| | |  Technology News | September 2009 
Can Amazon be the Internet's Walmart?
 Brad Stone - The New York Times
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Seattle - The hum of 102 rooftop air conditioners and a chorus of beeping electric carts provide the acoustic backdrop in Amazon.com's 605,000-square-foot distribution facility on this city's west side. But the center's employees can almost always hear Terry Jones.
On a recent summer afternoon, Jones, an "inbound support associate" making $12 an hour, steered a hand-pushed cart through the packed aisles and shouted his location to everyone in earshot: "Cart coming through. Yup! Watch yourself, please!" Jones explained that he was just making his time at Amazon "joyful and fun" while complying with the company's rigorous safety rules.
But his cries might double as a warning to the retail world: Amazon, the Web's largest retailer, wants you to step aside.
Fifteen years after Jeffrey P. Bezos founded the company as an online bookstore, Amazon is set to cross a significant threshold. Sometime later this year, if current trends continue, worldwide sales of media products - the books, movies and music that Amazon started with - will be surpassed for the first time by sales of other merchandise on the site. (That transition already occurred this year in its North American business).
In other words, in an increasingly digital age, Amazon is quickly becoming the world's general store. Alongside the books and CDs and DVDs are diapers, Legos and power drills, not to mention replacement car clutches and more arcane items like the Jackalope Buck taxidermy mount ($69.97).
"Amazon has gone from 'that bookstore' in people's mind to a general online retailer, and that is a great place to be," said Scot Wingo, chief executive of ChannelAdvisor, an eBay-backed company that helps stores like Walmart and J.C. Penney sell online. Mr. Wingo envisions e-commerce growing to 15 percent of overall retail in the next decade from around 7 percent. "If Amazon grows their market share throughout that period, and honestly I don't see anything stopping it, that is pretty scary," he said.
Indeed, Amazon has been gobbling e-commerce market share since 2006, taking away customers from eBay in particular. But its advances are shaking up the entire retail world. Giants like Walmart are warily replicating elements of its strategy, while small independent retailers in sporting goods and jewelry now worry their fate will be similar to that of small bookstores and independent video rental shops (remember those?).
Amazon's expansion strategy has allowed it, almost alone among retailers, to thrive during the recession, even while its own media business has stagnated. Over the last year, shoppers have bought fewer books, CDs and DVDs, in many cases opting for cheaper digital downloads. In the quarter ending in June, for example, Amazon's worldwide media sales grew only 1 percent, to $2.4 billion, highlighted by a slowdown in video games.
But during the same quarter, sales of other products, which the company lumps together on its balance sheet in a grouping dubbed "electronics and general merchandise," grew by 35 percent, to $2.07 billion.
Its relentless ambition to sell more of everything is constantly on display these days. In July alone, Amazon introduced separate hubs on its site for outdoor sporting goods and cellphones and wireless plans. Then it capped the month by buying an emerging competitor, the online shoe and apparel retailer Zappos.com, in a stock exchange now worth more than $930 million.
Aside from using its stock and $3.1 billion in cash and marketable securities to make acquisitions, Amazon has fueled its growth as a general retailer by nudging loyal customers to buy a greater variety of products by offering free shipping and speedy delivery with clubs like the $79-νyear Amazon Prime.
It has also lured an increasing number of small sellers to list their own products on Amazon.com, and takes around a 15 percent cut of each sale. Such third-party transactions now account for 30 percent of all the sales on the site. And Amazon continues to expand its network of more than 25 distribution centers around the world, where it constantly hones the art of getting products to customers as quickly as possible.
Next week, Amazon will take yet another step in this strategy, expanding its private label business with a line of Amazon-branded audio-video cables and blank media discs. Amazon already offers hundreds of private label kitchen products and outdoor furniture, and uses these direct relationship with manufacturers to further undercut prices from the competition. Amazon executives are nonchalant about the shift to general retailing, regarding the moment as preordained destiny ever since the company announced its ambition to offer the biggest selection of goods on earth, before going public in 1997. But they have reason to feel vindicated: after the dot-com bust, some analysts thought the company could go broke trying to stock such a wide array of merchandise.
"It means we are becoming increasingly important in the lives of our customers, which has been our mission from the beginning," said Jeff Wilke, Amazon's senior vice president of North American retail. "We had the chance to earn the trust of the customer beyond media, and we took it."
Inside Amazon's vast shipping centers, the company's growing capability as a general retailer is nearly invisible. What is clear is that the normal rules of retail don't apply here.
Instead of storing similar items next to each other - televisions with other electronics, shampoo with other personal care items - randomness abounds. Amazon says it stores dissimilar products next to each other on purpose, to minimize the possibility that employees select the wrong item.
"Imagine how many customers we serve and if they were all here now," said Bert Wegner, Amazon's director of North American fulfillment.
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