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Like many of you I have watched Amazon for some time now with some interest. I came to the conclusion about a year ago that unless Amazon created a brick-and-mortar presence (i.e., bricks and clicks) themselves or bought a brick-and-mortar retailer (similar to the AOL/Time Warner merger), they were headed for trouble.

Many of the Amazon bulls have said for a long time that Amazon would dominate e-commerce because they were the first major e-tailer. However, I have come to realize that the internet is not much more than another distribution channel for retailers to get their goods and services to consumers. I always knew that once a major retailer, like Wal-Mart, got their act together and decided to take Amazon head on, Amazon would not win. Amazon is $21 billion dollars in debt. Wal-Mart has hundreds of millions of dollars in cash. Who do you think will be left standing when the dust settles?

When I look at Amazon, I look at all of the competition it faces or will face. The major error Amazon bulls made was to say that Amazon's only competition was on the internet. Wrong! They have competition on the internet and in the "real world".

-Books: Why should I buy a book on Amazon when I could go to Borders, Barnes and Noble, or a local bookstore. There I can read some of a book and return it if I don't like it. I can drink coffee, chat with other people, and leave the same day with my book. With Amazon, I have to hope that I will like the book (pretty difficult to return it) and I have to wait several days to get it.

-Music: Why should I buy a CD on Amazon when I can go to any music store and listen to the CD there and take it home the same day? Or even better, go to Napster (if it stays around) and get my music for free?

-Auctions: Why should I go to an auction on Amazon when Ebay does it so much better?

-Z-shops: The Yahoo! Shopping site has many more stores and better selection.

-Hardware: Why would I want to buy a lawn mower over the internet? If I go to Home Depot I can get whatever I want that day and get some expert advice as well.

-Anything else Amazon sells that I left out: One word.....Wal-Mart.

With all of these obstacles, it will be very difficult for Amazon to survive without a brick-and-mortar presence. They should have bought Montgomery Ward to establish such a presence and to supplement their website.

I think ten years from now, Amazon will be nothing more than an interesting case study in a business school textbook.

All the best,

CashPhlo
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