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Amazon Coy on Free Shipping

Amazon.com CEO Jeff Bezos says the company, which aims to be the planet's most customer-centric business, expects to see operating margins over the long term that will be in the low double-digit range.

In a wide-ranging but relatively non-specific (especially on numbers) presentation at the Morgan Stanley Software, Services, Internet & Networking Conference in Scottsdale, Ariz., Bezos was coy when asked whether Amazon's offer of free shipping on sales of $25 or more will continue.

"Long term you can use the world's best retail rule of thumb -- customers get what they want, and what they want is free shipping," Bezos said. "But for us, structuring it around things like a $20 book is hard."

"We've said before that free shipping will remain in some form," he said, but he would not elaborate, saying only that an announcement will be made in several weeks.

Bezos also spent a lot of time discussing the new apparel store on the site, calling it the "most exciting thing we've done in the fourth quarter" and an "excellent indicator that three and a half years of work to broaden people's perception of Amazon is beginning to work."

He said the apparel store, with 450 clothing brands represented, "surprised us with the speed that it took off," and he added that "our clothing partners had modest expectations and they have been more than fulfilled."

Bezos said that Amazon started its strategy of partnering with third parties several years ago and already such sales are 23 percent of the goods Amazon sells in North America.

"What we learned this Christmas season -- the big thing -- is that people have embraced apparel to the degree they have. (The apparel store) has all the brands people want, it all came together, but you never really know how customers will respond to a new offering ... the key thing is that it speaks to the addressable market -- now we have media, hard lines (electronics) and soft goods."

On other matters, the chief executive said:

  • Since 1999 Amazon has spent $300 million on fulfillment centers, $700 million on marketing and $900 million on technology.
  • International sales represent 36 percent of overall sales, and by 2005, they may be 50 percent. Our competitive position in Germany, Japan and the U.K. is stronger than it is in the U.S.
  • The competition is not so much eBay or other online companies as it is "the physical world, because that's where all the sales are." Online sales are still too small ... (however) "we look at other online companies to learn from, see what they're doing, and maybe adapt it."

Seattle-based Amazon will report its fourth quarter earnings after the market close on Jan. 23. For the third quarter the company reported reported record revenues of $851 million.