russ Grandinetti, Vice President of Kindle Content. "We're excited that the new 70 percent royalty option for the Kindle Digital Text Platform will help us pay authors higher royalties when readers choose their books." This represents a significant change for authors, and potentially another blow to publishers. But it also makes us remember something noted tech guru/author Clay Shirky said in a speech at the 2008 Web 2.0 Expo in NY. The speech was titled "It's Not Information Overload. It's Filter Failure." It wasn't directly about pricing. But in the first few minutes of the speech, Shirky discussed how the invention of the printing press created "information abundance," because the cost of producing manuscripts dropped precipitously. Then with the advent of the Internet (550 years later), the cost of publishing changed drastically again. Anyone could publish. And the key change was that the risk attached to publishing all but disappeared. (Think about the Amazon announcement in this context: with digital platforms the "publisher" does not have to guess how many books to publish--so the risk of projection goes away. Thus the author gets more of the revenue). The rest of the speech may be less relevant, but still worth a look:

  • Kindle Can't Be Manufactured in US: Harvard's Shih Argues This is Bad for Innovation in High Tech

    Amazon keeps sales numbers for its Kindle close to the vest, but ABC is reporting that November was the biggest month yet for sales of the e-reader . And analyst Sandeep Aggarwal of Collins Stewart is estimating total sales of the Kindle to reach 550,000 by the end of 2009 . Good numbers for Amazon just as the e-reader market begins to heat up, with Sony upping the advertising for its e-reader and Barnes and Noble now taking pre-orders for its Nook e-reader. Whatever Kindle's future, it stands as one of the more recent innovative success stories in US consumer technology. And its real breakthrough is the display, which is also its most expensive component to build. Willy Shih , professor of Management Practice at Harvard Business School, is concerned that the display depends on overseas manufacturing, and not so much because that will contribute to the trade deficit. Rather, Shih argues that "when innovations can't be manufactured in the U.S., the locus of innovation in that area frequently shifts to the countries that can manufacture them." The more worrying thing to me, though, is the likelihood that by not manufacturing the electrophoretic display, the U.S. will miss out on the future industries that spring from it — things like large flexible displays, future generations of electronic signage, and plastic electronics. Those technologies could, in turn, spawn other innovations and new industries. Years ago the U.S. lost the vast majority of its infrastructure, or "commons," in precision optics to Japan. The Japanese used those capabilities to grab the lead in producing lithography tools for semiconductor manufacturing, which, in turn, drove most American semiconductor manufacturers out of the DRAM business. The Japanese also employed those capabilities to expand into lithographic tools needed to manufacture flat panel displays. This same story has played out in high tech industry after high tech industry. The lesson: Sometimes when you let your capabilities get away, you give up not only one industry but all its progeny. Read The U.S. Can't Manufacture the Kindle and That's a Problem here .

  • Surowiecki: Price Wars are 'the retail version of the doomsday machine'

    James Surowiecki 's Financial Page column in this week's New Yorker is a keen look at price wars as a high stakes game of chicken. He goes back to the airline industry's destructive price wars of the early 90s to shed light on the current Amazon-WalMart showdown . Surowiecki writes that there is only one way to win a price war: don't play. Instead, you can compete in other areas: customer service or quality. Or you can collude with your putative competitors: that’s why cartels like OPEC exist. Or—since overt collusion is usually illegal—you can employ subtler tactics (which economists call “signalling”), like making public statements about the importance of “stable pricing.” The idea is to let your competitors know that you’re not eager to slash prices—but that, if a price war does start, you’ll fight to the bitter end. One way to establish that peace-preserving threat of mutual assured destruction is to commit yourself beforehand, which helps explain why so many retailers promise to match any competitor’s advertised price. Consumers view these guarantees as conducive to lower prices. But in fact offering a price-matching guarantee should make it less likely that competitors will slash prices, since they know that any cuts they make will immediately be matched. It’s the retail version of the doomsday machine. Read Priced to Go here .

  • Amazon Acquires Zappos--and the Zappos Culture

    Shortly after Amazon 's acquisition of online retailer Zappos became public, Zappos CEO Tony Hsieh sent an e-mail to all Zappos employees explaining the move and what it means for the company and all of them--the employees. The apparent candidness and clairty of Hsieh's communique seems telling. Zappos has become a customer favorite largely because of its service and open culture ( The Consumerist shares a couple of examples, here and here ). And Hsieh's writes that Amazon values Zappos for that reason: Our culture at Zappos is unique and always evolving and changing, because one of our core values is to Embrace and Drive Change. What happens to our culture is up to us, which has always been true. Just like before, we are in control of our destiny and how our culture evolves. A big part of the reason why Amazon is interested in us is because they recognize the value of our culture, our people, and our brand. Their desire is for us to continue to grow and develop our culture (and perhaps even a little bit of our culture may rub off on them). They are not looking to have their folks come in and run Zappos unless we ask them to. That being said, they have a lot of experience and expertise in a lot of areas, so we're very excited about the opportunities to tap into their knowledge, expertise, and resources, especially on the technology side. This is about making the Zappos brand, culture, and business even stronger than it is today. Seth Godin writes--in a short, sharp post--that the Zappos sale contains a key lesson on what creates real value in companies today. Godin says that "what matters is..." -A corporate culture that's not the same (and where great people choose to work) -A tight relationship with customers that give you permission to talk with them -A business model that's remarkable and worth talking about -A story that spreads -Leadership Read his post here .

  • Jeff Bezos, The Kindle 2, and Amazon's "Seamless" Approach

    Amazon continues to zag as other companies zig. Or at least it has kept profits and sales going strong as others fall short in this recession. It is a remarkably different story from 2001, when the company's stock plummeted and people pushed for company founder Jeff Bezos to resign as CEO. Now Bezos is the darling of business media, and he's making the rounds to talk up the launch of its Kindle 2 e-reader . Bezos went on Charlie Rose to talk about the Kindle and the company's approach to its customers. In the interview, Bezos stresses the need to focus on customers rather than competition, and perhaps that helps explain the company's success. Watch the full interview here . Om Malik , writing at Fortune online and at Gigaom.com , picked up on Bezos's use of the word "seamless." He wasn't talking about the device itself, of course, but the experience of the customer that uses it. Whatever you think about the Kindle , Bezos' choice of that word goes right to the heart of Amazon's own strategy, and the reason why the company, its operations and its stock have held up so well in the past few months. Everyone knows that Amazon's (AMZN) e-commerce site succeeded because its interface was intuitive to the point of being completely natural. What isn't discussed as much is the ethic behind that success: Simplicity is hard. Just as Amazon went to great lengths and expense to make the Kindle experience seamless, it has gone to a considerable amount of trouble to adhere to what is a very simple corporate strategy: Make it easy for the customer, and make it cheap. Some may bicker with the Kindle 2's $360 price tag as cheap, but the device is selling, so at the moment it is hard to argue with Bezos about that. One way for companies to keep prices down is to watch the bottomline in operations and control its own debt. In this case, Malik points out a bit of news that hasn't been getting so much attention in the Kindle craze: Amazon is set to go nearly debt free by the end of this month. By March 27, Amazon plans to redeem the outstanding principle on its convertible subordinated notes due next year. Amazon offered the notes in 2000, and they accounted for $335 million of the company's long-term debt at the end of 2008. After the notes are redeemed, Amazon will have only $133 million in long-term debt outstanding. That's a far cry from the $2.8 billion in debt it held six years earlier. Read Malik's Why Amazon is Bucking the Trend here . And for a different sort of interview with Bezos, watch this clip from The Daily Show . The Daily Show With Jon Stewart M - Th 11p / 10c Jeff Bezos Daily Show Full Episodes Important Things With Demetri Martin Political Humor Joke of the Day
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