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CES 2004: Amazon.com a growing force in electronics market

By Monica Soto Ouchi
Seattle Times technology reporter

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The Seattle-based online retailer said electronics sales fared particularly well in the holiday season, the company's most critical quarter.

The number of electronics items sold on its U.S. site rose nearly 50 percent last year over the previous year, while electronics units sold worldwide grew more than 80 percent, Chief Executive Jeff Bezos said yesterday.

The company is scheduled to announce its fourth-quarter financial results on Jan. 27.

In a lunch with reporters here, Bezos outlined the ways Amazon has improved both the way it sells electronics to consumers and the margin it reaps from selling its products.

The company has added more information for individual electronics products, an important feature for consumers who typically use the Internet to research big-ticket items before buying. Bezos said the site now allows customers to view product manuals, and there have been more than 2 million downloads of them so far.

He also used industry data from the NPD Group to illustrate that its customers are making more expensive purchases on its site. According to NPD, the average price of desktop computers is $778. On Amazon's site, the average price is $1,106.

Likewise, the average industry price for digital music players is $181. On Amazon, it is $269.

Amazon has sought to reap a profit on the sale of electronics — a cutthroat business — by buying inventory and controlling the amount of money it spends picking, packing and shipping items.

Frank Sadowski, Amazon's vice president of merchandising consumer electronics, said the company's electronics business is not on the order of a large big-box store retailer, but it has the buying power of a "very large regional player."

Sadowski said the company has relied on the support of suppliers to help make timely deliveries of the products. Amazon has hired experts in merchandising popular electronics, such as televisions and digital cameras.

"All of this is not particularly complicated, it's just really hard," he said. "It's about execution."

Bezos said the company has concentrated on improving inventory turns, or the number of times it moves a product off the shelf and into consumers' hands.

Improving that measurement was important, he said, because every day products remain on a shelf, the inventory declines in value. Improving its inventory turns allows the company to both increase its margins and sell at lower prices.

Bezos said the company has outpaced the inventory turns of the biggest box stores by a factor of two because Amazon doesn't have to keep 100 copies of a product in stores nationwide.

Meantime, Bezos said the company's shipping promotion, which offers customers free shipping on certain orders over $25, helped the company's holiday quarter.

Amazon plans to maintain that offer indefinitely, he said.

"It's costing a lot, but we think it's worth it," he said.

Monica Soto Ouchi: 206-515-5632 or msoto@seattletimes.com

Copyright © 2004 The Seattle Times Company