The logistics of distribution are the iceberg below the waterline of online bookselling. —Jeffrey Bezos, Founder and CEO, Amazon.com
American publishers sold an estimated $40 billion in books in 2007—a number representing a relatively stable 2 annual increase of 3 percent over the last decade. A big chunk of this revenue flowed through three major book retailers, whose only major similarity was size: Amazon.com, Barnes & Noble, and the Borders Group. While Barnes & Noble and the Borders Group primarily sold books through bricks-and-mortar establishments, including superstores, Amazon.com sold only through the Internet. With sales of only $0.5 million in 1995, Amazon.com grew more than 1,000-fold in 10 years, surpassing, along the way, both major bricks-and-mortar competitors in terms of total book revenues. Overall, online sales have grown steadily at a 25 percent annual rate and Amazon.com remained the proverbial 800-pound gorilla of Web retailing, accounting for 8 percent of all U.S. online sales, while 3 ranking at the top on purchase intent and consistency of Web site functioning. Yet, as Amazon developed its Web sales, added new lines of merchandise, and expanded internationally, the company’s net income, nonetheless, fell throughout the 2006 fiscal year.
AMAZON.COM’S VIRTUAL OPERATION
Despite popular perceptions, Amazon.com was not the first Internet book retailer. Book Stacks Unlimited is often credited with being the first company to offer books on an online bulletin board back in 1992, that was subsequently replaced by a Web site in 1994. In contrast, Amazon.com did not ship its first book until 1995 and went public in 1997. Amazon.com’s operation was organized around a “sell all, carry few” business model. In Amazon.com’s first annual letter to shareholders in 1997, founder and CEO Jeff Bezos stated that “our store would now occupy six football fields” and from the very beginning, the company... [continues]
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