The pricing benefit really cannot be understated.

Amazon was 40% less than list for books -- which was a massive amount, even if you lived in Barnes & Noble markets (and B&N wasn't as pervasive in 1996/1997 as your average mall bookstore was), where there were similar markdowns.

And of course, you could get any book you wanted from Amazon.

And then Amazon very quickly moved into media like CDs and DVDs. I used to order DVDs from various online retailers in the late 1990s and although Amazon wasn't my go-to in 1999/2000 (there were plenty of startups that sold at ridiculous losses and coupons that 16 year old me took advantage of), I appreciated their selection -- not to mention the gift certificates.

I think a lot of us forget that Amazon wasn't the only big e-tailer in the late 90s, it's just the one that survived. There were lots and lots of bigger and smaller places that straight up went out of business after the .com crash, but Amazon, despite taking a massive beating, survived.

Price was a huge reason for its success -- but I agree with others who point out that Sears and other incumbents had a chance to take them on, if not on price, than on selection and speed, way earlier than they did.

Instead, many businesses chose to partner with Amazon (Borders, Toys R Us) for a time, to their ultimate detriment.

Very good points. I'd like to add that Amazon began in a time when the typical person didn't trust ANY online shopping options. To my recollection, Amazon and eBay were the two biggest players that found ways to give people confidence that they could safely shop online.

YES! That's an excellent point too -- though I think this is where legacy retailers really lost out because I know my mom for example, was more comfortable giving her credit card to a known brand than some random website. My first order from Amazon was in 1997, when I was 14, and I did it using a gift card I got as a holiday gift from GeoCities (as thanks for being free tech support -- this truly is the most 1990s story ever), because my mom wouldn't hand over her credit card and I didn't get a Visa check card until I was 16.

In 1996, Mom had been screwed over by phone reps for CompuServe's attempt at a true ISP stealing her credit card to order shit from Tiger Direct (told you this was a 1990s story) and was leery about anything online for years after that (and Tiger Direct was technically a mail-order catalog but it had a website).

But you're right that eBay and Amazon were two of the earliest trusted, in part because they were the two biggest/first to market. (And also, both proved themselves to be trustworthy, which was important in the age of fly-by-night e-tailers).

The same is true for PayPal.

Re: Trust; I always found it a bit ironic back in the late 90’s/early 00’s that people would not trust ordering things over the Internet, but happily call a mail-order number and give a complete stranger (and anyone within earshot) their name, address and credit card number.

Because the Phone Number, Mail-In Order Catalog and the Human Voice from other side of Phone are all Real World Interaction. With traces to be made that relate to Real World. On the internet Everything is virtual.

Were they wrong though? I'd wager far more credit cards have been stolen via the internet than by eavesdropping?

Absolute numbers don't mean much in this context.

Why not? I’ll happily dictate my credit card number into my phone, heck I’ll throw open my apartment window and loudly yell my credit card number into the street, along with the expiration and CVV2, with zero fear that someone or something will actually be listening and recording it / writing it down.

By contrast I refuse to send my credit card number in an email or post it on a non-SSL site.

Guess which way I’ve only ever had my credit card number stolen?

>To my recollection, Amazon and eBay were the two biggest players that found ways to give people confidence that they could safely shop online.

This so much. I remember people's fear of filling in their Credit Card info online. And people who thought sharing Uber with a Stranger would be a no no.....

How time changes.

Great observation. I remember eBay and PayPal’s partnership being extremely important in making people feel protected. As I recall, there was well-advertised buyer protection by using them. Good feedback systems for buyers and sellers in both cases have proven a valuable asset.

>Amazon was 40% less than list for books

Furthermore, it's easy to forget just how hard it could be to track down even an in-print book and how long it could take to actually get your hands on it. Some big city bookstores were better but, in many cases, (assuming the bookstore would special order books at all), it would basically be put into the next batch order from a publisher which might be a month or two.

Yup -- I remember in college (in the early 2000s) how slow it could be for a bookstore to get a book in that a professor required for class (there was a book of poetry I literally could not find in the state of Georgia and my professor let me photocopy the work she had assigned until I could get my copy from Amazon b/c she recognized that I had literally called every single major and minor bookseller in Atlanta and the publisher and none could get me a delivery time ahead of Amazon, which was still going to be after our test) and by the time I graduated, most of us just reflexively went to Amazon rather than trying to fight over 6 copies Barnes & Noble or the college bookstores would manage to get in.

That reminds me of the time I worked in the stock room of student book store in a major university on the west coast of US in mid 1990s. The stock room was in the basement of the school student bookstore. Before and beginning of each semester, we'd get crates of books, books that only college student taking a class would be required to buy.

The crazy thing was, once the semester was nearing the end, we'd pack up all the unsold books (some classes had many unsold books) and ship them back to the publisher, at a significant loss from what I remember.

The student union was run independently from the university as a non-profit and was running a big deficit. However, the office people upstairs had humongous 24 inch CRT monitors, ones that surely cost a pretty penny. In 1998, 17 inch CRT sold for nearly a thousand dollars. I just looked it up. But I digress.

> In 1998, 17 inch CRT sold for nearly a thousand dollars.

Huh?

Which brings an unrelated point of how much understanding a typical university professor has for the idea that their course may not be the be-all-and-end-all of student's life. Making an unavailable book a requirement for a course? Ahh how much I don't miss those days of being at the mercy of every university prof or bureaucrat's whims :-)

Some profs just over ordered books. Some students bought books from other privately owned book stores across the street. Some students dropped out of class and hence did not buy books that were needed for 2nd half of the semester.

Above reasons contributed to quite a bit of the books not getting sold.

But yeah, I had to uncrate the dang books, and a few weeks later, crate the same books to ship back to publishers.

I bet I'm one of the very few of the student body who learned how to work with Pallet trucks.

I rarely bought books until I attended the first few classes. Some classes had books on the list that were never even used. Literature professors were the worst: hey go buy this book for 20-40 dollars, you will need to read about 10 pages of it.

> Amazon was 40% less than list for books -- which was a massive amount, even if you lived in Barnes & Noble markets (and B&N wasn't as pervasive in 1996/1997 as your average mall bookstore was), where there were similar markdowns.

This.

But even for pure list, Amazon didn't pay sales tax so had a 5-8% advantage.

Amazon killed all the technical bookstores in short order because of that pricing advantage that they didn't deserve.

I don't remember that big of a price advantage, but they definitely had a HUGE selection advantage compared to the book stores in my city.

To a certain extent the price didn't matter much because it was the only way to buy a lot of books.

I agree here. I don't remember price being an advantage at all in the 2000s. I remember it being roughly comparable to local stores, and a refrain was often "but at least you don't pay the sales tax!"

Perhaps on certain things like accessories- IE cables that stores normally had huge margins on- you could find generic equivalents for cheaper prices, but not in a general case.

Until maybe 2009 or so, it was always about selection. I spent a good portion of the 2000s using their recommended book list to figure out what I was going to read next, and when I was almost done with my current book, giving my self a ~5 day lead time to order the next, because that's about how long it generally took. It was an easy tradeoff to make, since a few clicks was a lot less effort than going to a store. I was also reading a lot of somewhat specific programming books in those days that weren't carried by most stores.

I agree with your memory. I think they would undersell bestsellers, but Amazon has always been meh on price.

If memory serves it usually wasn’t that dramatic but there were significant outliers where it was 50+% cheaper and I don’t think I ever saw it go significantly the other way so there was a strong inertial tendency to just buy it on Amazon rather than put time into shopping around.

One other neat thing was international availability — Amazon.co.uk had Terry Pratchett books months ahead of the US release, so I could read them at the same time when people on Usenet were.

Yeah a brick and mortar book store could never compete with an online retailer warehouse when it comes to selection.

Eventually book stores started to create their own websites but by then it was too little too late.

Yup -- and some (Borders) made the strategic mistake to literally just use Amazon. When Borders finally broke off the relationship, not only was it too late [1], it was at literally the worst possible time it could have done it, from a business perspective -- given the financial crisis.

Toys R Us did this too and as a result, never built a really solid e-commerce strategy. In fact, when Toys R Us left Amazon in 2006 (after years of litigation to get out of the contract) [2], it had the unenviable position of being behind from a tech perspective in a massive way. Not only that, the experience was considerably worse than it had been under Amazon.

[1]: http://www.internetnews.com/ec-news/article.php/3749336/Bord... [2]: https://www.wsj.com/articles/SB113798030922653260

Borders tried early on - IIRC they had a partnership with IBM in... 1998 - again IIRC it was early 99 that their first public site went up. My recollection was that you had to register an account before you could search, which many in my office laughed out loud about. They (Borders) were a company down the street from us (a web company) and Borders had gone with IBM instead of us, so there was some bad blood there (but it had started before I got there I think).

Knew a couple other folks at Borders, and visited them at work a couple of times. Borders was just clueless at tech, and BN was starting to take a lead in tech, which helped them with sales a lot more.

> I think a lot of us forget that Amazon wasn't the only big e-tailer in the late 90s, it's just the one that survived. There were lots and lots of bigger and smaller places that straight up went out of business after the .com crash, but Amazon, despite taking a massive beating, survived.

It's my opinion that The Dot Com Crash is what created Amazon.

Here's how:

I worked in Redmond Washington during the crash, and there were thousands of people who lost their jobs due to that. I knew so many people who were struggling to find work.

This was Y2K, when Seattle wasn't the tech powerhouse it is today. T-Mobile didn't exist, Google hadn't opened any offices in Washington, and tech companies were failing left and right.

I think that the crash gave Amazon an opportunity to hire people. There was a lot of talented people out of work.

Arguably, this may also explain why T-Mobile has become so huge. I worked there before they were T-Mobile, and I can remember how tiny we were. You could fit our entire operations team into a conference room.

Nowadays, T-Mobile is HUGE and I think a lot of that may be a combination of geography and timing. In 2003, Sprint was bigger than T-Mobile, but they're based in Kansas and the Seattle area just has a much larger pool of engineers to support a company like that.

I'm not well versed on the subject but I recently learned that Amazon's share of a book's purchase price is HUGE at around 40% (21.60 on a $54 book)

I suppose the lesson is that there is a lot of value in being a distributor as I also know someone who is a part owner of a brewery and he says the same thing.

Source: http://fabiensanglard.net/gebbdoom/

That is the case at pretty much any retailer. Grocery stores, drug stores, clothing stores, etc.

Don't forget app stores, music distributors, etc!

> Amazon was 40% less than list for books -- which was a massive amount, even if you lived in Barnes & Noble markets (and B&N wasn't as pervasive in 1996/1997 as your average mall bookstore was),

The two main mall bookstore chains (Waldenbooks and B. Dalton) were, despite keeping their names, owned by and integrated with Borders and B&N respectively by the time Amazon existed.

In the late 90's and early 2000's Amazon was one of the few online retailers I actually trusted to buy things from. It sounds crazy now but the concept of ordering online was not nearly as consistent and as safe as it is now.

Don't forget the reviews! Buying the right one is often more important than buying one today.

> Don't forget the reviews! Buying the right one is often more important than buying one today.

Amazon itself seems to have forgotten this; reviews used to be very useful, but either they're not trying very hard to combat fake reviews or they're not up to the challenge, because they're almost useless now for big-ticket items.

In my experience the reviews are most useless for small items, where fake reviews can easily manipulate the reviews or are even the only reviews available.

> In my experience the reviews are most useless for small items, where fake reviews can easily manipulate the reviews or are even the only reviews available.

Yeah, 'big ticket' wasn't the right word; probably I meant 'commodity'. I meant to exclude things like reviews of obscure books, which sellers apparently usually don't bother trying to game, since they seem to be reasonably reliable (at least, last time I checked, which was a while ago …).

One way Amazon was able to compete on price was by not having nexus in most of the country. Consequently, Amazon didn't collect sales tax on behalf of states and consumers, on the whole, never declare use tax. I still see that mentioned on most deal-hunter sites: "tax kills the deal" or "order from X and you don't have to pay tax." It's tax-free in the same sense that all tax evasion is tax-free. But, sales tax is levied at the state level and states don't have the resources to audit everyone.

That's not to say that Amazon didn't execute well. And their selection was excellent. It's just really easy to compete on price when your checkout total is 5+% cheaper than an in-state competitor even when the items were priced the same. Of course, this only applies to states that levy a sales tax, but that's still a large portion of the US.

Mail order operations didn't collect sales tax either. Amazon didn't invent the interstate tax dodge. Sears did.

I've read your comment a few times and I can't really tell if you're trying to refute what I said or if you're agreeing with it. I don't think mail order operations ever amounted to more than a tiny fraction of what online purchases are today. They were certainly nowhere near as convenient.

Setting that aside, my point was Amazon had a built-in price advantage that brick & mortar retailers did not. Use tax really should have been the normalizing force there, but no one declares it and it's hard to enforce. So, all things being equal, consumers would shop where they could realize a price savings. The story of brick & mortar retailers transitioning to e-commerce is more nuanced than some titan resistant to change being taken out at the knees by some peppy up and comer. Amazon was quite aware of this and fought very hard against any change in rules regarding collection of sales tax.

Everyone is jumping over themselves to counter everyone else's memories and theories on "how Amazon became successful" so I hate to add to the ruckus but there is one factor everyone seems to be forgetting that is crucially important in my opinion. That factor was Amazon's approach to customer service, a factor that predates their earning the moniker of "The Everything Store" and was a necessary atep toward success as they first had to get people comfortable with buying things online.

There were several popular books written on the subject of Amazon's customer service model (or ones that used them as a key example to their thesis) that were written long before Amazon ever offered prime and even before they really started taking off. The Amazon of the mid-00's was a major player, but still small enough that they had to differentiate themselves from competitors (at the time) like Ebay and Newegg. Outside of selling media (books, CDs, DVDs, games etc), Amazon's inventory was still mostly limited to the kinds of goods one could also find on those sites (clothing, accessories, electronics) which had them stuck competing on price. What eventually began separating Amazon from the pack was the fact that they would go to extraordinary lengths to take care of the customer. Their return policies were why I stopped shopping exclusively on price well before Prime became a thing as the confidence that I could teturn an item in reasonable condition (as in I could still return something after discovering a flaw after opening it) for free (in almost all reasonable circumstances) and without having to do anything more than print a label and drop the box back by a UPS pickup location was a gamechanger in building my confidence in online retail. It was to the point that making s return with Amazon was easier than making a return to a store and thar was the edge they needed to convince consumers fo choose Amazon over not only other online retailers, but ohysical stores as well.

The rise of 2 day Prime shipping undoubtedly fueled their exponential growth and made Amazon what it is today. However, I doubt they would have ever had the ability to build the infrastructure needed to make Prime work if it wasn't for the initial wave of consumers becoming loyal customers due to their reputation for customer service.

In hindsight, Bezos was playing chess while the retailers were playing Uno. I'm generally suspicious of a CEO making that much of a difference, but in this case, clearly, his vision was worth billions in business advantage.

> In hindsight, Bezos was playing chess while the retailers were playing Uno.

Keep in mind, his long term goal is to put people on other planets. So he's definitely playing the long game. Blue Origin is a huge factor here.

That's a fairly recent mindset. When he launched Amazon his plan was to sell books online. That was it.

I think free shipping is the reason Amazon was successful. Nobody wants to pay for it. That and cheaper prices.