Watch Amazon, Get Rich

I took a look at Amazon.com's (Nasdaq: AMZN  ) list of top-sellers earlier this month to get an early read on this season's holiday winners. Now that shipping deadlines are coming to an end for pre-Christmas deliveries, we can nail the trends weeks before the rest of the market catches on.

Let's keep this our little secret, OK? We don't want everyone to be able to pounce on the hot sellers long before they become official, do we? Let the skeptics try to read the tea leaves or resort to dowsing with dirty water-witching twigs for that eureka moment. Meanwhile, we'll turn to Amazon's best-seller lists, updated every hour.

I can confirm most of the trends that I pointed out earlier this month. This time, I'd like to highlight a few brisk sellers that I didn't get around to discussing before.

Lessons from the top
For starters, the top-selling toy over the past few weeks on Amazon happens to be the EyeClops Bionic Eye. As startling as it may seem to find kids in a frenzy over geek science -- at least from the perspective of gift-buying parents -- is the EyeClops' manufacture by a public company, JAKKS Pacific (Nasdaq: JAKK  ) .

Since JAKKS is a relatively small company, a single hit product like this can really make a difference. The company won't report its quarterly earnings for another two months, but when the company singles out EyeClops as the catalyst for market-thumping results, just remember who told you first.

Over at Amazon's software department, the obvious Microsoft (Nasdaq: MSFT  ) Windows and Apple (Nasdaq: AAPL  ) titles aren't at the top of the hill. Adobe (Nasdaq: ADBE  ) has owned the pole position through most of the past few weeks with its Adobe Photoshop Elements 6 photo-editing juggernaut.

That speaks volumes about our digital shutterbug ways, whether it's our need to touch up family photos or add that sultry touch to the snapshot on our social-networking profile. Digital picture frames are also selling well at Amazon, but there are too many companies jockeying for position there to bank on a winner.

Kindle sticks
Then we have the Kindle, the proprietary electronic media reader that Amazon has been promoting, even though promised delivery dates were bumped to next year weeks ago.

The one neat thing about the Kindle is that it appears to be the only item at Amazon that the e-tailer won't allow third-party sellers to pitch. That's a material point. Amazon has rarely had Nintendo's (OTC BB: NTDOY.PK) Wii in stock, although there is always another vendor willing to sell one at nearly twice the $250 retail price. Premium-priced resellers were the key to finding Mattel's (NYSE: MAT  ) Tickle Me Elmo TMX on Amazon when it was the hot toy last year.

Amazon's thinking in keeping third-party Kindles off its site is sound. It is in the company's best interest to have as many of the readers in circulation -- as opposed to sitting unopened by some speculator -- to sell more of its high-margin digitally delivered content. However, it would prefer to be the one making the direct sale. It can also manage expectations better when it knows it can sell a Kindle once at $399, instead of dealing with a potentially disappointed buyer who paid twice as much in a deal that let the speculator cash in on the price difference.  

Falling on deaf clicks
Amazon itself doesn't need a strong holiday season. The company is already an all-weather retailer, posting consistent profitability in all four quarters. However, analysts will be watching to see whether the company can keep its foot on the accelerator.

With the exception of this year's opening quarter, Amazon's year-over-year growth rate has actually accelerated sequentially over the past two years. Here's the table I whipped up to illustrate the point after the company's stellar third-quarter report.

Amazon.com

Sales Growth (YOY)

Q1 2006

20%

Q2 2006

22%

Q3 2006

24%

Q4 2006

34%

Q1 2007

32%

Q2 2007

35%

Q3 2007

41%

The rub here is that we won't know more about the fourth quarter until the company tells us how things are going. Is it ironic that we can use Amazon.com to gauge how its suppliers are faring, but get little insight into how Amazon itself is doing?

Just take the trends that Amazon feeds you, nod accordingly, and remember to keep it as our little secret.

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