Amazon at a risky crossroads, Forrester says
Experiencing an identity crisis, Amazon.com faces new challenges as it tries to grow in three separate areas: retailing, shopping portal and technology platform provider – and more than $8 billion is at stake, Forrester says.
"Amazon’s success or lack thereof could mean the difference of $8.1 billion by 2008," Forrester says. An Amazon spokesman declined to comment, citing a corporate policy about not commenting on analysts` reports.
In a report it released this week, "The Future of Amazon.com," Forrester lists several challenges facing the big online marketplace: It has become cluttered and commoditized on the consumer side, putting it fourth in overall quality of operation among leading retail sites, behind Lands End.com, LLBean.com and WalMart.com; and, on the business side of providing its e-commerce platform to other retailers, Amazon has irked some of its customers due to inflexible negotiations, weak execution and disappointing sales.
"Amazon has reached a crossroads and must focus on what it does best -- selling merchandise," said Carrie A. Johnson, senior analyst at Forrester. "The company is trying to be all things to all people, which is weakening its customer experience and relationships with retail partners. "
To fix things, she adds, "Amazon must work on moving its impressive base of repeat customers into new product categories by cleaning up their user experience and on increasing its portal business by boosting its account management."
Johnson notes that if Amazon can meet its challenges, it stands to do about $15.5 billion in gross merchandise sales by 2008. If it doesn’t meet its challenges, it will do only about $7.4 billion, she says.
Forrester says that Amazon faces stiff competition in all areas of its business, but is best suited to succeed in the retail and portal industries, where it has considerable expertise and fills a unique gap in the retail and portal markets. But it will also have to compete in this space for market share with eBay, Wal-Mart, AOL, Yahoo, MSN, and Google, Forrester adds.
Forrester suggests that Amazon lower its expectations for its technology platform business, where it is up against powerful players like IBM and Microsoft Corp. and smaller ones like GSI Commerce. Forrest contends that these other providers can better deliver the multi-channel shopping and brand experiences most retailers are interested in building.
One Amazon official said privately that Forrester has been proven wrong before, noting that the research firm also predicted in a 1997 published report that Amazon would soon be building brick-and-mortar stores.
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