Bezos bracing for huge holiday sales

CHICAGO -- Amazon.com CEO Jeff Bezos said that the company is bracing for huge holiday shopping volume, possibly two to three times what it had last year.

Bezos, speaking at the National Postal Forum here Tuesday, based these preparations on recent reports by industry research firms. He does expect that Amazon.com's (Nasdaq:AMZN) expanded product line, which now includes toys, auction items and electronics, will help drive volumes.

Bezos spoke on a panel moderated by the U.S. Postal Service's Postmaster General, William Henderson, along with executives from eBay (Nasdaq:EBAY), Citigroup, Entrepreneur Magazine and Output Technologies. Amazon.com and the Post Office today said they would being co-branding packages.

While EToys Inc. (Nasdaq:ETYS), Disney (NYSE:DIS), Toysmart and Toys 'R' Us Inc. (NYSE: TOY) are among its many competitors in the online toy space, Bezos said he doesn't worry about competition or the downward pressure on prices for some popular toys in brick-and-mortar stores.

"We're very pleased with the way things are going with (electronics and toys sales) so far," Bezos said. He declined to give figures between official quarterly reports, but said the brisk sales are allowing Amazon to fine-tune its customer service and distribution procedure before the holiday rush.

Personalization the key
Bezos said that the online trend which most excites him is personalization.

"Our goal is to be earth's most customer-centric company, listening to customers and giving them what they want. If we have 10.7 million customers, so we should have 10.7 million stores."

Bezos said personalization is Amazon's core strategy, and its "collaborative filtering," which matches a buyer's habits with other buyers' habits to predict and suggest other purchases, represents just "two percent of what can be done" to personalize customer experience on the site.

Bezos also predicts that some new Internet appliances will revolutionize the way the Internet will be integrated into all facets of users' lives. He said U.S. Robotics' new Palm VII and larger-screen digital phones with Internet access will make access more convenient and ubiquitous.

He said while most companies spend about 30 percent of their time building services and 70 percent of their time "shouting" about them, that will flip-flop in the equation in the near future.

Frets, not fears
And while Bezos may say he doesn't fear his competitors, he does indeed fret over how to stay ahead of them.

'I have regrets about bookshops going out of business. ... I still buy half my books at physical bookstores.' -- Jeff Bezos, Amazon.com

"The thing that scares me most, if you look at the history of pioneers, is it's not very good for pioneers," he said. "You always have to be a step ahead and continually raise the bar every day to keep the competition behind. There is no rest for the weary. There is no resting on laurels. No one should think they own this business."

Bezos said Amazon.com sells products at 20 percent above cost, which is a strategy that has yet to net a profit for the company. But Bezos defends it for the long-term, saying selling on the Internet out of 30-cents-per-square-foot distribution centers is much more cost-effective than being strapped with commissions, display costs and other heavy overhead.

Still buys in stores
"Amazon is a famously unprofitable company. It is the right strategy for now," Bezos said. "At some point in time, you have to be profitable, (but) we're not focusing on it for the short term."

"For now, we are obsessed with the user experience," he said. "(Our competitors) aren't as experienced as we are on 'was that the stuff they ordered, do we answer our phones, and do we answer our e-mails.' "

Despite the expansion into new territory for 1999, the four-year-old company's core business is still books. But as Amazon expands to serve its 10.7 million customers, does he regret having a part in leaving some bricks-and-mortar bookshops in the dust?

"I have regrets about bookshops going out of business," he said. "It does give me pains of conscience. I think these stores will continue to compete on personality, but they will never be able to compete on price," he said. "I still buy half of my books at physical book stores. There's a great place in Seattle called Elliot Bay. I go for the experience."