On Wednesday, November 18, 2000 Amazon.com entered the home improvement business. Reported by every paper, including the LA Times ("Amazon Accelerates Its Expansion Beyond Books"), this is a move that has many analysts wondering. After all, here is perhaps the biggest Internet company making a move into a business other than books, videos, toys, and electronics. It has also has extremely high brand awareness. Its just expanding its product line. So what's the complaint?
From a marketing perspective, the question underlying the analyst's concerns is how far can Amazon extend its name (again, think of "Will"). Arguably, Amazon has gone after and succeeded with a segment of customers who want a combination of convenience and a good price (basically the benefits desired by most Internet shoppers). Within this segment they have appealed to a type of customer, probably described by demographics and psychographics, that buys not just books, but also products in other categories. Amazon has bet that books, videos, toys, and electronics will appeal to the same segment.
The data is not on this, since the LA Times reports that "analysts say the majority of Amazon's revenue still comes from that [books] core business." Even Worth magazine recently said "Amazon supporters assume that the company will come to dominate toys and consumer electronics just as it dominates book and music retailing. But the evidence argues otherwise. Anyone browsing through Amazon's auction site will soon see that many items don't have bids on them." In any case, do tools and drills appeal to this segment as well? As a Merrill Lynch VP wrote, "Amazon's core customer base likes reading books five days a week, not hammering nails five days a week."
From a marketing perspective, let's think of the arguments why this should work. First, Amazon has an amazing brand awareness, so when people want to buy tools online, they'll first go to Amazon. But does awareness translate into purchase? And when Home Depot or Lowes jump online, don't they enter with incredible brand awareness for this category? Second, think of all the people who watch "This Old House." Aren't these the same folks that buy Amazon's books, and they don't shop at Home Depot, so shouldn't that guarantee the success of this strategy? But do people who watch "This Old House" actually go out and work on their house (or do they hire other people to do it)? Alternatively, do the home improvement types typically buy books from Amazon?
I think Amazon has gone too far!
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